Greece clears final reform hurdle before new bailout talks

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ATHENS – Greece’s radical left-led government emerged bloodied but alive early Thursday from a key vote in parliament, which overwhelmingly approved new creditor-demanded reforms despite a revolt among hardliners in the main coalition partner.

The reforms to the judiciary and banking systems were the final hurdle the financially-battered country was obliged to clear before it can start talks with its creditors on a third bailout worth around 85 billion euros ($93 billion).

Without the money Greece would face financial ruin and forced exit from the euro currency club.

Lawmakers voted 230-63 in favor of the measures, following a whirlwind debate that ended at 4 a.m. (0100 GMT). Another 5 members of the 300-seat house voted present, a kind of abstention.

Prime Minister Alexis Tsipras was unable to forestall a second revolt in a week among his own Syriza party lawmakers, but had no trouble passing the draft legislation with the backing of pro-European opposition parties.

Government spokeswoman Olga Gerovasili conceded that there is a clear rift within Syriza, but would not say whether rebels would be expelled.

“From this point on, party procedures will be followed in order to deal with the problem,” she said after the vote.

The number of disaffected Syriza lawmakers, who see the reforms as a betrayal of the anti-austerity platform that brought their party to power in January, shrunk slightly compared to last week’s similar vote – from 38 to 36. But that is still roughly a quarter of all party lawmakers.

Addressing parliament before the vote, Tsipras said the reforms were a necessary price to pay to keep Greece alive after stormy talks with its creditors nearly collapsed earlier this month.

“We have chosen a compromise that forces us to implement a program in which we do not believe, and we will implement it because the alternatives are tough,” he told lawmakers. “We are summoned today to legislate under a state of emergency.”

Tsipras also ruled out resigning.

“The presence of the left in this government isn’t about the pursuit of office, it’s a bastion from which to fight for our people’s interests,” he said. “And as far as I’m concerned, I won’t abandon this bastion, at least of my own free will.

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Tsipras said approval would give Greece breathing room to quash speculation that the country will be forced to abandon the euro, and help it regain market confidence and eventually tap bond markets again.

Before the debate got underway, about 10,000 people demonstrated outside parliament, protesting the latest measures to overhaul Greece’s judicial and banking sectors. Minor violence marred the end of the protest when a few teenagers threw petrol bombs at riot police, but no injuries or arrests were reported.

Negotiations with creditors are now expected to start soon.

“From this point on, the government will focus all its attention on negotiating efforts in order that the agreement is concluded,” Gerovasili said. She also pledged action to tackle corruption and tax evasion, address the “humanitarian crisis” in a country where more than a quarter of the workforce is jobless and poverty has soared, and restart the recession-mauled economy.

The Syriza-led coalition government hopes the new bailout talks can conclude before Aug. 20, when Greece must repay a debt worth more than 3 billion euros ($3.3 billion) to the European Central Bank.

On Wednesday, the ECB provided a new vital cash injection to Greece’s battered banks. A European banking official told The Associated Press the ECB decided to increase emergency liquidity to Greek banks by 900 million euros (0 million) – the second such cash injection in just under a week.

Fearing a run by depositors flocking to take their savings out of Greek banks, the government imposed capital controls more than three weeks ago, restricting daily withdrawals to 60 euros ($65) per account holder. Extra ECB liquidity means that Greek banks will still be able to hand out cash.

Greece has relied on bailout loans totaling 240 billion euros since 2010 after it was locked out of international money markets. It nearly crashed out of the eurozone this month, after relations between Athens and its creditors hit rock-bottom, and was only saved by a last-minute U-turn from Tsipras.

Thursday’s vote was Tsipras’ second crunch test in parliament in a week.

Many in Syriza, including former finance minister Yanis Varoufakis, voted against last week’s austerity measures, which included a big hike to sales taxes that took effect on Monday. But Varoufakis voted in favor of the new reforms Thursday.

An increase in the number of dissenters would have left Tsipras politically hamstrung. Although he would still retain a nominal parliamentary majority – as he has shown no inclination to expel rebels – Tsipras would depend on the support of opposition parties to pass any new reforms.

Syriza rebels in Thursday’s vote included the firebrand parliament speaker, Zoe Konstantopoulou. In a letter to Greece’s president and Tsipras, Konstantopoulou asserted the measures were a “violent attack on democracy,” arguing that lawmakers had been given very little time to study the voluminous bill.

Tsipras has accused party critics of acting irresponsibly.

The reforms approved Thursday are aimed at reducing the country’s court backlog and speeding up revenue-related cases. Greek lawyers’ associations oppose them, arguing that they will have the opposite effect.

Justice Minister Nikos Paraskevopoulos conceded that the government would have preferred changes, but added that Greece is “in a state of emergency” and the alternative to accepting the proposed reforms would be the country’s forced exit from the eurozone.

“Out of two problems, I chose the milder one,” he said.

Lawmakers also approved reforms related to banking union mechanisms, aimed at reducing the risk for European governments from bank crises.

In Brussels, Pierre Moscovici, the European Union’s top economy official, said he hopes the bailout deal can be signed by mid-August, although he acknowledged that means Greece has to meet a “punishing” schedule.

In return for Greece’s bailouts, successive governments have had to enact harsh austerity measures to try to get public finances into shape. Though the annual deficit has been reduced dramatically, the country’s debt burden has risen as the Greek economy has shrunk by around a quarter.

The European Union’s statistics agency announced Wednesday that Greece was making some progress on the debt front at the start of 2015, improvement that was largely erased by the bank closures and other recent events.

Following repayments to European creditors and the International Monetary Fund, Eurostat said Greece’s debt fell to 301 billion euros at the end of the first quarter from 317 billion at the end of 2014. That took the country’s debt burden down to 168.8 percent from 177.1 percent.

Greece’s debt still remains the highest in the 19-country eurozone by a wide margin.