Greece agrees deal to extend bailout at last-ditch summit
Move averts insolvency in Athens and gives fresh hope for euro's future
Greece has secured a four-month reprieve from eurozone creditors at a last-ditch summit in Brussels, heading off imminent default and a disastrous rupture of the monetary union.
The interim accord gives Greece breathing room to flesh out its economic agenda and reform plans, with bridging finance to avert a crunch as budget coffers run dry in Athens and capital flight reaches €1bn a day.
Greek officials confessed privately that the country faced insolvency. It was likely to exhaust its limit on emergency liquidity from the European Central Bank (ECB) as soon as Tuesday, risking a run on the banking system and a financial meltdown.
They now have a stay of execution until the end of June, when the drama is likely to be repeated. Greece must repay €6.7bn to the ECB in July and August, an impossible task without a fresh EU-IMF programme or similar alternative.
A deal came earlier than expected yesterday evening. On the way into the meeting in Brussels, Finance Minister Noonan had said he couldn't predict whether a definitive agreement would be found.
The Eurogroup has softened demands for yet further austerity and fiscal tightening, accepting that consolidations should be appropriate for "economic circumstances". This is a victory of sorts for Greece's radical Syriza government on at least one crucial point. "It is a balanced agreement. It will help Greece to get on its feet again," said Pierre Moscovici, the EU economics commissioner.
Last night's text said the Greeks "reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely".
"The Greek authorities commit to refrain from any roll-back of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions," it said.
Jeroen Dijsselbloem, the head of the Eurogroup, sweetened the bitter pill with a promise that there is "flexibility in the programme and we will make the best use of it".
Greece will work with the various components of the Troika, although the term as such will be dropped. Syriza will have to prepare a list of reforms by Monday.
Shares on Wall Street surged in late trading as the news broke, and the euro rose more than one cent against the US dollar to $1.14. The breakthrough came after five hours of "corridor diplomacy" as Mr Dijsselbloem and IMF Managing Director Christine Lagarde shuttled messages back and forth to the German and Greek delegations.
It came after German Chancellor Angela Merkel and French president Francois Hollande pledged to uphold the sanctity of monetary union and keep Greece anchored in the eurozone family.
"Greece has to stay in the eurozone," said Mrs Merkel. Mr Hollande said a Greek withdrawal from the euro was out of the question. "The position of France is that everything should be done - by both the Greek side and the European side - to restore the cohesion of the eurozone. There can today be no scenario of a Greek exit from the euro."
The Greek side has abandoned demands for a debt write-off or a bond swap to link interest payments to economic growth. Earlier threats to walk away from its bailout loans had enraged Italy, Spain and Portugal.