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Greece - EU

ECB raises funding for Greeks but fundamental problems not addressed, critics say

The European Central Bank decided Thursday to boost emergency funding for Greek banks after lawmakers in Athens passed a bailout-for-reforms deal. The parliament voted 229 in favour, 64 against with 6 abstentions. But Greek Prime Minister Alexis Tsipras lost the absolute majority of his coalition as 38 dissidents of his own Syriza party voted against.

Greek Prime Minister Alexis Tsipras smiles before a ruling Syriza party parliamentary group session in Athens, Greece, 15 July 2015.
Greek Prime Minister Alexis Tsipras smiles before a ruling Syriza party parliamentary group session in Athens, Greece, 15 July 2015. Reuters
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The ECB will add 900 million euros to the emergency fund, and this will provide for banks to continue to allow people to take a maximum of 60 euros per day from cash machines. Banks will re-open on Monday, but capital controls will not be lifted.

Critics say the latest agreement, which was heavily criticised by ex-minister of finance Yannis Varoufakis, does not address fundamental problems of the Greek economy.

“It’s just a further kicking of the can further down the road,” says Robert Oulds, director of the Bruges Group, a Eurosceptic thinktank established by Margaret Thatcher.

“It’s just delaying dealing with the debt and it is not addressing … the productivity of the Greek economy that was harmed by membership of the euro.

"This is just more delay; just a panic measure by the Greek government so that they can get the emergency funding from the ECB,” he says.

The International Monetary Fund also says that Greece needs relief and it is looking at it differently, it seems, than Germany, Finland and the Netherlands, where voices are strong to remove Greece from the eurozone.

“The IMF is looking at this situation from a purely economic perspective and they can see that the debt can’t be repaid,” says Oulds.

“Part of the problem has been created by the IMF itself which did not have a significant write-off of Greek debts at the very beginning of this process in 2009," he says. "The IMF has really done too little, far too late. But finally they’ve woken up to the fact the debt simply is unmanageable.”

Meanwhile, it is not surprising that Brussels desperately wants to keep Greece within the EU.

“If one country leaves then it shows that the euro is not a permanent project. It was meant to show that other countries may well leave," says Oulds. "There’s growing opposition to the euro in Italy and Spain. If there are suspicions that a country may be leaving the eurozone, that will create a situation where there will be capital flights from that country to safer havens.”

Even the most hawkish countries such as Finland will, in the end, toe Brussels’ line, even if one of the coalition parties, the Eurosceptic Finn party, is opposed to a Greek bailout, says Marco Siddi, a senior research fellow with the Finnish Institute of International Affairs.

“If the German Bundestag supports the third bailout for Greece, it is quite unlikely that Finland opposes it,” says Siddi.

“Even if the Finnish government takes a very hawkish position and opposes the bailout, there are still ways for the Eurogroup to circumvent the Finnish veto. That's because the ECB and the European Commission could say that the stability of the eurozone is in danger, and they could activate a special procedure that allows a majority vote on the European Stability Mechanism,” where 85 percent of the vote is enough, he says. “So Finland would be sidelined."

Meanwhile, the Greek governing Syriza party did vote in favour of the deal, though 38 MPs voted against. It is now unlikely that this situation will be tenable for Tsipras in the long-term.

“This parliament can not survive for much longer,” says political scientist Ioannis Andreadis of the Aristotle University of Thessaloniki.

“We cannot have elections right now during the summer and before finalising the agreement with our partners. But this is an awkward situation. There are members of the opposition parties voting in favour of the agreement and the decision made by the prime minister, and on the other hand you have members of the parliament that belong to the government party Syriza who have rejected this decision.”

Andreadis thinks snap elections may be held in autumn.

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