Greece debt crisis: Greek government faces massive austerity package amid popular backlash at Germany's €50bn 'coup'

Brussels hails dramatic deal but mood in Athens threatens to turn ugly

German chancellor Angela Merkel giving a final press conference at the end of a Eurozone leader summit on the Greek crisis
German chancellor Angela Merkel giving a final press conference at the end of a Eurozone leader summit on the Greek crisis

Greece’s leaders face the challenge of pushing a massive austerity package through their parliament, agreed after 17 hours of negotiations in Brussels, amid angry talk of a German “coup” and the first signs of a popular backlash on the streets of Athens.

Alexis Tsipras, the Greek Prime Minister, tried to cast the result of the often acrimonious talks in the best possible light for his country. “I think the vast majority of the Greek people will support this … because they understand that we have given our best to the bitter end,” he said.

But his insistence that “we will keep fighting to regain our lost sovereignty” reflected widespread accusations that he had capitulated in the face of intimidation by Greece’s eurozone creditors, the other 18 nations whose leaders had spent the previous night battling to persuade him to bow to their demands.

At dawn on Monday, the creditors unveiled an agreement to restart negotiations that will grant Athens a third bailout worth up to €86bn (£61bn) and prevent Greece becoming the first nation to crash out of the single currency.

Although the deal prompted an initial sigh of relief from financial markets around the world, the stringent terms demanded by the German Chancellor, Angela Merkel, for signing off on it, including a bold attempt to take control of €50bn of Greek sovereign assets, provoked widespread accusations of an attempted “coup” against the Athens government. Others expressed fears that Germany’s threats to expel Greece from the euro unless it capitulated meant Berlin had burnt through a disastrous amount of its political capital across the Continent in one night.

Meanwhile on Monday night around 800 Greeks, some shouting “This is a coup” in an echo of social media protests, gathered outside parliament in Athens to demonstrate against the new austerity proposals.

German chancellor Angela Merkel giving a final press conference at the end of a Eurozone leader summit on the Greek crisis

The agreement could also still crumble, forcing Greece out of the single currency as early as next week. Negotiations on a new bailout deal will only begin if the Greek parliament passes a series of contentious laws on Wednesday to raise VAT, cut pension spending and liberalise the country’s jobs market. And the country needs at least €7bn in funding to pay sovereign debts due on Monday. This will have to take the form of an emergency short-term loan to Greece from its European partners, since the full bailout deal simply cannot be concluded in time.

The domestic legislation due to be put forward by Athens on Wednesday is expected to face strong resistance from the left wing of Mr Tsipras’s Syriza party as the reforms are the very creditor demands that were overwhelmingly rejected by a national referendum in Greece on 5 July.

Unless that legislation is passed, Greece’s banks could yet find themselves forced into insolvency by the European Central Bank by as early as Thursday, putting the country on course for an accidental “Grexit”.

The chances of Mr Tsipras forcing the legislation through the Athens parliament were significantly boosted after the opposition parties said they would back the Brussels agreement. That means the legislation should have majority support from MPs even if a significant number of parliamentarians from his own Syriza party rebel.

But there may be another obstacle in the form of the outspoken, far-left house Speaker Zoe Konstantopoulou, who is opposed to further austerity and who had said she will not quit, even if she is asked. The Speaker is not obliged to introduce the bills received from the government to be put to the vote, and some MPs fear she will seek to block the process. She could be voted out from her post, but that will take time. “I think it can be done, but it really is an extraordinary amount of stuff to do,” said the centrist opposition MP Antigone Lyberaki, who will back the new deal.

Another potential stumbling block is the bridge financing that Athens will need to see it through next week even if the negotiations start. It is unclear where the money will come from. France has proposed using the remaining funds from the European Financial Stabilisation Mechanism bailout fund to make the loan – but that ran into fierce opposition from Downing Street, since using the EU-guaranteed pot would leave the UK financially exposed.

If Greek MPs do pass the required legislation, eurozone finance ministers will hold a conference call on Thursday over whether to recommend a third bailout. At that point, other national legislatures will also be asked for their approval, including Germany, which will hold a special parliamentary session before a vote.

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