Greece’s parliament has to ram through a huge piece of legislation on Wednesday to secure the bailout funding it agreed with its European creditors on Monday morning.
The main debate on the package will begin at 10 p.m. Greek time (8 p.m. in London and 3 p.m. in New York), but it’s likely to stretch into the early hours, given the controversial nature of the bailout deal.
Passing these “prior actions,” the precise detail of which hasn’t been made public yet, may give Greece access to some immediate bailout funding, which will be especially important for making a major debt repayment to the European Central Bank (ECB) on July 20.
According to Citi chief economist Willem Buiter (who invented the portmanteau “Grexit”), “The list of prior actions is thought to include wide-ranging measures on VAT, other fiscal reforms, pensions, and bank reform, which go beyond the pre-referendum proposal.”
BNP Paribas analysts suggested that there may be a cabinet reshuffle after the vote, but there are no signs that Prime Minister Alexis Tsipras is planning on going anywhere.
On Greek TV on Tuesday night, Tsipras said “The worst thing a captain could do while he is steering a ship during a storm, as difficult as it is, would be to abandon the helm.”
It also sounds like the government will need support from outside of its own coalition: Between them, Syriza and the Independent Greeks have 162 of the 300 seats. The Independent Greeks have already said they will oppose the deal, and there will likely be a decent chunk of Syriza rebels.
MPs from three pro-euro parties, PASOK, New Democracy and To Potami will largely vote for the deal, but Tsipras’ political position may be weakened for having to rely on their support.
BNP Paribas analysts say that the vote is the first step for Greek banks to get additional support from the ECB, too:
In the knowledge that the alternative is the exit door, we assume that the measures will be passed in the Greek parliament.
If so, the least we can expect the ECB to do in response is to raise the threshold for emergency liquidity assistance (ELA) from the current level of around EUR 89bn. How much it will go up is difficult to predict. It may well be a relatively small adjustment, as a reciprocal gesture following Greek parliamentary approval of the initial round of measures agreed at the summit.
That probably wouldn’t allow allow Greek banks to open straight away, but it is a necessary step for any sort of half-way recovery for the country’s financial system.
Here’s a reminder of the reforms Athens is expected to sign off on if the bailout is to be successful:
- A “significantly scaled up privatisation programme with improved governance.”
- “Ambitious pension reforms” and measures to make the system more affordable.
- General deregulation and liberalisation of Greece’s market economy, with areas such as pharmacies being opened up to more competition.
- A “rigorous review” of modernising the Greek labour market.
- Depoliticising the Greek governing establishment — it’s a common criticism that Greece’s government is riddled with cronies from whichever administration is in office at the time.
- Amending or rolling back some legislation that has been passed in Syriza’s first six months in power, much of which ran against previous bailout deals.