EuroSummit has unanimously reached agreement. All ready to go for ESM programme for #Greece with serious reforms & financial support
— Donald Tusk (@eucopresident) July 13, 2015
How Tsipras will actually enforce the measures of the new deal is all the buzz in Athens.
We could very well see Tsipras’ government breakdown, new elections, or even a caretaker government put in place in order to carry on with the very tough reforms.
Expect lots of turmoil, protests, and trouble in Greece, but after the summer break…that’s when the real work begins.
After a six-month offensive against austerity succeeded only in derailing Greece’s economy and deepening its financial mess, there was no face-saving compromise on offer for Tsipras at a rancorous euro-area summit that ran for more than 17 hours.
“Trust has to be rebuilt, the Greek authorities have to take on responsibility for what they agreed to,” German Chancellor Angela Merkel said after the meeting ended just before 9 a.m. in Brussels Monday. “It now hinges on step-by-step implementation of what we agreed.”
The agreement shifts the spotlight to the parliament in Athens, where lawmakers from Tsipras’s Syriza party mutinied when he sought their endorsement for spending cuts, pensions savings and tax increases in a vote early Saturday.
With Greece running out of money and its banks shut the past two weeks, the summit was billed as the country’s last chance to stay in the euro. Greece has been in financial limbo since the government missed a payment to the International Monetary Fund and allowed its second rescue package to lapse on June 30.
The conditions that Tsipras accepted comprised a laundry list of unfinished business from Greece’s two previous bailouts and a new demand for the government to transfer 50 billion euros of state assets to a holding company that will seek to either sell or generate cash from them. His creditors rejected Tsipras’s pleas for a cut in the nominal value of Greek debt.
Merkel said interest-payment grace periods and longer maturities will “be discussed once there is a successful evaluation of the new Greek program.”
The final knockout blow came when, as Zerohedge describes…
Greece capitulated on the IMF remaining as a key part of the deal, as well as the formation of a €50 billion “escrow” fund which would receive proceeds from the liquidation of Greece assets, and where the first €25 billion of capital would be used to bailout the insolvent Greek banking system.
Reuters’ take on the deal…
Asked whether the tough conditions imposed on a desperate Greece were not similar to the 1919 Versailles treaty that forced crushing reparations on a defeated Germany after World War One, she 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 calculated the cost to the Greek state of the last two weeks of political and economic turmoil at 25 to 30 billion euros. A euro zone diplomat said the full damage might be closer to 50 billion euros.
Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets worth 50 billion euros – including recapitalized 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.
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.