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 Euro zone leaders welcomed new budget proposals from Athens on
Monday as a basis for further negotiations to unlock billions of
euros in frozen aid and avert a default that could trigger a Greek
exit from the single currency area.
Stock markets also cheered, with European shares extending the
previous session's sharp rally and climbing to a three-week high on
hopes of a deal. But the euro fell on fears the plan would struggle
to win approval in Greek parliament.
Prime Minister Alexis Tsipras, who was voted into office in January
on a pledge to roll back years of austerity in a country battered by
recession, must keep his leftist Syriza party as well as his
creditors onside for a deal to stick.
Outspoken Syriza lawmakers voiced outrage at Tsipras's offer to
raise a range of taxes as well as pension and healthcare
contributions, which threaten to further increase hardship on Greeks
reeling from previous rounds of austerity.
"I believe that this program as we see it ... is difficult to pass
by us," deputy parliament speaker and Syriza lawmaker Alexis
Mitropoulos told Greek Mega TV.
"The prime minister first has to inform our people on why we failed
in the negotiation and ended up with this result," he said. "I
believe (the measures) are not in line with the principles of the
left. This social carnage ... they cannot accept it."
Officials of the three institutions representing Athens' creditors -
the European Commission, the European Central Bank and the
International Monetary Fund - were analyzing the Greek proposals
intensively in Brussels to see whether the numbers add up to make
Greek public finances sustainable.
The creditors may well come back and demand further savings or
reform measures in the drive to clinch a deal on Wednesday evening,
people familiar with the talks said.
If parliament fails to back a deal, Tsipras might be forced to call
a snap election or a referendum that would prolong the uncertainty.
Athens urgently needs money to avoid defaulting on a 1.6 billion
euro loan repayment due to the IMF next Tuesday.
Jitters over the risk of a default leading to capital controls have
prompted savers to pull billions of euros out of Greek banks,
forcing the European Central Bank to increase emergency lending to
keep them afloat.
With Greece perilously close to bankruptcy, it is unclear whether
lawmakers, for all their bluster, would ultimately pull the rug from
under Tsipras if he secures a deal.
"I believe the deal will pass parliament and will reconfirm the
government's majority," Dimitris Papadimoulis, a Syriza lawmaker at
the European Parliament, told Reuters.
"I do not believe that top Syriza lawmakers will want to be
responsible for bringing down a five-month-old government and a
prime minister who enjoys popular support of about 70 percent."
Opinion polls suggest most Greeks want to stay in the euro. Tsipras
can also likely count on support from opposition lawmakers, who want
to secure Greece's place in the euro, even though the government
says it cannot continue unless its own lawmakers back any deal it
brings to parliament.
"If (the government) does not have the parliamentary majority, it
cannot remain (in power)," government spokesman Gabriel Sakellaridis
said.
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The ECB raised the ceiling on emergency liquidity Greek banks can
draw from the country's central bank for the fourth time in a week
on Tuesday, a banking source told Reuters, declining to say by how
much.
DIFFICULTIES AHEAD
Although the mood after Monday's summit was broadly positive, there
have been several false dawns in the talks.
Tsipras appeared to have reached an understanding with the creditors
at the start of June, only to blast their demands as "absurd" in
parliament after running into a backlash at home.
In its proposal, Greece pledged to lift the retirement age gradually
to 67 and curb early retirement, but avoiding making concessions on
some so-called "red lines" like direct pension cuts or a mooted tax
hike on electricity.
Ahead of emergency talks in Brussels, he had spent hours with his
cabinet in an apparent attempt to secure ministers' backing. But
Tsipras returned home to accusations from some quarters of having
caved in.
"The government has fallen into a trap, I don't know to what extent
this can be implemented," said Pavlos Haikalis, a deputy with
Syriza's junior coalition partner, the Independent Greeks.
The exact contours of a final agreement are not clear. Eurogroup
finance ministers are expected to meet to approve a reform package
on Wednesday evening and put it to euro zone leaders for final
endorsement on Thursday morning.
But German Chancellor Angela Merkel, who is under pressure from
within her own ranks not to appear soft on Greece, has been more
cautious, saying there were no guarantees that a final agreement
could be reached.
Greek newspapers on Tuesday saw a deal in sight but warned that the
creditors could ask for tougher measures.
"The deal is not only visible but there are sound expectations that
it will be concluded in the next days," Greek daily Ethnos said.
"While this dissipates reasonable fears of catastrophic consequences
in the event of a failure in the negotiations, the difficulties are
ahead of us."
(Writing by Matthias Williams, editing by Deepa Babington and Paul
Taylor)
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