Greece has finally struck a deal to re-open talks on a new bailout deal with its European partners.
Following a 17-hour marathon summit between the leaders of the Eurozone’s 19 member states — beating the previous record for the longest ever meeting held by European leaders — an agreement was finally reached that could form the framework for a new bailout. In total, the European leaders estimate that Greece will have financing needs of between €82 billion and €86 billion over the duration of the programme which will come from the European Stability Mechanism (ESM) and the IMF.
However, the deal still needs to be passed by national parliaments and there is likely to be resistance on all sides following months of fractious negotiations during which trust between the SYRIZA-led Greek government and its partners threatened to break altogether.
Here are the key details of the agreement:
- €50 billion worth of Greek assets to be transferred to a fund, based in Athens and overseen by the Greek authorities, and scheduled for privatisation. The proceeds of these sales will go to pay for at least a part of €25 billion earmarked for bank recapitalisations, 50% of the remaining €25 billion to pay down the country’s debt and the rest to be spent on investment.
- The Greek government must pass a number of reform measures into law including on streamlining VAT and broadening the tax base, upfront pension reforms to improve sustainability and introducing “quasi-automatic spending cuts” if the country looks set to miss its surplus targets before creditors can finalise the terms of the bailout.
- Bridging finance of €7 billion in July and a further €5 billion by mid August to be arranged in order to allow Greece to meet its repayment obligations to the ECB and the IMF. The country is due to repay €3.5 billion plus interest to the ECB on July 20.
- Commitment to introduce further reforms to pensions, product and energy markets, labour market regulations and financial sector reforms and to roll back legislation that backtracked on previous commitments made by the government (or suggest “compensatory equivalents for the vested rights that were subsequently created”).
- There was some commitment to debt relief, a key demand of the Greek government, but only “after the first positive completion of a review” — so not for some time yet.
Here are some of the best of the responses and background to the deal so far:
Reuters (video) — “Strict conditions to be met”
Paul Krugman (NYT) — Killing the European Project
Olivier Blanchard (IMF) — Greece: Past critiques and the path forward