After negotiating through the night, euro zone leaders and Greek Prime Minister Alexis Tsipras clinched an agreement early Monday on a path forward to keep Greece in the currency union. But as a precondition to open talks on a fresh round of aid for the nearly bankrupt country, the Greek Parliament would first have to pass a long list of economic reforms to reestablish trust with its creditors — and fast.
European Council President Donald Tusk tweeted, “Euro Summit has unanimously reached agreement. All ready to go for ESM programme for #Greece with serious reforms & financial support.”
Details have not yet been confirmed, but among the legislation the other 18 countries in the euro zone were demanding that Greek lawmakers enact by Wednesday were measures to broaden the tax base and streamline the VAT to increase revenue, improve the long-term sustainability of its pension system, and, as Germany in particular has pushed for, ramp up the privatization of state assets, which Greece had committed to as a condition for previous bailout assistance but had stalled on since the leftist Syriza party came to power.
A draft of the euro zone proposal published by Reuters gave Greece the option to either establish a much more robust privatization program than it has had the stomach for to this point, or, in line with a harsh German policy paper leaked Saturday, transfer 50 billion euros worth of state assets to a fund in a foreign country to serve as collateral for new loans and to be sold off eventually to pay down Greek debts.
This reportedly was the last major area in which Tsipras was fighting for better terms as bleary-eyed politicians in Brussels attempted to close a deal Monday morning.
The Greek Parliament must also make automatic spending cuts if targets for primary surpluses are missed.
Tsipras reportedly failed in one of his other last attempts at resistance: to bar the IMF from an oversight role in any forthcoming new assistance.
Greece’s economy has contracted a stunning 23.6% since 2008, amid the global financial crisis and harsh austerity measures taken as a condition for 240 billion euros in bailout assistance. Now Greece requires an additional 82 billion to 86 billion euros in aid over the next three years, according to an estimate prepared over the weekend by euro zone finance ministers. The country’s banks, closed since June 29, have faced a slow drain of money via capped daily withdrawals from ATMs; to remain solvent they desperately need an increase in emergency funding from the European Central Bank.
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