Europe moves to restore funding to Greece after bailout vote

July 17, 2015 08:10
Shoppers walk along a street in Athens on Thursday after the parliament approved austerity measures demanded by creditors. Photo: Bloomberg

Europe is restoring funding to Greece after the parliament in Athens approved a package of tough austerity measures demanded by creditors.

The European Central Bank increased emergency funding for Greek lenders, although capital controls will have to remain in place to avoid a run on the banks when they reopen on Monday, Reuters reported.

European Union finance ministers also approved 7 billion euros (US$7.6 billion) in bridge loans to keep Greece afloat, allowing it to make a bond payment to the ECB next Monday and clear its arrears with the International Monetary Fund, the news agency said.

The loans were to be finalized on Friday provided Germany's parliament approves a Berlin government request to open talks on a three-year bailout program — Greece's third in the past five years — worth up to 86 billion euros.

The twin lifelines were a reward for Greek Prime Minister Alexis Tsipras after he won the backing of parliament in the early hours of Thursday for the tough reform measures demanded by creditors led by Germany.

Tsipras was left weakened by a revolt in his left-wing Syriza party, who voted against the measures, forcing him to rely on opposition votes to pass the package. He is expected to reshuffle his cabinet to replace four ministers and deputy ministers who rebelled.

Interior Minister Nikos Voutsis said a snap election could be held in September or October, "depending on developments".

German Finance Minister Wolfgang Schaeuble, one of Greece's sternest critics, questioned whether Athens would ever get a third bailout, even after the parliamentary vote.

He suggested its financing needs were spiraling and a debt "haircut" or write-off — outside the eurozone — might be a better solution.

All 28 EU countries are expected to contribute to the bridge loan, despite reluctance of non-euro members such as Britain and the Czech Republic, after a compromise was found to use eurozone funds to guarantee their contributions.

Britain accepted the deal after receiving what its finance minister, George Osborne, said was a legally binding deal to protect any British money used in the loan.

The Greek parliament comfortably approved the agreement Tsipras struck on Monday with the eurozone that demands austerity measures and economic reforms tougher than those rejected by voters in a July 5 referendum.

Some of the main measures, including an increase in value-added tax, take effect immediately, although it will be extended to hotels in October after peak tourist season.

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