IMF calls for Greece debt relief ahead of bailout vote

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Greeks Fear Cost of New Deal

A secret International Monetary Fund study showed Greece needs far more debt relief than European governments have been willing to contemplate so far as fractious parties in Athens prepared to vote on a sweeping austerity package demanded by their lenders.

The IMF's stark warning on Greece's debt was leaked as Prime Minister Alexis Tsipras struggled to persuade deeply unhappy leftist lawmakers to vote for a package of austerity measures and liberal economic reforms to secure a new bailout.

In an interview with state television, he said that although he did not believe in the deal, there was no alternative but to accept it to avoid economic chaos.

The study, seen by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept "deep upfront haircuts" on existing loans.

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IMF calls for Greece debt relief ahead of bailout vote
Members of the Communist-affiliated PAME labor union hold a banner reading ''No to the giant new bailout'' during an anti-austerity rally at Omonia square in Athens, Wednesday, July 15, 2015. Greece has a tentative rescue deal, but relief that it is not falling out of the euro is unlikely to last long: its economy has taken a huge hit. Months of political brinkmanship, uncertainty and bank closures have hurt companies and brought everyday business to a standstill. (AP Photo/Petros Giannakouris)
Members of the Communist-affiliated PAME labor union march during an anti-austerity rally in Athens, Wednesday, July 15, 2015. Greece has a tentative rescue deal, but relief that it is not falling out of the euro is unlikely to last long: its economy has taken a huge hit. Months of political brinkmanship, uncertainty and bank closures have hurt companies and brought everyday business to a standstill. (AP Photo/Petros Giannakouris)
Members of the Communist-affiliated PAME labor union shout slogans during an anti-austerity rally in Athens, Wednesday, July 15, 2015. Greece has a tentative rescue deal, but relief that it is not falling out of the euro is unlikely to last long: its economy has taken a huge hit. Months of political brinkmanship, uncertainty and bank closures have hurt companies and brought everyday business to a standstill. (AP Photo/Petros Giannakouris)
Members of the Communist-affiliated PAME labor union shout slogans during an anti-austerity rally in Athens, Wednesday, July 15, 2015. Greece has a tentative rescue deal, but relief that it is not falling out of the euro is unlikely to last long: its economy has taken a huge hit. Months of political brinkmanship, uncertainty and bank closures have hurt companies and brought everyday business to a standstill. (AP Photo/Petros Giannakouris)
Riot police guard near an anti-austerity protest in Athens, Wednesday, July 15, 2015. Greece has a tentative rescue deal, but relief that it is not falling out of the euro is unlikely to last long: its economy has taken a huge hit. Months of political brinkmanship, uncertainty and bank closures have hurt companies and brought everyday business to a standstill. (AP Photo/Emilio Morenatti)
Demonstrators gather near the Greek Parliament during a rally against the government's agreement with its creditors in Athens, in central Athens, Tuesday, July 14, 2015. The eurozone's top official says it's not easy to find a way to get Greece a short-term cash infusion that will help it meet upcoming debt repayments. (AP Photo/Emilio Morenatti)
Anti-austerity placards, some reading in Greek: "neonazis out", are seen ready to be used ahead of a demonstration in central Athens, Wednesday, July 15, 2015. Greek Prime Minister Alexis Tsipras faced a revolt in his left-wing party and workers' calls for strikes ahead of Wednesday's Parliament vote on a bailout deal meant to prevent the country's economy from collapsing. (AP Photo/Emilio Morenatti)
Anti-austerity demonstrators march along a street during a protest in central Athens, Wednesday, July 15, 2015. Greek Prime Minister Alexis Tsipras faced a revolt in his left-wing party and workers' calls for strikes ahead of Wednesday's Parliament vote on a bailout deal meant to prevent the country's economy from collapsing. (AP Photo/Emilio Morenatti)
People walk in front of the Greek Parliament in central Athens, Tuesday, July 14, 2015. The eurozone's top official says it's not easy to find a way to get Greece a short-term cash infusion that will help it meet upcoming debt repayments. (AP Photo/Emilio Morenatti)
Members of the Communist Party-affiliated trade union PAME demonstrate in central Athens, marking a 24-hours public sector and pharmacists strike on July 15, 2015 against the new package of austerity measures. Greece geared up for a parliamentary vote on draconian reforms demanded by eurozone creditors in exchange for a huge new bailout, just hours after a bombshell report from the International Monetary Fund criticised the deal. AFP PHOTO / ANDREAS SOLARO (Photo credit should read ANDREAS SOLARO/AFP/Getty Images)
Pro-communist supporters demonstrate in front of the finance ministry in central Athens, marking a 24-hours public sector and pharmacists strike on July 15, 2015 against the new package of austerity measures. Greece geared up for a parliamentary vote on draconian reforms demanded by eurozone creditors in exchange for a huge new bailout, just hours after a bombshell report from the International Monetary Fund criticised the deal. AFP PHOTO / ANDREAS SOLARO (Photo credit should read ANDREAS SOLARO/AFP/Getty Images)
A security officer walks along a track at a closed central train station during a 24-hour strike of Greece's railway, in Athens, Wednesday, July 15, 2015. Lawmakers on Wednesday began debating the austerity bill Greece must pass before the country can start talks on a third international bailout, amid growing anger among governing left-wing Syriza party members. (AP Photo/Petros Giannakouris)
A man sits and begs for money, as pedestrians walk by outside of a National Bank, in central Athens, Tuesday, July 14, 2015. The eurozone's top official says it's not easy to find a way to get Greece a short-term cash infusion that will help it meet upcoming debt repayments. (AP Photo/Petros Karadjias)
ATHENS, GREECE - JULY 14: A man begs on the streets of Athens on July 14, 2015 in Athens, Greece. Greek Prime Minister Alexis Tsipras is meeting members of his party to discuss the eurozone bailout deal before a meeting in parliament to begin implementing bailout reforms. (Photo by Christopher Furlong/Getty Images)
A man walks past "Greek Railways'' at the central train station during a 24-hour strike of Greece's railway, in Athens, on Wednesday, July 15, 2015. Lawmakers on Wednesday began debating the austerity bill Greece must pass before the country can start talks on a third international bailout, amid growing anger among governing left-wing Syriza party members. (AP Photo/Petros Giannakouris)
Anti-austerity demonstrators march during a protest in central Athens, Wednesday, July 15, 2015. Greek Prime Minister Alexis Tsipras faced a revolt in his left-wing party and workers' calls for strikes ahead of Wednesday's Parliament vote on a bailout deal meant to prevent the country's economy from collapsing. (AP Photo/Emilio Morenatti)
A protester argues with police while holding a Greek flag on the stairs leading to the Greek Parliament in Athens on July 13, 2015, during an anti-EU demonstration calling for the dismissal of accords between Greece and its European creditors and further austerity measures. Eurozone leaders struck a deal July 13 on a bailout to prevent debt-stricken Greece from crashing out of the euro forcing Athens to push through draconian reforms in a matter of days. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
ATHENS, GREECE - JULY 13: Protesters gather outside the Greek parliament to demonstrate against austerity after an agreement for a third bailout with eurozone leaders on July 13, 2015 in Athens, Greece. The bailout is conditional on Greece passing agreed reforms in parliament by Wednesday which includes streamlining pensions and rasing more raise tax revenue. (Photo by Christopher Furlong/Getty Images)
ATHENS, GREECE - JULY 13: A man sits alone with his thoughts as protesters gather outside the Greek parliament to demonstrate against austerity after an agreement for a third bailout with eurozone leaders on July 13, 2015 in Athens, Greece. The bailout is conditional on Greece passing agreed reforms in parliament by Wednesday which includes streamlining pensions and rasing more raise tax revenue. (Photo by Christopher Furlong/Getty Images)
A woman burns the flag of the ruling party Syriza, surrounded by journalists, in front of the Greek parliament in Athens, during an anti-EU demonstration in Athens calling for a no to any agreement with the creditors on July 13 , 2015. Eurozone leaders struck a deal on a bailout to prevent debt-stricken Greece from crashing out of the euro forcing Athens to push through draconian reforms in a matter of days. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
ATHENS, GREECE - 2015/07/13: Leftists demonstrated in Syntagma square against the new agreement between the Greek government and its international creditors during the Eurogroup Summit that announced new austerity measures that will be imposed. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE - 2015/07/13: Leftists demonstrated in Syntagma square against the new agreement between the Greek government and its international creditors during the Eurogroup Summit that announced new austerity measures that will be imposed. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE - 2015/07/13: Leftists demonstrated in Syntagma square against the new agreement between the Greek government and its international creditors during the Eurogroup Summit that announced new austerity measures that will be imposed. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE - 2015/07/13: Leftists demonstrated in Syntagma square against the new agreement between the Greek government and its international creditors during the Eurogroup Summit that announced new austerity measures that will be imposed. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE - 2015/07/13: Leftists demonstrated in Syntagma square against the new agreement between the Greek government and its international creditors during the Eurogroup Summit that announced new austerity measures that will be imposed. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE - JULY 14: A man cleans off the latest batch of anti-austerity graffiti from the walls of the Bank of Greece on July 14, 2015 in Athens, Greece. Greek Prime Minister Alexis Tsipras is meeting members of his party to discuss the eurozone bailout deal before a meeting in parliament to begin implementing bailout reforms. (Photo by Christopher Furlong/Getty Images)
ATHENS, GREECE - 2015/07/13: Leftists demonstrated in Syntagma square against the new agreement between the Greek government and its international creditors during the Eurogroup Summit that announced new austerity measures that will be imposed. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: A protester holds a Greek flag at the anti-austerity protest outside the Greek Parliament. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: Protesters pose with a Greek flag next to the Tomb of the Unknown Solider, making a victory sign, at the anti-austerity protest. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: A protester holds up a banner at the anti-austerity protest outside the Greek Parliament. The banner reads 'Syriza's Deputies Don't Vote For The New Memorandum, The Only Left Thing Left To Do. #ThisIsACoup #NO-OXI DEMOCRACY NOT FUND ON THIS EUROPE'. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: Eleni Louka, a religious activist, rants against the EU and the government at the anti-austerity protest outside the Greek Parliament. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
Protesters stand behind a banner in Athens on July 13, 2015 while participating in an anti-EU demonstration calling for the dismissal of accords between Greece and its European creditors and further austerity measures. Eurozone leaders struck a deal July 13 on a bailout to prevent debt-stricken Greece from crashing out of the euro forcing Athens to push through draconian reforms in a matter of days. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
People pass by a graffiti showing a euro sign bleeding, in central Athens on July 14, 2015. Greek Prime Minister Alexis Tsipras was on July 14 holding meetings with his party, faced with the tough task of selling a new bailout deal that requires Athens to push through draconian reforms within two days. AFP PHOTO / ARIS MESSINIS (Photo credit should read ARIS MESSINIS/AFP/Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: Hundreds of Protesters have come to the anti-austerity protest outside the Greek Parliament. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: A protester poses for the press with a Greek flag at the anti-austerity protest on the steps leading up to the Greek Parliament. Riot police officers have secured the steps and watch him. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
SYNTAGMA SQUARE, ATHENS, ATTICA, GREECE - 2015/07/13: A riot police officer returns the Greek flag to the protester. Greeks assembled outside the Greek Parliament under the banner of 'We leave this Europe'. They called for the government to not give into the demands of the Greek creditors for more austerity measures, but rather to leave the Eurozone. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
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The Debt Sustainability Analysis is likely to sharpen fierce debate in Germany about whether to lend Greece more money, while it will be seen by many in Greece as a vindication of the government's plea for sweeping debt relief. A Greek newspaper called the report a slap in the face for Berlin.

German Finance Minister Wolfgang Schaeuble made clear in Brussels on Tuesday that some members of the Berlin government think it would make more sense for Athens to leave the euro zone temporarily rather than take another bailout.

The Greek Finance Ministry said it had submitted the legislation required by a deal Tsipras reached with euro zone partners on Monday to parliament for a vote on Wednesday.

Assuming Athens fulfils its end of the bargain this week by enacting a swathe of painful measures, the German parliament is due to meet in a special session on Friday to debate whether to authorize the government to open new loan negotiations.

"The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date - and what has been proposed by the ESM," the IMF said, referring to the European Stability Mechanism bailout fund.

An EU source said euro zone finance ministers and leaders had been aware of the confidential IMF figures when they agreed on Monday on a roadmap to a third bailout.

IMF Managing Director Christine Lagarde was present but the IMF did not make the updated assessment public, in contrast to a previous study that was released in Washington on July 2.

A ONE-WAY STREET

In the interview on Greek state television, Tsipras defended the deal he signed up to, saying it was better than the alternative of being forced out of the euro zone.

He said banks, closed for the past two weeks to prevent a flood of withdrawals that would collapse the banking system, would reopen once the deal had been fully ratified by parliaments in Greece and other European countries.

Tsipras could not conceal the bitterness left by last weekend's acrimonious euro zonesummit.

"The hard truth is this one-way street for Greece was imposed on us," he said.

Lawmakers from his ruling Syriza party and their allies argued behind closed doors about whether to back sweeping reforms the government must ram through parliament as it races to meet the terms of the bailout deal.

A poll in To Vima newspaper showed that more than 70 percent of Greeks believed there was no alternative to a deal and that parliament should pass it.

Having staved off a financial meltdown, Tsipras has until Wednesday night to pass measures tougher than those rejected in a referendum days ago. With as many as 30-40 hardliners in his own ranks expected to mutiny, Tsipras will likely need the support of pro-European opposition parties to muster the 151 votes he needs to pass the law in parliament.

Speculation has grown that the fractures caused by the bailout will be too much for the government to bear and Tsipras will be forced to step down. But he appeared to rule out an early exit or forming a national unity government with opposition parties.

"The worst thing a captain could do while he is steering a ship during a storm, as difficult as it is, would be to abandon the helm," he said.

He gave no explicit indications of plans for a cabinet reshuffle, saying only that his priority was restoring stability and that party matters could wait.

Syriza and its right-wing nationalist junior coalition ally held separate meetings to prepare for parliament sittings to pass the laws, which include plans for tax hikes, pension reforms and tighter supervision of the government's finances.

It was a spectacular turnaround for a Syriza party voted into power in January promising to end years of cuts and recession in a country where one in four people is unemployed.

In Germany, the biggest contributor to euro zone bailouts, doubts lingered about whether Tsipras would stick to his word.

"There are many people, including in the federal government, who are quite convinced that in the interests of Greece and the Greek people that what we wrote down would have been much the better solution," Schaeuble said when asked about a German proposal on a "time-out" for Greece from the euro zone.

European Leaders Announce Greece Bailout Deal


GORDIAN KNOT

The Syriza party's junior coalition partner promised support, with the ambiguous caveat that it would only vote for bailout measures agreed before last weekend's summit in Brussels, which were less stringent. Opponents of the new measures plan strikes and protests in the coming days.

"I've taken the decision, this is a tough third bailout and I will not vote for it," Despoina Charalambidou, a deputy parliament speaker and Syriza lawmaker, told Vima FM radio.

"Why should I resign? I was elected on the basis of a certain manifesto, the Syriza program, which support these positions. I'm not giving up my seat."

Another obstacle could be parliamentary speaker Zoe Constantopoulou, who is key to the logistics of the vote and has been one of the creditors' most ferocious critics. Tsipras could try to force her out through a no-confidence vote but that would eat up precious time and political capital for the reform bills.

Austria's Chancellor Werner Faymann said a "Grexit" could not be ruled out despite the agreement, echoing findings by a Reuters poll of 60 economists, some of whom saw at least a 50 percent chance of Greece leaving the currency.

The poll, which was carried out in the 24 hours after news of the agreement broke, also pointed to scepticism about whether the deal was good for both Greece and Europe, and whether Greece had enough assets to sell to meet the terms of the deal.

Euro zone finance officials must find a way to give Greece bridge financing to keep the country afloat while the third bailout package is negotiated, especially to pay back loans owed to the European Central Bank that are due next week.

There has been mounting anger at the government and creditors as many Greeks decry what they see as the humiliation of their country being treated like a European colony.

The pain for Greece continued, with strict controls on withdrawals from cash machines and businesses being squeezed dry. A Greek trade federation called on the government to loosen capital controls to allow companies to make payments owed to overseas vendors, and pharmacists warned they were having difficulties getting supplies.

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