EU deal awaits Greek approval

The deal struck with eurozone leaders earlier this week faces a vote in Athens on Wednesday night, before the 18 other eurozone leaders can start negotiations for the country's rescue program. If approved, it will be the country's third bailout in five years.

In an interview on Greek public television on Tuesday night, Prime Minister Alexis Tsipras was asked if he would resign if the reforms failed to pass, or if he lost his parliamentary majority. "A prime minister must fight, speak the truth, take decisions and not run away," he said.

Deputy Greek Finance Minister Nadia Valavani announced her resignation on Wednesday. In a letter to Tsipras she said she could not support the harsh austerity measures agreed with creditors. "It is impossible to continue to be part of government," she wrote.

Tsipras criticized German Finance Minister Wolfgang Schäuble's comments on an exit for Greece from the eurozone, even as a temporary, five-year measure: "Europe does not belong to Schäuble," Tsipras said.

Schäuble's comments have also drawn criticism from members of both the SPD - Chancellor Merkel's junior coalition partner - and of the opposition parties at home. "With his Grexit plan Schäuble was calling for the division of Europe," Green party financial expert Gerhard Schick said.

A three-year bailout worth up to 86 billion euros ($95 billion) is to be discussed with creditors according to the agreement announced in Brussels on Monday. Eurozone governments are expected to contribute between 40 and 50 billion euros in total.

The International Monetary Fund (IMF) is expected to make a substantial contribution to the next, proposed bailout, with the rest coming from the sale of state assets and borrowing on financial markets. The IMF has warned that Greece needs substantial debt relief.

The IMF has long held that the country's debt is too high and that any deal must include debt relief - a key point made also by the Greek side. In a report released late Tuesday, the IMF said Greece's debt was now "highly unsustainable" and would reach "close to 200 percent of GDP in the next two years."

Immediate payments

The new deal will take several weeks to finalize and implement. Greece's creditors estimate the country needs 12 billion euros to meet payments on current debt up to the middle of next month. On Monday, Greece missed its second payment to the IMF in two weeks, bringing its arrears to 2 billion euros.

Next Monday, Greece is due to pay the European Central Bank (ECB) 4.2 billion euros. A default would force the ECB to cut off emergency loans which are keeping banks in Athens solvent.

Quick aid

Late on Tuesday, the European Commission submitted a formal proposal to the EU-wide fund known as the European Financial Stability Mechanism (EFSM) to rush aid to Greece to avoid a default on July 20. The EFSM was set up at the start of the eurozone financial crisis with 60 billion euros in lending capacity.

The Commission's decision has met with objections from the UK, Denmark and Sweden.

The EFSM distributed 48.5 billion euros as part of Ireland's and Portugal's rescue and has 11.5 billion euros left. Greece needs 7 billion euros by Monday to make the ECB bond payment plus interest, and to pay its 2 billion euros arrears to the IMF.

Opinion polls published late Tuesday by Kapa Research found 72 percent of Greeks surveyed thought the deal was necessary. The majority blamed Europe for the "tough measures."

US Treasury Secretary Jacob Lew is due in Frankfurt on Wednesday to meet European Central Bank President Mario Draghi to discuss the Greek bailout. He is then expected in Berlin on Thursday to meet Finance Minister Wolfgang Schäuble, before going to Paris to meet French Finance Minister Michel Sapin.

jm/kms (AFP, Reuters)