Talks on 'draconian' bailout deal to take another month
Tsipras must sell package to the Greek parliament
Published 14/07/2015 | 02:30
Talks on securing a potential third bailout for Greece could take up to a month, it was revealed last night, after the debt-stricken country agreed to further tough austerity to avoid a possible exit from the Eurozone.
The deal secured in Brussels followed a dramatic all-night summit of European leaders that concluded early yesterday morning with an agreement requiring Greece to back more "draconian" financial measures in return for talks on further financial aid.
Greece won conditional agreement to receive a possible €86bn over three years.
But for negotiations to begin, the Greek parliament faces a tight deadline of tomorrow to enact sweeping, unpopular reform measures including spending cuts, tax hikes and pension reforms - measures that were effectively rejected in a Greek referendum just over a week ago.
Taoiseach Enda Kenny, who attended the all-night meeting, said a third bailout for Greece has the potential to allow the Greek economy to "thrive and prosper and continue to remain a member of the Eurozone".
"May I say that I am glad a deal has been reached here," Mr Kenny said.
"This has been a pretty bruising experience over the last period."
Mr Kenny said it was a "challenging" position for Greece, but one that the Greek Prime Minister Alexis Tsipras had said "he is up for".
As attention shifts back to Athens with Mr Tsipras facing a political hurdle to get over, options will be presented to Eurozone finance ministers on possible short-term funding for Greece to allow it meet crucial debt repayments, including one due to the European Central Bank as soon as Monday.
Finance ministers met yesterday afternoon, with an expert group set up to examine potential options.
But Jeroen Dijsselbloem, chair of the Eurogroup - the group of finance ministers using the euro - said negotiations on securing so-called bridge financing would be complex.
"We haven't yet found the golden key to solve that issue," Mr Dijsselbloem said.
Mr Dijsselbloem said if talks on a third bailout can begin, it will take time to negotiate, and will be closer to four weeks rather than two weeks, suggesting even that is optimistic.
Faced with near bankruptcy and a possible exit from the single currency, one Greek minister said the country had been forced to accept the "draconian" measures.
"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."
As part of the agreement, Greece had accepted a compromise on German-led demands for €50bn of Greek state assets to be transferred to a trust fund beyond government reach, with half to be used to recapitalise the banks. Mr Tsipras also agreed to International Monetary Fund involvement in a potential third bailout, dropping earlier opposition.
Finnish finance minister Alex Stubb, regarded as a stickler for EU fiscal rules, dampened expectations yesterday that talks on a third bailout would inevitably go ahead.
"A lot of people have jumped the gun and thought that the beginning of the negotiations is automatic," he said.
"The big issue for today is going to be bridge financing and I foresee those negotiations are going to be very difficult because I don't see many countries having a mandate to give money without any conditions."
European Commission President Jean-Claude Juncker dismissed suggestions that Mr 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," Mr 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."
Mr Tsipras said he had "fought a tough battle".
The Taoiseach described the summit meeting as "realistic, frank and very pragmatic".
A number of European countries must get parliamentary approval to begin negotiations on a third bailout, including Germany and the Netherlands.
The Bundestag is due to vote on Greece on Friday.
The deal - what Greece must do
- Streamline the VAT system and broaden the country's tax base to increase revenue
- Introduce pension reforms
- Ensure the full legal independence of Greece's statistics agency.
- Introduce automatic spending cuts which will kick in if Athens deviates from targets
- Greece takes in more than it spends each year.
And beyond that, other measures include:
- Agreeing to transfer up to €50bn of Greek assets to a new fund, which will contribute to the recapitalisation of Greek banks. The fund will be based in Athens and not Luxembourg, as originally demanded. But it still means Athens must also develop a significantly scaled up privatisation programme.
- Consult and agree with the institutions on all draft legislation in relevant areas before submitting it for public consultation or to parliament.
- Reversing measures passed after Syriza came to power.
- Liberalising the economy, to bring in reforms like Sunday trading hours for closed professions.
- Having further IMF support from next March, against the wishes of Prime Minister Tsipras.
- Getting on with privatising the state's electricity transmission network
- Reviewing the labour market and modernising collective bargaining and industrial action to align them with international practice.
- Taking decisive steps to strengthen financial sector, including action on non-performing loans.