Greek crisis round up – 16 July 2015

– Greek parliament approves bailout, but Syriza has lost its majority with many more rebel MPs voting against than in previous vote last week; 32 Syriza MPs voted no, 6 abstained, 1 absent (Varoufakis voted no); the vote took place amidst clashes outside parliament, so social tensions within the wider Left bloc increasing, and the Syriza rebellion still at the beginning of its course. The key question here is if Tsipras can go ahead with a new majority without elections – and if not, what would happen in the case of elections? A saga to be watched closely, majorly underplayed by moderate EU mainstream, busy portraying an image of stability.

– Some European parliaments (or their appointed committees) have to vote for European Stability Mechanism (ESM) bailout talks to go ahead; France predictably voted yes; Finland too – perhaps not so predictably; other countries yet to hold votes. German vote on Friday is particularly crucial, with Schäuble talking about Grexit while deal supposedly goes ahead.

– It seems like ‘bridge financing’ (money needed in the short-term for debt repayments and similar and avoid outright collapse of Greek financial system) will be from the European Financial Stability Mechanism (EFSM) – which is Europe-wide and includes countries outside Eurozone – including British money, despite huge resistance from UK Chancellor Osborne.

– The overall bailout estimated around 85bn euros; ESM won’t cover everything, IMF still expected to chip in, even though IMF is sending clear message that without substantial debt relief, Greek debt is unsustainable, and hence IMF has option to walk out. For now EU hawks seem to be opposed to any debt relief (i.e. cancellation of part of the debt), and have not committed to debt restructuring (i.e. grace periods and special rates to ease repayments of loans) – the Eurosummit draft agreement only talks about possibility of debt restructuring once other measures are in place.

– Another key element of the puzzle is the emergency liquidity by the European Central Bank (ECB) to Greek banks – a decision to extend liquidity by ECB is expected soon. Various quarters, including Greek government ministers, talk about extended capital controls to continue for weeks, if not months – even if bailout goes ahead as expected, ECB helps out etc.


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