Greek government defends bailout deal ahead of vote

ATHENS, Greece, Aug 13 (AP) — The Greek government defended its new bailout program Thursday as tough but essential to avoid the nation's financial collapse, as it faced a rebellion in the governing Syriza party ahead of a parliamentary vote on the deal.

The draft bill for the three-year rescue package worth about 85 billion euros ($93 billion) in loans includes harsh spending cuts and tax hikes that Prime Minister Alexis Tsipras has said he has no option but to implement.

His radical left Syriza party won elections in January on the promise to repeal similar budget austerity imposed in return for Greece's two previous bailouts.

The bill is expected to pass thanks to votes from opposition parties.

But the tough terms of the new deal — agreed on this week with creditor negotiators from the European Central Bank, European Commission and International Monetary Fund — have left Tsipras battling severe dissent from within his party.

Anti-austerity demonstrations were planned outside parliament during the Thursday evening debate. And twelve left-wing politicians announced this week they will create a new anti-bailout movement, with former energy minister and government dissenter Panagiotis Lafazanis saying he'll join.

The draft bill was being debated at committee level ahead of a full assembly debate Thursday evening, with a vote expected after midnight. The deal then needs the approval of eurozone finance ministers, who are due to meet Friday afteroon, as well as approval from several other countries' parliaments, including Germany's.

Germany, who was the largest single contributor to Greece's two previous bailouts, has been the country's harshest critic and has maintained a cautious stance.

German deputy finance minister Jens Spahn said that "Germany isn't the only country that is still asking questions at the moment."

Spahn told Deutschlandfunk radio that the Greek government clearly recognizes its country must change if it wants to remain in the eurozone — "a lot has been achieved." But he said it was normal "that questions are asked."

Spahn stressed the importance to Germany of getting a clear signal from the IMF that it will remain a part of the bailout program and said there still needs to be discussion about details of a planned privatization fund that will sell off Greek state-owned property.

Greece is anxious for the deal to be completed in time for it to receive funds ahead of a big debt repayment to the ECB due on Aug. 20. Without the money, it would default — reviving concerns that it might drop out of the euro, with disastrous economic consequences.

Finance Minister Euclid Tsakalotos insisted Greece does not want an interim loan, which some creditors have proposed as a solution if the main bailout deal cannot be finalized with all creditors in time.

However, senior EU finance officials overnight tasked the European Commission with drawing up a "contingency plan" for a new interim loan as a safety net, said an EU official who was not permitted to speak on the record due to departmental rules.

If needed, the loan would take care of Greece's Aug. 20 debt payment and buy more time for eurozone members to tweak the plan.

Speaking in parliament, Tsakalotos said the government has pledged to stick to the creditors' demand of achieving a primary surplus — the budget without taking into account debt servicing — of 3.5 percent of gross domestic product by 2018, but that the country will have a more gradual path to achieve the target than originally foreseen.

Greece will implement most of the savings in 2017 instead of this year and next year. Tsakalotos said there would be a package of measures in October 2015 that will be implemented in 2017.

Progress on Greece's reforms will be reviewed every three months.

"I think there are very difficult measures in this package. In some of these we have tried to play with time" and stagger their implementation, such as gradual increases on diesel fuel taxes for farmers, to soften the blow, Tsakalotos said.

The broad terms of the bailout were agreed on after months of acrimonious wrangling and failed negotiations that have cost the Greek economy dearly.

The economy is expected to have taken a severe hit in July, when talks on the bailout collapsed, leading the government to close the banks and stock market for about a month.

In the three months before that, however, the economy grew by an unexpected 0.8 percent compared with the previous quarter, the national statistics agency estimated Thursday.

Analysts said the jump could have been due to a strong start to the tourism season and the government's suspension of some budget cuts. They note, however, that the economy likely took a big hit after the second quarter due to the capital controls.

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