Alexis Tsipras may have his hands full in Athens, trying to push through reforms that will secure a three-year €86 billion bailout against the will of many in his hard-left Syriza party.
But there are also divisions in Berlin.
The German government is sending mixed signals on whether or not it will immediately approve the bailout deal, which Athens urgently needs.
On Tuesday morning the Greek finance minister, Euclid Tsakalotos, reached a deal on the technical details with negotiators from the country's creditors – the European Union, the European Central Bank, and the International Monetary Fund – as well as the bailout fund, the European Stability Mechanism.
The euro zone finance ministers are due to meet in Brussels on Friday afternoon to sign off on the bailout.
However, German finance minister, Wolfgang Schäuble, who has long been skeptical about the viability of a third bailout in five years for Greece, is saying he won’t be rushed into a decision.
He has said he wants until the end of the week to assess the agreement. On Wednesday his ministry sent a note to euro-zone counterparts looking for clarifications on the draft agreement, known as the Memorandum of Understanding, or MoU.
We’re still taking bridge financing into consideration if it’s not possible to pay out a first tranche in August. Jürg Weissgerber, German finance ministry spokesman
In a two-page paper entitled "preliminary check of MoU," the finance ministry described the Greek reform plans on debt sustainability and privatizations as "not yet compliant."
On the other hand, there is a different tone emanating from Chancellor Angela Merkel’s office and from the economics ministry, headed by Sigmar Gabriel, who is leader of the Social Democrats in the governing right-left coalition.
“The direction of the agreement is right,” said, Ms. Merkel’s spokesman Steffen Seibert.
However, he said, it was too early to give a full assessment of the deal, which only reached Berlin on Tuesday evening.
The skeptical tone coming from within the finance ministry is said to have irritated Mr. Gabriel. “We regard the state of the negotiations positively,” an economics ministry source told Handelsblatt.
The government’s “supposed position,” detailed in the finance ministry’s paper had caused some “surprise,” several media outlets reported.
“There is no agreed government position,” a source in Mr. Gabriel’s ministry said.
Martin Schulz, the president of the European parliament and a senior member of Mr. Gabriel’s SPD party, urged Berlin to act swiftly. “It is good for the euro and therefore for Germany, that the negotiations with Greece have been concluded,” he told Der Spiegel on Thursday. “The Bundestag should therefore vote for it swiftly.”
In the face of possible tensions in the Berlin coalition, the tone emerging from the finance ministry on Wednesday evening was somewhat more conciliatory.
“We want an agreement, because we recognize how much Greece has shifted,” a source told Handelsblatt. “However, before we can go to the Bundestag, there is a need for clarification on important questions.”
Yet, time is of the essence.
Athens needs a bailout agreement by next Thursday, the deadline for a €3.4 billion repayment to the ECB.
However, with the German chancellor flying to Brazil on Wednesday, there will have to be a vote in the German parliament by Tuesday at the latest.
Yet, if the finance ministry drags its heels, Greece may have to get an interim loan instead.
“Bridge financing is not off the table,” finance ministry spokesman Jürg Weissgerber said on Wednesday. “We’re still taking bridge financing into consideration if it’s not possible to pay out a first tranche in August to meet the outstanding obligations.”
For Mr. Schäuble, it makes no sense to sign off on a deal he doesn’t think is viable.
His ministry’s paper on the MoU says that not all the measures are specified fully and there is “no full clarity on the direction of policies.”
The Germans want more details, for example, about when the planned €50 billion privatization fund will get to work. There are currently disagreements about who exactly is going to have authority over the fund, and in the draft deal, there are plans for a task force set up to decide on the issue by December. “Just to set up a task force is not sufficient,” the German paper notes.
Furthermore the ministry is concerned that Greece’s annual budget targets had been scaled back. For example, Greece is to be allowed run a budget deficit of 0.25 percent this year, instead of attaining a planned surplus of 1 percent.
Outstanding issues for clarification also included whether the IMF completely affirms the agreed conditions of the bailout deal and whether debt sustainability was ensured, although any debt relief was only likely to follow later.
Deputy finance minister, Jens Spahn, said on Thursday that while Germany would talk about debt relief, such as extending the maturity of loans, a haircut was not an option.
"A so-called haircut is not legal, where you give up some debt ... but under the term debt relief you can also talk about extending maturities, having a period without making interest payments or redemption payments and we can talk about that, we have always said that," Mr. Spahn told Deutschlandfunk.
Mr. Schäuble has made no secret of his doubts about the wisdom of yet another bailout for Greece, which follows on two previous bailouts worth €240 billion since 2010.
At the make-or-break E.U. summit in mid-July at which Greece agreed to the creditors’ conditions, he even brought up the option of Greece temporarily leaving the euro zone. The German finance minister maintains that Greece’s debts are not sustainable and that it is not possible to reduce those debts and also remain part of the single currency.
Meanwhile, the European Commission has already given its blessing to the agreement. “All last details have been clarified,” commission spokeswoman, Annika Breidthardt, told reporters on Wednesday.
Commission President Jean-Claude Juncker spoke to Ms. Merkel and French president Francois Hollande on Tuesday to tell them about the details of the memorandum. Brussels is said to be very pleased with the constructive approach in Athens, according to sources.
The Greek prime minister, Mr. Tsipras, now has to make sure that a sweeping list of reform measures, or “prior actions” that form part of the deal, are passed by the Greek parliament.
The parliament will meet on Thursday to discuss the deal, and a vote is expected sometime after midnight. Although there are many hard-left rebels within the governing Syriza party, it is likely that the laws will be approved, as Mr. Tsipras can rely on the pro-European opposition parties.
The next hurdle for Greece is the Eurogroup meeting on Friday afternoon, and persuading the Germans in particular that the deal is good enough to put before parliament.
In particular, the IMF role is crucial. The Washington-based fund’s current Greece program runs out in March 2016. And it has said it will only decide on whether to participate in the third bailout in the fall, after the first review of the implementation of the bailout.
That means that the German parliament will be asked to vote on the bailout without knowing if the IMF is even on board going forward.
The IMF’s involvement has long been a core condition in Ms. Merkel’s Christian Democrats party. The uncertainty will not go down well.
In July, 65 members of her party had already refused to support opening talks with Greece on the bailout.
“For me the further participation of the IMF is urgently required,” Michael Fuchs, the party’s deputy parliamentary leader told Handelsblatt.
Siobhán Dowling covers German and European politics for Handelsblatt Global Edition. Ruth Berschens heads the paper's Brussels bureau. Donata Riedel covers politics from Berlin. To contact the authors: [email protected], [email protected], [email protected].