Laws passed, Greece to open bailout talks

A second package of reform measures was adopted despite a rebellion that may bring early elections.

Protestors stand behind a huge Greek flag in front of the Greek parliament in central Athens, on 29 June 2015. Picture: AFP.

ATHENS/BRUSSELS - Greece's creditors prepared on Thursday for the start of bailout talks in Athens, after lawmakers adopted a second package of reform measures before dawn despite a left wing rebellion that may bring early elections.

In a sign of how the goal of coming to grips with the country's debt is swiftly sliding even further away, Greece's most influential think tank predicted a sharp drop back into recession.

That adds to the headwinds facing leftwing Prime Minister Alexis Tsipras, who must negotiate a bailout worth up to €86 billion with sceptical lenders while struggling to hold his divided Syriza party together.

After another marathon session that ended in the early hours of Thursday, the Greek parliament voted overwhelmingly to approve the second package of reform measures.

But 36 Syriza lawmakers rebelled, forcing Tsipras to rely on opposition votes.

While his personal popularity is high, a renewed drop into recession after a modest recovery last year would test his government's ability to push through the tough mix of tax hikes, spending cuts and economic reforms demanded by the lenders.

A spokeswoman for the European Commission, one of the three creditor institutions alongside the European Central Bank and the International Monetary Fund, welcomed the Greek vote. Formal negotiations are due to start on Friday.

Greek officials say they aim to wrap the talks up and have a deal approved in parliament by 20 August, when a 3.4 billion euro repayment to the ECB falls due.

The new IMF representative for Greece, Delia Velculescu, and officials from the Commission and the ECB are expected in Athens on Friday. Talks will be on two parallel tracks, one dealing with a new memorandum of understanding on actions Greece has to take and a second stream on the loans it hopes to obtain.

But already there have been doubts about whether the severely weakened Greek economy can support the programme after a six year-long slump that has cut national output by a quarter and sent unemployment over 25 percent.