IMF’s Christine Lagarde tells Europe again: Cut Greece’s debt

Finance ministers of the 19-nation euro single currency group have approved the first 26 billion euros ($29 billion) of a vast new bailout package to help rebuild Greece’s shattered economy.

The deal was settled this week with worldwide creditors – the European Central Bank, European Commission and global Monetary Fund. It imposes harsh new spending cuts and tax increases in exchange for new loans.

Greek lawmakers approved their country’s draft third bailout on Friday after a almost 24-hour marathon parliamentary procedure culminated in a vote that saw the government coalition suffer significant dissent.

The deal also needs approval from the parliaments of several other countries, including Germany’s, before any funds can be disbursed.

“While an early election could be helpful in terms of removing hardliners from a Tsipras-led Syriza and, possibly, forcing the party to adopt a more centrist stance, the most likely outcome will be another fragmented parliament in which no party controls an absolute majority”, said Wolfgango Piccoli of Teneo Intelligence.

Former Energy Minister Panagiotis Lafazanis, who is opposed to the new bailout agreement, has dismissed it as “a negotiating fiasco” and said Tsipras could not “avoid the outcry by resorting guiltily and hurriedly to elections”.

But a revolt against leftwing PM Alexis Tsipras for agreeing to tax hikes and spending cuts demanded by worldwide lenders, despite being elected in January on an anti-austerity ticket, could plunge the country into the uncertainty of fresh elections. “We undertook the responsibility to stay alive over choosing suicide”.

State television said Mr Tsipras was expected to call a vote of confidence in his government, but that was not confirmed.

That clears the way for Eurozone finance ministers to approve the first batch of aid from the 85-billion-euro package later on Friday, though deep doubts remain in major creditor Germany about whether Athens will fulfill its pledges.

Earlier in the morning, the Greek parliament overwhelmingly voted in favour of adopting series of new austerity measures to secure the long-awaited bailout plan.

German Finance MinisterWolfgang Schaeuble, long the most powerful sceptic on the merits of giving Greece a third bailout to keep it in the EU’s common currency area, voiced optimism as the meeting began that it would end with an accord that will give Athens the funds needed to meet a loan repayment next week.

The decision came hours after MPs in Greece voted to support the details of the bailout.

“Let’s hope the Greek people will be able to make the best of this deal, to make the best of the reforms and the ability to reform and mitigate any negative consequences that surely exist”, he said.

A key sticking point has been whether to forgive some of Greece’s debts.

The head of the European Commission said that the deal’s approval meant that Greece would “irreversibly” remain in the eurozone.