Today the Greek bailout plan comes before the German parliament (the Bundestag), the latest approval hurdle for the third bailout package which nobody believes will work.
Ratification of the €86 million rescue deal is expected, notwithstanding yesterday’s comments from Germany’s Federal Finance Minister Wolfgang Schäuble suggesting Greece’s best chance of cutting debt exposure would be accepting a temporary exit from the euro.
In an interview on Deutschlandfunk public radio Schäuble proposed a temporary exit from the euro “could perhaps be a better way” than adopting the proposed Greek bailout, the third such package in just five years. He suggested “a real debt haircut” is probably needed but could not be reconciled with continued euro membership.
In expressing serious misgivings over the deal reached after 17 hours of “extremely hard, violent even” negotiations last weekend, Schäuble joins the ranks of various sceptical economists, the International Monetary Fund (IMF) and the Greek government itself. For her part, Germany’s Chancellor Angela Merkel remains “absolutely convinced” the Greek bailout package provides the best way forward, warning that a temporary exit from the eurozone would damage European solidarity.
Despite the expected rebellion of up to 50 MPs from within Chancellor Merkel’s coalition, the vote is expected to pass. France and Finland have also ratified the terms of the deal.
The vote today follows Wednesday’s in the Greek parliament when the reforms demanded as a precondition to the bailout process, were passed. Substantial opposition to the reforms came from Prime Minister Tsipras’s own Syriza party, a move which according to AFP Tsipras believes contradicted “the principles of friendship and solidarity at a critical time” leaving the party “bruised”.
Tsipras insists his position remains secure but a cabinet reshuffle is expected this month and there is growing speculation of an early autumn ‘snap’ election’ being called.
Some welcome relief did come yesterday when the European Central Bank (ECB) announced increased emergency funding for Greek banks allowing them to reopen on Monday. Capital controls will remain in place to avoid a run on the banks. In addition, subject to German ratification today, European Union finance ministers approved €7 billion of interim finance for Greece meaning it will be able both to honour a bond payment to the ECB due on Monday and to clear its arrears with the IMF.
For those saying the Greek bailout deal signals the beginning of the end of the continent’s troubles, it is worth remembering how many players believe it simply will not work in the long term without some form of debt relief. A further failed austerity regime is seen by many as storing up future troubles.
Donald Tusk, President of the European Council, sounded an ominous note of caution in an interview with the Financial Times. He warned of potentially revolutionary forces brewing up across Europe:
“For me, the atmosphere is a little similar to the time after 1968 in Europe. I can feel, maybe not a revolutionary mood, but something like widespread impatience. When impatience becomes not an individual but a social experience of feeling, this is the introduction for revolutions.”