 "Greece, EU strike deal on Euro 86-billion bailout talks")
Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on a Euro 86-billion ($95-billion) bailout to keep the near-bankrupt country in the single currency.
The terms imposed by international lenders, led by Germany, in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity. This could fracture his government and lead to an outcry in Greece.
The terms imposed by international lenders, led by Germany, in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity. This could fracture his government and lead to an outcry in Greece.
Read more from our special coverage on "GREECE CRISIS"
“Clearly, the Europe of austerity has won,” Greece’s reform minister George Katrougalos said. “Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of banks. So, it is an agreement that is practically forced upon us,” he told BBC Radio.
Greece, however, aimed to reopen its banks on Thursday, bankers said. Facing a wave of withdrawals, the banks were shut two weeks ago.
If the summit on Greece’s third bailout had failed, Athens would have been staring at an economic abyss, with its banks on the brink of collapse and the prospect of having to print a parallel currency and exit the euro.
“The agreement was laborious, but it has been concluded. There is no Grexit,” European Commission President Jean-Claude Juncker told a news conference after 17 hours of talks. He dismissed suggestions Tsipras had been humiliated, though the summit statement repeatedly insisted Greece must now subject much of its public policy to prior agreement by bailout monitors.
Tsipras, elected five months ago to end five years of suffocating austerity, said he had “fought a tough battle” and “averted the plan for financial strangulation”.
Conditional agreement
Greece won conditional agreement to receive a possible Euro 86 billion ($95 billion) over three years. As part of the deal, euro zone finance ministers will discuss on Monday how to keep Greece financed during the time it will need to agree on a bailout. None of the options appeared easy, officials said.
Athens must meet a tight timetable for enacting unpopular reforms of value-added tax, pensions, budget cuts, bankruptcy rules and an EU banking law that could be used to make big depositors take losses.
German Chancellor Angela Merkel said she could recommend “with full confidence” that the Bundestag authorise the opening of loan negotiations once the Greek parliament had approved the entire programme and passed the first laws.
The Bundestag is due to vote on Greece on Friday.
Tsipras returned to Athens on Monday and was expected to meet aides and coalition partners. Facing a Wednesday deadline, he could put all the required measures in one parliamentary bill.
Meanwhile, Merkel’s allies defended the deal, with her chief of staff, Peter Altmaier, saying Europe had won and Germany “was part of the solution from the beginning to the end”!
But in Greece, relief was mixed with anger at Germany. “Listen, it is some sort of victory but it is a Pyrrhic victory because the measures are very strict,” Marianna, 73, told Reuters.
Malta’s prime minister, Joseph Muscat, said Greece had been “humiliated”, mostly as a result of its refusal to take an offer made to it two weeks ago.
Asked whether the tough conditions imposed on Greece weren’t similar to the 1919 Versailles treaty that forced crushing reparations on a defeated Germany after World War I, Merkel said: “I won’t take part in historical comparisons, especially when I didn’t make them myself.”
The deterioration of the Greek economy since Tsipras won office in January, particularly in the past two weeks, had led to a much higher financing need, she said.
A senior EU official put the cost to Greece in the past two weeks of turmoil at Euro 25-30 billion. A euro zone diplomat said it might be closer to Euro 50 billion.
State assets
Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets worth Euro 50 billion, including recapitalised banks, in a trust fund beyond government reach, to be sold primarily to repay debt. In a gesture to Greece, about Euro 12.5 billion of the proceeds would go to investment in Greece, Merkel said.
The Greek leader had to drop his opposition to a full role for the International Monetary Fund in the next bailout, which Merkel had insisted on to win parliamentary backing in Berlin.
In a sign of how hard it might be for Tsipras to convince his own Syriza party to accept the deal, Labour Minister Panos Skourletis said the terms were unviable and would lead to new elections this year. Six sweeping measures, including spending cuts, tax increases and pension reforms, must be enacted by Wednesday night and the entire package endorsed by parliament before talks could start, the leaders decided.
In almost the only concession after imposing its tough terms on Tsipras, Germany dropped a proposal to make Greece take a ‘time-out’ from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.
Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favourable terms in June and held a referendum last week to reject it. Only France and Italy worked to try to soften the terms being imposed on Greece.
Some diplomats questioned whether it was feasible to rush the package through the Greek parliament in three days. Tsipras was set to sack ministers who did not support him and make dissident Syriza lawmakers resign from their seats, people close to the government said.
Even if this week’s rescue succeeds, EU diplomats question whether Greece will stay the course on a three-year programme.
Euro zone finance ministers were tasked with finding sources of immediate bridge funding for Greece to prevent it defaulting on a key payment to the ECB next Monday. Greece needs Euro 7 billion of funding by July 20, when it must make a bond redemption to the ECB, and Euro 12 billion by mid-August, when another ECB payment is due.
On Monday, the ECB maintained emergency funding for Greek banks to keep them afloat this week, said a source.
BACK TO SQUARE ONE?
The terms agreed to by the parties suggest they differ very little from the original ones laid out by the ‘troika’ (IMF, ECB and European Commission) and put to a referendum by Greece
PREVIOUS PROPOSALS
Tax and pension reforms: The troika insisted Greece overhaul its VAT system, saying the current one provided multiple exemptions and discounts, and made enforcement impossible. Creditors also demanded pension reforms
Privatisation and labour market: The creditors demanded privatisation of lucrative state assets. European Commission chief Juncker argued for labour market reforms
Government spending: Creditors pressed for government spending cuts. While the government pledged to cut military spending by Euro 100 million this year and Euro 200 million the next, creditors demanded an immediate cut of Euro 400 million
NEW PROPOSALS
Tax and pension reforms
- Greece will have to simplify VAT rates, widen the tax base, cut on pensions and make the national statistics agency independent
- A clear timetable will be needed to implement an ambitious pension reforms agenda; cuts in public administration to restrict expenditure
- Privatisation programme possibly involves transfer of Euro 50 billion of assets to external and independent funds. Of this, Euro 25 billion might be used to recapitalise Greek banks
- Greece will have to initiate market reforms to strengthen the financial sector and eliminate political interference. On reforms in the labour market, Greece will have to review collective bargaining, industrial action and collective dismissals
- There will be no haircuts on debt, though there is a possibility of debt re-profiling