After bailout vote: Europe moves to restore funding to Greece

ECB raises emergency funding for Greek banks; EU to provide 7 billion euros in bridging finance

ATHENS: Europe moved to re-open funding to Greece’s stricken economy on Thursday after the parliament in Athens approved a new bailout programme in a fractious vote that left the government without a majority.

The European Central Bank (ECB) increased emergency funding for Greek lenders, although capital controls will have to remain to avoid a bank run when they reopen on Monday.

European Union (EU) finance ministers also approved 7 billion euros in bridging loans to keep Greece afloat, allowing it to make a bond payment to the ECB next Monday and clear its arrears with the International Monetary Fund (IMF).

The loans will be finalised on Friday provided Germany’s parliament approves a Berlin government request to open talks on a three-year bailout programme worth up to 86 billion euros.

The twin lifelines were a reward for Greek Prime Minister Alexis Tsipras after he won the backing of parliament in the early hours of Thursday for the tough reform measures demanded by creditors led by Germany.

But Tsipras was left weakened by a revolt in his left-wing Syriza party and is expected to reshuffle his cabinet to replace four ministers and deputy ministers who rebelled. Interior Minister Nikos Voutsis said a snap election could be held in September or October, “depending on developments.”

German Finance Minister Wolfgang Schaeuble, one of Greece’s sternest critics, questioned whether Athens would ever get a third bailout, even after the parliamentary vote. He suggested its financing needs were spiralling and a write-off outside the euro zone might be a better solution.

But the move by the Greek parliament was enough to persuade the ECB to raise Emergency Liquidity Assistance ELA for the banks by 900 million euros for a week to nearly 90 billion euros.

Published in The Express Tribune, July 17^th, 2015.