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Sunday 4 December 2016

Greece faces tough conditions under deal with eurozone

* Greece to open talks on third bailout worth €86bn
* Merkel says will recommend to Bundestag once Greeks enact laws
* Juncker, Merkel deny talks humiliating for Tsipras
* Greek PM faces opposition to deal in his leftist Syriza party

Paul Taylor and Renee Maltezou

Published 13/07/2015 | 20:04

Anti-austerity protesters hold a Greek flag during a rally against the government's agreement with its creditors in front of the tomb of the unknown soldier in Athens (AP Photo/Petros Giannakouris)
Anti-austerity protesters hold a Greek flag during a rally against the government's agreement with its creditors in front of the tomb of the unknown soldier in Athens (AP Photo/Petros Giannakouris)
Pensioners are given priority tickets by a National Bank branch manager (R), as they wait to receive part of their pensions in Athens, Greece July 13, 2015. Euro zone leaders clinched a deal with Greece on Monday to negotiate a third bailout to keep the near-bankrupt country in the euro zone after a whole night of haggling at an emergency summit. REUTERS/Yiannis Kourtoglou
Youths hold a placard that reads 'Do we stay in Euro?' during an anti-austerity protest in central Athens, Greece, July 12, 2015. Euro zone leaders told near-bankrupt Greece at an emergency summit on Sunday that it must restore trust by enacting key reforms before they will open talks on a new financial rescue to keep it in the European currency area. REUTERS/Yiannis Kourtoglou
A security worker leaves a National Bank branch after bringing money in central Athens, Greece, July 13, 2015. Euro zone leaders clinched a deal with Greece on Monday to negotiate a third bailout to keep the near-bankrupt country in the euro zone after a whole night of haggling at an emergency summit. REUTERS/Yiannis Kourtoglou
Sunlight reflects off solar water heaters in Athens, Greece, July 12, 2015. Euro zone leaders told near-bankrupt Greece at an emergency summit on Sunday that it must restore trust by enacting key reforms before they will open talks on a new financial rescue to keep it in the European currency area. REUTERS/Cathal McNaughton
German Chancellor Angela Merkel arrives in her car at a euro zone leaders summit in Brussels, Belgium, July 12, 2015. Euro zone leaders will fight to the finish to keep near-bankrupt Greece in the euro zone on Sunday after the European Union's chairman cancelled a planned summit of all 28 EU leaders that would have been needed in case of a "Grexit". REUTERS/Philippe Wojazer TPX IMAGES OF THE DAY
A one Euro coin is seen in this file photo illustration taken in Rome, Italy July 9, 2015. Greece's 18 euro zone partners want Prime Minister Alexis Tsipras to push legislation through parliament before releasing funds to avert a state bankruptcy and starting negotiations on a third bailout programme. REUTERS/Tony Gentile/Files GLOBAL BUSINESS WEEK AHEAD PACKAGE - SEARCH "BUSINESS WEEK AHEAD JULY 13" FOR ALL IMAGES
Greek Prime Minister Alexis Tsipras speaks with German Chancellor Angela Merkel (L) and French President Francois Hollande at a euro zone leaders summit in Brussels, Belgium, July 12, 2015. Euro zone leaders will fight to the finish to keep near-bankrupt Greece in the euro zone on Sunday after the European Union's chairman cancelled a planned summit of all 28 EU leaders that would have been needed in case of a "Grexit". REUTERS/Stringer/Pool
IMF managing director Christine Lagarde and Finance Minister Michael Noonan and French Finance Minister Michel Sapin at the meeting in Brussels
Greek prime minister Alexis Tsipras
Taoiseach Enda Kenny arrives for the meeting in Brussels yesterday
Pro-EU protesters take part in a rally in front of the Greek parliament in Athens last week. Photo: Yannis Behrakis/Reuters
Greece still has a chance to access €1.2bn allocated to banks
A worker at the Athens Stock Exchange stands in the reception hall as an electronic board displays stock prices. Getty Images
A Greek national flag flies near the Parthenon temple on Acropolis Hill in Athens, Greece, on Saturday, Feb. 21, 2015. Photo: Yorgos Karahalis/Bloomberg
People withdraw cash from ATMs in central Athens on June 19, 2015, as a beggar lays on the pavement. The European Central Bank's decision-making governing council will hold an emergency session on June 19 to discuss a request from the Bank of Greece for an
Greek Finance Minister Euclid Tsakalotos (L) and former finance minister Yanis Varoufakis talk during a parliamentary session in Athens
Traders talk in front of the German share price index DAX board at the stock exchange in Frankfurt, Germany
Greek Finance Minister Yanis Varoufakis leaves the Prime Minister's office where a governmental council takes place in Athens June 15, 2015. Greece's government on Monday played down the prospect of submitting a new counter-proposal as sought by lenders in
Visitors look at the view across the city from beneath the Parthenon temple on Acropolis Hill in Athens, Greece
Passersby walk past an electronic stock quotation board outside a brokerage in Tokyo July 13, 2015. Japan's Nikkei share average rose on Monday as yet another strong rebound in Chinese shares soothed investor sentiment and as oil's fall boosted airliners and other energy users, though uncertainty on Greece's fate in the euro zone capped gains. REUTERS/Issei Kato

Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an €86bn bailout to keep the near-bankrupt country in the single currency.

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Just hours after the deal was settled in marathon all-night talks, doubts were already emerging about whether leftwing Prime Minister Alexis Tsipras would be able to hold his government together long enough to implement any bailout.

The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece.

"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 the banks. So it is an agreement that is practically forced upon us," he told BBC radio.

Read more: Greece crisis: Pressure on Tsipras as Greek outcry expected following bailout deal

If the summit on Greece's third bailout had failed, Athens would have been staring into 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 bargaining.

Greek prime minister Alexis Tsipras
Greek prime minister Alexis Tsipras
Taoiseach Enda Kenny arrives for the meeting in Brussels yesterday
Pro-EU protesters take part in a rally in front of the Greek parliament in Athens last week. Photo: Yannis Behrakis/Reuters
Greece still has a chance to access €1.2bn allocated to banks
A worker at the Athens Stock Exchange stands in the reception hall as an electronic board displays stock prices. Getty Images
A Greek national flag flies near the Parthenon temple on Acropolis Hill in Athens, Greece, on Saturday, Feb. 21, 2015. Photo: Yorgos Karahalis/Bloomberg
People withdraw cash from ATMs in central Athens on June 19, 2015, as a beggar lays on the pavement. The European Central Bank's decision-making governing council will hold an emergency session on June 19 to discuss a request from the Bank of Greece for an
Greek Finance Minister Euclid Tsakalotos (L) and former finance minister Yanis Varoufakis talk during a parliamentary session in Athens
Traders talk in front of the German share price index DAX board at the stock exchange in Frankfurt, Germany
Greek Finance Minister Yanis Varoufakis leaves the Prime Minister's office where a governmental council takes place in Athens June 15, 2015. Greece's government on Monday played down the prospect of submitting a new counter-proposal as sought by lenders in
Visitors look at the view across the city from beneath the Parthenon temple on Acropolis Hill in Athens, Greece

He dismissed suggestions that Tsipras had been humiliated even though the summit statement insisted repeatedly that Greece must now subject much of its public policy to prior agreement by bailout monitors.

"In this compromise, there are no winners and no losers," Juncker said. "I don't think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement."

Tsipras himself, 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".

But to get the accord through parliament by the deadline on Wednesday, Tsipras will have to rely on votes from pro-European opposition parties, raising big question marks over the future of his government and opening the prospect of snap elections.

Read more: European shares surge after Greece bailout agreement with creditors

Leftwing rebels in the ruling Syriza party and his junior coalition partner, the right-wing Independent Greeks party, indicated they would not tear up election pledges that brought them to power in January.

"We cannot agree to that," Independent Greeks leader Panos Kammenos told reporters after meeting Tsipras. "In a parliamentary democracy there are rules and we uphold them."

CONDITIONAL AGREEMENT

Greece won conditional agreement to receive a possible 86 billion euros ($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 a bailout, but none of the options appear 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 has approved the entire programme and passed the first laws.

The Bundestag is due to vote on Greece on Friday.

Merkel's allies meanwhile defended the deal, with her chief of staff, Peter Altmaier, saying Europe had won and Germany "was part of the solution -- from the beginning until the end!"

Read more: Euro Summit - full statement

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.

Asked whether the tough conditions imposed on Greece were not similar to the 1919 Versailles treaty that forced crushing reparations on a defeated Germany after World War One, 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, and particularly in the last two weeks, had led to a much higher financing need, she said.

One senior EU official put the cost to Greece of the last two weeks of turmoil at €25bn to €30bn. A euro zone diplomat said it might be closer to €50bn.

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 and he said the talks had been brutal. "It was not pretty to watch," he said.

STATE ASSETS

Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets worth 50 billion euros - including recapitalised banks - in a trust fund beyond government reach, to be sold off primarily to pay down debt. In a gesture to Greece, some 12.5 billion euros of the proceeds would go to investment in Greece, Merkel said.

Read more: Greece crisis: Five ways Tsipras-led government backed down in bailout talks

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 may 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 hikes and pension reforms must be enacted by Wednesday night and the entire package endorsed by parliament before talks can 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.

Read more: Greece agreement is not a coup - lessons for #thisisacoup mob

Tsipras is set to sack ministers who did not support him and make dissident Syriza lawmakers resign 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 €7bn of funding by July 20, when it must make a bond redemption to the ECB, and €12bn by mid-August when another ECB payment falls due.

The ECB on Monday maintained emergency funding for Greek banks to keep them just afloat this week, a banking source said.

Reuters

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