Greek MPs backed a third €85bn (£60.7bn) bailout but the debt-laden nation faces more political uncertainty after the Syriza Prime Minister Alexis Tsipras called a confidence vote for next week.
Syriza swept to power in January on an anti-austerity platform but Mr Tsipras only won the Athens vote yesterday with the backing of opposition parties as 46 MPs in his party rebelled over the spending cuts and tax rises included in the bailout deal. Hardliner and former energy minister Panagiotis Lafazanis said he was “ashamed” of Mr Tsipras and declared Greece a “eurozone dictatorship”.
The conservative New Democracy leadership will not support the Syriza leader in the confidence vote, leaving Mr Tsipras – who won 149 of Greece’s 300 seats in January – facing a knife-edge survival fight and the possible splintering of his party.
Although the bailout agreement staves off the threat of a debt default – allowing Greece to repay €3.2bn to the European Central Bank next week – losing the vote would herald fresh elections in September. Greece veered close to a eurozone exit in July, forcing Syriza to sign up to more brutal austerity in a U-turn to avert the collapse of its financial system.
Berenberg bank economist Holger Schmieding said: “A new popular vote would offer two advantages for him. First, he can influence the selection of Syriza candidates, forcing the recalcitrant left-wingers around Lafazanis out of the group. Second, holding new elections while he is still popular, and before most of the new fiscal cuts bite, gives him the best chance to win a fresh mandate.”
The Greek bailout has to be ratified by national parliaments including arch-critic Germany. It came as figures revealed that the pace of growth across the eurozone slowed to 0.3 per cent between April and June, thwarting hopes of an advance at least as strong as the 0.4 per cent seen in the first quarter. The 0.4 per cent growth in Germany was weaker than expected and the French economy ground to a halt.
Experts were disappointed by the eurozone’s performance, which came despite plunging inflation boosting consumer wallets and a €1.1trn money-printing programme launched by the European Central Bank. Inflation in the single currency bloc was confirmed at 0.2 per cent in July.
Portugal’s 0.4 per cent expansion was slightly weaker than feared and the Netherlands managed just 0.1 per cent. Ironically Greece generated growth of 0.8 per cent despite the extended uncertainty over the bailout.
CMC Markets analyst Michael Hewson flagged up particular concerns over Germany’s performance: “As probably the most efficient economy in Europe, the failure to post significantly better numbers is concerning given the fact that the euro remains at its lowest level for years, while the fiscal boost of lower oil and food prices doesn’t appear to be having any significant trickle-down effect.”
ABN Amro analyst Nick Kounis added that the eurozone would recover momentum but said the slowdown “could reflect some fallout from the Greek crisis and potentially weakness in the Chinese economy”.
The UK is expanding twice as fast as the eurozone after the economy grew 0.7 per cent between April and June.Reuse content