Greek Government Confident Despite Backlash Over Debt Deal

Athens: Greece's leftwing government expressed confidence on Tuesday that parliament would approve a debt deal with lenders, despite an angry reaction from some of its own lawmakers who accused it of caving in to pressure for more austerity.

Concessions offered by Prime Minister Alexis Tsipras, including hikes to tax and pension contributions, garnered a cautious welcome from euro zone leaders but triggered a furious reaction from some leftists in the ruling Syriza party.

One lawmaker said the deal was tantamount to a "tombstone" for Greece, after repeated rounds of austerity during five years of crisis.

Deputy parliament speaker and Syriza lawmaker Alexis Mitropoulos said the concessions were "not in line with the principles of the left" and would cause "social carnage".

"I believe that this programme as we see it ... is difficult to pass by us," he told Greek Mega TV.

However State Minister Nikos Pappas, one of Tsipras' closest aides, said he was confident that the deal would get through.

"I assure you that the deal will be such that it will win the backing of the government majority and of the Greek people," Pappas told Mega TV."

Euro zone leaders said the new budget proposals from Athens on Monday were a basis for further negotiations to unlock billions of euros in frozen aid and avert a default next week that could lead to a Greek exit from the single currency area.

Stock markets also cheered, with European shares extending the previous session's sharp rally and climbing to a three-week high on hopes of a deal.

But the euro fell on fears the plan would struggle to win approval in the Greek parliament.

Tsipras, who was voted into office in January on a pledge to roll back years of austerity in a country battered by recession, must keep Syriza as well as creditors onside for a deal to stick.

Underlining the delicate balancing act he faces, thousands of pensioners and members of the Communist-affiliated PAME trade union marched through central Athens on Tuesday to protest against further austerity measures.

"People who supported Tsipras thought he'd be different, but he's just giving into the demands of foreigners," said 34-year-old Panagiota Panayiopoulou, a former nursery school teacher who is now unemployed. "I voted for him and it was a lost vote."

Officials of the three institutions representing Athens' creditors - the European Commission, the European Central Bank and the International Monetary Fund - were analysing the Greek proposals intensively in Brussels to see whether the numbers add up to make Greek public finances sustainable.

The creditors may well come back and demand further savings, tax rises or reform measures in the drive to clinch a deal on Wednesday evening, when euro zone finance ministers meet at 7 p.m. (1700 GMT) to review the outcome of the talks, people familiar with the situation said.

Comments by German Vice-Chancellor Sigmar Gabriel, warning Greece that its creditors would not be blackmailed, underscored that progress on a deal remained fragile. A European Commission spokesman emphasised that Greece needed to spell out what actions it will take before any bailout funds can be released.

If the Greek parliament fails to back a deal, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty.

Bluster

Athens urgently needs money to avoid defaulting on a 1.6 billion euro loan repayment due to the IMF next Tuesday.

Jitters over the risk of a default leading to capital controls have prompted savers to pull billions of euros out of Greek banks, forcing the ECB to increase emergency liquidity assistance (ELA) to keep them afloat.

Irish Finance Minister Michael Noonan, whose country has successfully completed its bailout programme and returned to growth, warned that emergency funding for Greece's banks could be cut off unless a deal is reached soon.

"The new round of negotiations have a very short timeframe to be concluded satisfactorily or there is a risk that ELA will be cut off because they are bound by legal arrangements in the European Central Bank," he told parliament in Dublin.

With Greece perilously close to bankruptcy, it is unclear whether lawmakers, for all their bluster, would ultimately pull the rug from under Tsipras if he secures a deal.

"I believe the deal will pass parliament and will reconfirm the government's majority," Dimitris Papadimoulis, a Syriza lawmaker at the European Parliament, told Reuters.

"I do not believe that top Syriza lawmakers will want to be responsible for bringing down a five-month-old government and a prime minister who enjoys popular support of about 70 percent."

As well as mustering Syriza lawmakers, Tsipras must also satisfy his coalition partners in the right-wing Independent Greeks party. They insist that any deal must include a debt writedown and that special VAT exemptions that apply to some Greek islands must remain in place.

"Our red lines remain," party leader Panos Kammenos said following the party's parliamentary group meeting.

Opinion polls suggest most Greeks want to stay in the euro. Tsipras, whose coalition has a 162-seat majority in the 300-seat parliament, may also find support from opposition lawmakers, who want to secure Greece's place in the euro, even though the government says it cannot continue unless its own lawmakers back any deal it brings to parliament.

"If (the government) does not have the parliamentary majority, it cannot remain (in power)," government spokesman Gabriel Sakellaridis said.

The ECB raised the ceiling on emergency liquidity Greek banks can draw from the country's central bank for the fourth time in a week on Tuesday to just under 89 billion euros, a banking source told Reuters.

Difficulties Ahead

Although the mood after Monday's summit was broadly positive, there have been several false dawns in the talks.

Tsipras appeared to have reached an understanding with the creditors at the start of June, only to blast their demands as "absurd" in parliament after running into a backlash at home.

In its proposal, Greece pledged to lift the retirement age gradually to 67 and curb early retirement, but avoiding making concessions on some so-called "red lines" like direct pension cuts or a mooted tax hike on electricity.

"It was all a set-up from the start," said Michalis Damianidis, 75, who used to own a factory he said he was forced to sell because of the crisis. "Greece is finished. They are talking about more contributions. Where will that come from if people aren't working? There are no jobs."

Tsipras had spent hours with his cabinet before the Brussels summit in an attempt to secure ministers' backing. But he came home to accusations from some quarters of having caved in.

"The government has fallen into a trap, I don't know to what extent this can be implemented," said Pavlos Haikalis, a deputy with Syriza's junior coalition partner, the Independent Greeks. The party has kept a low-profile lately but could find certain tax hikes - like axing tax breaks for islands - unpalatable.

The exact contours of a final agreement are not clear. Eurogroup finance ministers are expected to meet to approve a reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning.