August 13, 2015 / 8:54 AM / in 2 years

Greek ruling party heads toward split before bailout vote

ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras’s Syriza party looked set to split after the leader of its far-left faction called on Thursday for a new movement to fight a bailout deal that lawmakers are due to vote on in the coming hours.

Greek Prime Minister Alexis Tsipras delivers his speech as he attends a news conference after a meeting at the Greek Ministry of Infrastructure, Transport and Networks in Athens, Greece, August 12, 2015. REUTERS/Christian Hartmann

Days after striking a deal with foreign creditors, Tsipras is asking parliament to approve a bailout agreement that pledges tax rises and spending cuts in exchange for 85 billion euros in fresh loans. It will be Greece’s third financial rescue program agreed with creditors in five years.

The vote will test the strength of a rebellion by anti-austerity Syriza lawmakers, which could raise pressure on Tsipras to call elections as early as September.

Parliamentary speaker Zoe Konstantopoulou, one of the Syriza hardliners who oppose the deal, snubbed a request from Tsipras to speed up handling of the bailout bill so that it can be voted on well before euro zone finance ministers meet in Brussels to vet the agreement deal on Friday.

As midnight passed in Athens, the plenary debate had yet even to start as Konstantopoulou raised a series of procedural questions and objections, meaning no vote can be held at least until well into the early hours of Friday.

Some lawmakers accused Konstantopoulou, a lawyer, of deliberately stalling. “It’s a crazy situation. She is torturing us. She is delaying the whole process because she has a different view from the prime minister,” said one lawmaker, who declined to be named.

The rebels’ leader, former energy minister Panagiotis Lafazanis, took a step toward breaking away from Syriza, a coalition of leftist groups which stormed to power in January promising to reverse austerity policies demanded by the euro zone and International Monetary Fund creditors.

“The fight against the new bailout starts today, by mobilizing people in every corner of the country,” said a statement signed by Lafazanis and eleven other Syriza members posted on the far-left faction’s Iskra website.

The statement called for founding a “united movement that will justify people’s desire for democracy and social justice”, although it did not explicitly call for a new party or a split from Syriza.

The government responded by saying the move “finalizes his decision to choose a different path from that of the government and Syriza”.

The rebels insist the government should stand by the promises on which it was elected, to reverse the waves of spending cuts and tax rises which have had a devastating effect on an already weak economy over the past few years.

Parliament, however, is expected to approve the bailout agreement by a comfortable margin when it finally votes since opposition parties have promised their backing for the government to ensure Greece does not return to financial chaos.

Once the bill is passed, the euro zone finance ministers are expected to pave the way for disbursement of aid before a 3.2 billion euro debt payment to the European Central Bank falls due next week.

“SERIOUS CONCERNS”

Tsipras has faced a rebellion among about a quarter of his 149 lawmakers since agreeing last month to the bailout deal under the threat of a banking collapse and euro zone exit.

He is expected to tighten his grip over most of Syriza when the party holds a special congress to debate its differences, after which he is widely expected to call early elections to seal popular support for the deal.

Finland, one of the euro zone countries most skeptical about pouring yet more aid into Greece, backed the bailout on Thursday. But parliament in Germany, the biggest contributor to the deal, has yet to approve it.

A poll showed on Thursday that more than half of Germans oppose the third bailout while the vast majority do not believe Athens will implement economic reforms it demands.

Tsipras has long argued Greece cannot repay all its huge debts and demanded a partial write-off. However, the creditors - the European Commission, ECB and IMF - have agreed to consider the issue only after a review in October of the government’s implementation of its side of the deal.

An analysis seen by Reuters said the creditor institutions had “serious concerns” about the sustainability of Greek public debt. However, sustainability could be achieved without any write-off by extending grace periods before Athens has to start paying interest and principal on its bailout loans.

Months of bitter negotiations between Athens and the creditors have shaken an economy which last year had been pulling out of a long depression before turning down again.

Data on Thursday showed the economy returned to growth in the second quarter, confounding economists’ expectations of a deepening recession, but it is likely to have worsened since then as the government imposed capital controls on June 29 to save the Greek banking system from collapse.

The bailout deal is based on forecasts that the economy will shrink between 2.1 and 2.3 percent this year. Nikos Magginas, an economist at National Bank, said the surprise data offered hope the fall could be less than 2 percent.

additional reporting by Michele Kambas, Tina Bellon and Michelle Martin; writing by David Stamp and Deepa Babington; editing by John Stonestreet

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