There’s been some confusion about whether Greek banks will or will not open on Monday, but a senior banker has now said they will. Helena Smith reports:

After three weeks of being closed and with capital controls, banks will reopen on Monday, a senior finance official in Athens has said, ending speculation that they would remain shut for a while longer.

Earlier in the day there were concerns that it would be technically too difficult to open branches without special preparation. But the official confirmed that lenders would re-open for specific operations barring foreign transfers.

“We are expecting a decree either later tonight or tomorrow with the specifics,” he told me. “What is sure is that they will only open for domestic banking operations, capital controls will still be in place for foreign transactions.”

But, he added, the government would facilitate cash withdrawals from ATMs by allowing customers to withdraw weekly amounts of 60 euro daily limits. Business transactions would also be fast-tracked in an effort to re-energise the economy. “No funds will be transferred abroad. Restrictions will be in place for at least six months although my gut feeling is that capital controls will probably last a lot longer.”

With Greek bailout talks back on, former US Federal Reserve chairman Ben Bernanke says that Europe needs to hold up its end of the bargain:

Specifically, is the euro zone’s leadership delivering the broad-based economic recovery that is needed to give stressed countries like Greece a reasonable chance to meet their growth, employment, and fiscal objectives? Over the longer term, these questions are evidently of far greater consequence for Europe, and for the world, than are questions about whether tiny Greece can meet its fiscal obligations.

Unfortunately, the answers to these questions are also obvious. Since the global financial crisis, economic outcomes in the euro zone have been deeply disappointing.

He also points to the strength of the German economy as a problem:

Nobody is suggesting that the well-known efficiency and quality of German production are anything other than good things, or that German firms should not strive to compete in export markets. What is a problem, however, is that Germany has effectively chosen to rely on foreign rather than domestic demand to ensure full employment at home, as shown in its extraordinarily large and persistent trade surplus, currently almost 7.5 percent of the country’s GDP. Within a fixed-exchange-rate system like the euro currency area, such persistent imbalances are unhealthy, reducing demand and growth in trading partners and generating potentially destabilizing financial flows.

... Germany could help restore balance within the eurozone and raise the currency area’s overall pace of growth by increasing spending at home, through measures like increasing investment in infrastructure, pushing for wage increases for German workers (to raise domestic consumption), and engaging in structural reforms to encourage more domestic demand. Such measures would entail little or no short-run sacrifice for Germans, and they would serve the country’s longer-term interests by reducing the risks of eventual euro breakup.

He concludes:

I’ll end with two concrete proposals. First, negotiations over Greece’s evidently unsustainable debt burden should be based on explicit assumptions about European growth. If European growth turns out to be weaker than projected, which in turn would make it tougher for Greece to grow, then Greece should be allowed greater leeway after the fact in meeting its fiscal targets.

Second, it’s time for the leaders of the euro zone to address the problem of large and sustained trade imbalances (either surpluses or deficits), which, in a fixed-exchange-rate system like the euro zone, impose significant costs and risks. For example, the Stability and Growth Pact, which imposes rules and penalties with the goal of limiting fiscal deficits, could be extended to reference trade imbalances as well. Simply recognizing officially that creditor as well as debtor countries have an obligation to adjust over time (through fiscal and structural measures, for example) would be an important step in the right direction.

The full version is here:

Greece and Europe: Is Europe holding up its end of the bargain?

Elsewhere in Athens of course, fires are raging. Here is a video showing emergency workers battling the blazes:

Dozens of residents have been forced to leaves their houses as at least 80 fire engines and three aircraft try to stop the spread of the flames.

MegaTV has confirmed the report that one person has died, said to be a tourist in Lakonia, affectec by respiratory problems from the thick smoke in the area.

Ahead of the reshuffle being announced, the Greek prime minister had a visit from nobel prize-winning economist Joseph Stiglitz. The US economics professor is holding talks with Tsipras, as I write, says Helena.

His visit has elicited wry commentary in the Greek media that perhaps he might also be offered a job in the new cabinet. Stiglitz, like many US economists, has been scathing of Europe’s handling of the crisis and its emphasis on fiscal targets being met.

Over in Athens our correspondent Helena Smith is hearing that the reshuffle is expected to be announced “any moment.”

The cabinet shake up is expected to see at least three government ministers moved. The energy minister Panagiotis Lafazanis, the deputy social security minister Dimitris Stratoulis and the deputy defense minister Kostas Isychos are all expected to go (the latter has already resigned).

The labour minister Panos Skourletis, a close ally of prime minister Alexis Tsipras, is also expected to step down with media reports suggesting he will be replaced by his deputy the US-trained Rania Antonopoulou. The deputy finance minister Nadia Valavani, who resigned earlier this week after describing the new bailout agreement as Greece’s tombstone, will also be replaced - along, rumour has it, with the government spokesman Gavriel Sakellarides.

Tsipras is keen to show he is in control and moving fast - so much so that the new cabinet will be sworn at around 7:30 PM according to the reports. Senior cadres this afternoon told me the aim was to inject new life into the government but none underplayed the task at hand.

And here’s the Eurogroup statement as promised:

The Eurogroup welcomes the successful completion of the relevant national procedures related to the decision to grant in principle a 3-year ESM stability support to Greece, and especially the recent swift legislative steps taken by the Greek parliament as a first step towards rebuilding trust.

Following a formal decision taken by the ESM Board of Governors, the institutions were entrusted with the task of swiftly negotiating a Memorandum of Understanding (MoU) detailing the policy conditionality attached to the financial assistance facility.

In line with the Euro Summit statement of 12 July, the Eurogroup discussed the issue of possible short-term bridge financing to ensure that the Greek sovereign can clear its arrears to the IMF and to the Bank of Greece and honour its debt obligations in the coming weeks. In this respect, the Eurogroup welcomes the decision of the Council to grant short-term financial assistance to Greece, using up to EUR 7.16 bn of the funds still available under the European Financial Stability Mechanism (EFSM).

In this context, the Eurogroup agrees in principle to transfer the 2014 SMP equivalent profits to be held at an ECB account to ensure legally enforceable rights to protect non euro area Member States from a risk of loss resulting from an EFSM programme to Greece. This will be confirmed by a letter from the President of the Eurogroup to the ESM. The SMP profits will be exclusively used either as compensation to non-euro area Member States in case of losses or will be returned to the euro area Member States, if not needed. Should Greece fail to repay the EFSM loan, the available instruments to recover the debt and protect the Union budget will be used, confirming that the risks of not concluding swiftly the negotiations on the ESM programme remain fully with Greece.

The Eurogroup welcomes the very constructive approach taken by the non-euro area EU Member States. The Eurogroup commits to ensure proper transparency and to strengthen cooperation with the non-euro area EU Member States. The Eurogroup confirms that all matters of general application, including the EU budget and the EFSM, are to be discussed and decided upon in the Council involving all Member States.

The Greek cabinet reshuffle could come in the next few hours, local media are now reporting.

There could be problems if the loan runs out before a new deal is reached, my colleague Jennifer Rankin points out:

And another development:

Here’s Finland’s finance minister:

And a Eurogroup statement is expected shortly:

And here is a statement from the European Stability Mechanism indicating that negotiations can now officially begin:

The Board of Governors of the European Stability Mechanism (ESM) approved today a decision to grant, in principle, stability support to Greece in the form of a loan programme. This decision follows the completion of national procedures that involved parliamentary approval in some of the ESM Member States. The basis for the Board of Governors’ approval was the assessment by the institutions and the proposal by ESM Managing Director Klaus Regling.

This in-principle decision paves the way for the institutions to negotiate a Memorandum of Understanding (MoU) detailing the agreed macroeconomic reforms, or policy conditionality, linked to the ESM financial assistance facility. Simultaneously, the ESM Managing Director will prepare a proposal for the loan contract with Greece, the Financial Assistance Facility Agreement (FFA).

Once the MoU is finalised, the Board of Governors must take a further decision, involving national parliaments in some Member States, to approve the MoU as well as the FFA proposal. The European Commission must sign the MoU. Finally, the ESM Board of Directors must adopt the FFA and agree to disburse the first tranche of the loan.

Klaus Regling, ESM Managing Director, said: “We welcome that the Greek government and parliament voted in favour of the reforms with a very broad majority. This has paved the way for today’s decision in principle to start negotiations on a new programme for the benefit of Greece. Let me stress that thanks to reform implementation, Greece had started to grow again in 2014, unemployment had begun to decline, and the country had regained some market access. The ESM has a remaining lending capacity of €455 billion but only a small part of this sum will be needed. The ESM stands ready to provide financial assistance when our Members fully adopt an ESM programme.”

And here’s how German MPs voted:

Manfred Weber, leader of the centre-right European People’s Party, the biggest bloc in the European parliament, has welcomed the various parliamentary votes backing talks for a new Greek bailout.

But he warned it was only the start of a long and difficult process (which I think we probably already knew):

But despite the loan agreement, and contrary to what had been suggested earlier, there are now reports that Greek banks will NOT now open on Monday.

More from Dombrovskis:

EC vice president Valdis Dombrovskis said he hoped a three year bailout programme could be agreed with Greece within a few weeks.

The way is clear now Greece’s key eurozone partners have voted in favour of starting negotiations on a new bailout using the European Stability Mechanism.

Dombrovskis said a debt restructuring would be part of the talks. He told a press conference:

On debt I would expect this being a part of the negotiations, because this is also something the IMF insists on.

There is also a clear conclusion of the Euro Summit that the IMF should be a part of the third programme.

(Quotes courtesy of Reuters)

The comments came as a €7bn bridging loan from the European Financial Stability Mechanism was agreed.

Once the Greek’s receive the €7bn bridging loan, they can pay the €3.5bn due to the ECB on Monday as well as clearing the €1.5bn arrears it owes to the International Monetary Fund. The IMF would not be involved in any new bailout without these payments being cleared.

And here’s the official statement from the European Council:

On 17 July 2015, the Council adopted a decision granting up to €7.16bn in short term financial assistance to Greece under the European Financial Stabilisation Mechanism (EFSM).

The loan will have a maximum maturity of three months and will be disbursed in up to two instalments. It will allow Greece to clear its arrears with the IMF and the Bank of Greece and to repay the ECB, until Greece would start receiving financing under a new programme from the European Stability Mechanism (ESM).

And here’s the relevant paragraph addressing the concerns of the UK and other non-eurozone members about being left carrying the can if Greece did not repay the loan:

A mechanism has been designed so as to ensure that non-euro area member states do not carry any risk. Under the decision, the exposure of non-euro area member states will be fully guaranteed by liquid collateral under legally binding arrangements. If Greece were unable repay the loan in accordance with its terms, any liabilities incurred by non-euro area member states would be immediately reimbursed.

There are reports Tsipras may delay a reshuffle of his cabinet because of the emergency situation caused by the wildfires. Reuters reports:

Dozens of Athens residents fled their homes on Friday as wildfires fanned by strong winds and high temperatures burned through woodland around the Greek capital, sending clouds of smoke billowing over the city.

The fires are compounding the problems facing the government of Prime Minister Alexis Tsipras, which is struggling to obtain a fresh bailout from foreign creditors.

Tsipras, who may delay a reshuffle of his cabinet - expected on Friday - because of the emergency, urged calm as more than 80 firefighters with 18 fire engines and three aircraft battled the flames, which a Reuters photographer said were near homes.

Meanwhile it has been reported that one person has died as a result of the fires.

As the fires continue, prime minister Alex Tsipras has been briefed on the situation:

The Latvian parliament has also reportedly given the green light to begin negotiations on a third Greek bailout.

More on the bridging loan:

And Jeroen Dijesselbloem’s spokesman has given some timings:

Meanwhile Greek energy minister Panagiotis Lafazanis, one of the Syriza rebels who voted against the bailout deal on Wednesday, is widely expected to leave the cabinet in the forthcoming reshuffle.

Earlier Reuters reported his replacement as energy minister could be labour minister Panos Skourletis.

Still in his job at the moment Lafazanis has apparently been visiting the scene of the fires, with not entirely favourable results:

Many people, including loyal reader Kizbot, point out that while Germany votes, Greece burns.

Large wildfires are now burning in Peloponnese, Athens and Evia, with reports that some residents on Mount Hymettus are fleeing their homes.

Angela Merkel has voted, in the throng:

Ralph Brinkhaus, a CDU member, has argued that Grexit could still happen if Greece cannot reform.

The Bundestag is now hearing from one of CDU MPs who plans to reject talks with Greece about a third bailout:

Many in the City are unconvinced that a third Greek bailout will succeed.

Ipek Ozkardeskaya of London Capital Group explains:

Although the very much expected Greece-EU deal is almost sealed, the market remains sceptical on Greece’s future in the Eurozone.

The bailout package, as agreed, is too strict to fuel the growth engine in Greece. The €86bn aid package is going to be a financial relief for couple of more years. In the absence of significant aid to investment, we will be discussing the Grexit once that money would have melted.

Not all German MPs are best pleased with their finance minister:

Half an hour to go until the German parliament votes. MPs are still offering opinions, but we’ve heard from the main players.

Back in the Bundestag, the parliamentary group leader of Angela Merkel’s CDU party, Volker Kauder, has backed the chancellor:

On top of everything else, Greece now has to deal with a large fire breaking out on the outskirts of the capital:

*ZING*

The debate continues, with Thomas Opperman, the chairman of the Social Democratic Party pledging that only two of his MPs will oppose the plan.

Opperman offers Schäuble some support, saying it was right to prepare alternative plans:

(Plan B means Schäuble’s temporary Grexit escapade, which Merkel has already admitted lacked support at last Sunday’s euro summit)

Mystery solved:

Ouch:

That’s Alternative for Deutschland - the country’s eurosceptic party.

Sahra Wagenknecht of Die Linke, the left-wing party, follows Schäuble.

She’s arguing that that Greek deal is badly flawed, because it doesn’t provide the debt relief that Greece desperately needs. We’ll be back here soon enough once it fails, she adds, and Schäuble knows that too.

Wolfgang Schäuble ends his speech by asking the Bundestag to vote in favour of negotiating a third deal for Greece.

It’s a decision between our hearts, and our heads - but we must try to make this new package work, he concludes.

Schäuble clearly believes Greece needs debt relief, showing his own doubts about the chances of this new bailout deal working:

Schäuble is going to leave a dent in that lectern if he keeps thumping it....

It’s Wolfgang Schäuble’s turn to speak....

Göring-Eckardt doesn’t share Angela Merkel’s appreciation for Schäuble’s tireless work.....

Reminder, you can watch the debate here.

Katrin Göring-Eckardt of the Green party is now speaking, and criticising Merkel for taking such a hard line with Greece. She speaks of a Europe where the strong push the weak around.

Merkel, though, is busy tapping away on her mobile. Answering birthday wishes, perhaps.

We shouldn’t forget that Sigmar Gabriel was taking a much harder line on Greece earlier this month, warning that Greece had ‘torn down the last bridge” towards a compromise. What a difference a deal makes.

Sigmar Gabriel has reminded German MPs of the suffering in Greece:

Here’s a summary of the second half of Merkel’s speech:

Merkel told the Bundestag that Greece’s expressions of intention were not enough. It was necessary to see deeds.

Talking of the marathon of negotiations that went on over days, nights and hours, she then bestowed her praise on her finance minister Wolfgang Schauble, telling him “a very fulsome thank you”. The Bundestag reacted with a sea of applause.

Merkel went on to stress that the only alternative to the deal would have been “predictable chaos”.

Many people, she said, had “doubt and worries” as to whether Greece had the strength to emerge from its crisis.

“But I’m convinced we’d be irresponsible if we didn’t at least try this way”.
Europe is strong and robust, she said. Germany too. But in the long term, Germany can only do well if Europe does well.

She then stressed how the crisis had proved the strength of the Franco-German relationship, because DESPITE all their many differences, now and in the past, they had managed to come together.

This she said, should be an example of how the whole of Europe should work.

She predicted that Europe would “come out of this stronger than it went in” five years ago.

Then she concluded by making the issue far more global. Issues such as Ukraine, the refugee crisis and terrorism were pressing and when the decision was made on Greece “I can only say we didn’t just decide about Greece”… this is a decision about having a strong Europe, and much more was at stake than just the Eurozone.

And finally, in a direct address to her domestic audience, she concluded her address by saying:

“We’re doing this for Greece, as much as for the German people.”

Sigmar Gabriel, Germany’s vice-chancellor (and the most senior social democrat in the coalition) speaks next.

Gabriel says it is vital that Grexit is now off the table. But he also criticises the first two Greek bailouts, saying they haven’t helped:

Try quoting the Guardian next time, Gregor....

Gregor Gysi, the head of the left-wing Linke party is now speaking, and warning that the German government has made terrible mistakes.

Amid heckling, he criticises Merkel for allowing Schäuble to push his idea of a temporary Grexit.

Gysi also reminds MPs that Germany has done awfully well out of the euro, making its exports more competitive.

MPs listened in respectful silence during Merkel’s speech - such a contrast with Wednesday night’s drama in Athens (or your average Prime Minister’s Questions in London).

And they give her a rousing round of applause as she exits the lecturn.

Angela Merkel ends her speech by assuring MPs that Europe will come out of this crisis stronger.

Merkel insists that the Greek deal is the only option, the alternative is chaos.

Her message to doubtful MPs is that we must give Greece a chance, and reminds them that Germany’s success is tied up with Europe’s.

She admits there were disagreements with Paris:

Applause ripples across the debating chamber as Merkel thanks Schäuble for working “tirelessly”.

Merkel is now criticising Alexis Tsipras’s government for sending the Greek economy into reverse this year -- but she’s encouraged by Wednesday night’s vote:

On debt relief, Merkel says that haircuts are not allowed within the eurozone.

Merkel is covering some familiar themes, saying that trust in Greece has been lost recently.

Solidarity and reforms must go together

We could not simply give into all Greece’s demands, as they would have violated European treaties.

Angela Merkel opens the debate, telling MPs that Europe has seen unprecedented drama in Greece in recent days.

Merkel cites the bank closures and capital controls which Greece has now experienced for almost three weeks:

Norbert Lammert’s voice breaks as he says that with Philipp Missfelder’s death, “the Bundestag has lost an engaged and respected parliamentarian”.

German MPs are now in the chamber.

Merkel who is celebrating her 61st birthday today, has been given a bouquet of flowers. Most of the 630 MPs have just come from the funeral of the 35 year old CDU politician Philipp Missfelder, who died suddenly from a lung embolism earlier this week, leaving a wife and two young children.

That’s why many of them are dressed in black.

Norbert Lammert, the Bundestag president is now paying tribute to the politician, who was a rising star in the party.

Germany isn’t the only eurozone country asking its MPs to vote on the Greek bailout plan.

Austria is also due to debate it today, and likely to approve the deal.

Both Latvia and Estonia are expected to take it to parliament too. Other country’s have already given their assent; France even voted before Greece!

Here’s a full explanation:

Visitors to Greece are already feeling the impact of the austerity measures which creditors demanded, in return for opening talks on a third bailout:

Around 50 German MPs from Angela Merkel’s conservative alliance are expected to revolt against the government and vote no to a third Greek bailout in the Bundestag today.

My colleague Kate Connolly in Berlin reports:

In what is expected to be a heated and emotional debate, the 6th time in five years that the German parliament has taken a decision directly relating to the Greek crisis, the rebels say they will vote ‘nein’ out of anger at the German chancellor’s decision to offer Greece another bailout, having signalled at one point that she was willing to push for Greece to leave the Eurozone.

Other MPs are furious over the way Germany is seen to have acted towards Greece during the negotiations:

In a taster of what might come on Friday, Reinhard Bütikofer, a Green MEP, accused Schäuble of giving Germany a “heartless, imperious, and hideous” face.

Today’s vote isn’t in doubt because of the size of Germany’s grand coalition between Merkel’s CDU/CSU and the SPD.

One of Angela Merkel’s close allies has already pledged to vote in favour of negotiating a third Greek bailout: