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Deal on Greek Debt Crisis Is Reached, but Long Road Remains Deal on Greek Debt Crisis Is Reached, but Long Road Remains
(about 3 hours later)
BRUSSELS — Greece and its European creditors announced an agreement here on Monday that aims to resolve the country’s debt crisis and keep it in the eurozone, but that will require further budgetary belt-tightening that Prime Minister Alexis Tsipras could have trouble selling back in Athens. BRUSSELS — Greece agreed to a deal with its European creditors on Monday after long and bitter negotiations, swallowing substantial new concessions in the face of imminent financial collapse and insistent demands from Germany and other countries that it prove it was worthy of a third bailout in five years.
The agreement does not guarantee that Greece will receive its third bailout in five years. But it does allow the start of detailed negotiations on a new assistance package for Greece. The agreement, announced after a contentious all-night session among leaders of the 19 nations that use the European common currency, requires Greece to move quickly to adopt a host of economic policy changes and to allow close monitoring by Europe and the International Monetary Fund.
One open question is whether the deal gives enough confidence to the European Central Bank to let it continue channeling sorely needed emergency funding to Greek banks, which have been hollowed out by a long economic slump and the withdrawal of billions of euros in recent months by account holders. If Prime Minister Alexis Tsipras can push the central elements of the package through his Parliament in the coming days — a political challenge likely to prove difficult — the creditors said they would be willing to open negotiations on providing as much as 86 billion euros, or $96 billion, to keep Greece afloat for the next three years, and to consider proposals to ease repayment terms on much of Greece’s existing debt of more than €300 billion.
The tough terms, demanded by Germany and others, are meant to balance Greece’s demands for a loan repayment system that will not keep it mired in recession and austerity budgets, against creditors’ insistence that loans worth tens of billions of euros not be money wasted. Testy negotiations and Greece’s inability to live up to the promises made in its previous bailouts had cast a shadow of distrust over the weekend’s discussions. The creditors also agreed, once terms of the bailout are settled, to pull together a short-term stimulus program of up to €30 billion to help Greece’s ravaged economy.
An accord would end five months of bitter negotiations that raised concerns that Greece would be the first country to be forced out of the euro currency union — a development that proponents of European unity had sought desperately to avoid. To Germany and other nations that went gone into the negotiations fed up with Greece’s inability to get its financial act together, the outcome was fair and the new requirements necessary to assure that the Athens government lives up to its commitments. But to some Greeks, and to critics of the German-led policy of imposing deep budget austerity as a condition for aid, the deal amounted to an unwarranted violation of Greece’s sovereignty.
“The advantages far outweigh the disadvantages,” Chancellor Angela Merkel of Germany told a news conference, explaining her decision to accept the deal and recommend that the German Parliament also grant its approval. Either way, it appeared to remove the immediate threat of Greece’s financial crisis escalating to the point that the country might be forced to abandon the euro as its currency. By Monday afternoon, the European Central Bank had signaled that it would leave its credit line to Greece’s banks in place at its current level, leaving the banks, which have been closed for two weeks, in severe distress but likely to muddle through until a bailout deal can be finalized.
“The country which we help has shown a willingness and readiness to carry out reforms,” said Ms. Merkel, referring to Greece. “The advantages far outweigh the disadvantages,” Chancellor Angela Merkel of Germany said at a news conference, explaining her decision to accept the deal and recommend that the German Parliament also grant its approval.
The total commitment of money has not been disclosed. But a document by the eurozone leaders noted that experts had estimated that Greece might need from 82 billion to 86 billion euros more — $91 billion to $96 billion — to shore up its economy, rebuild its banks and meet its debt obligations over the next three years. The document said Greece and its creditors should seek to “reduce that financing envelope,” if possible. “The country which we help has shown a willingness and readiness to carry out reforms,” Ms. Merkel said, referring to Greece.
As part of Greece’s commitments, Ms. Merkel said, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt. That fund would be “to the tune of” €50 billion, she said. The agreement said Greece and its creditors should seek to “reduce that financing envelope,” if possible.
As part of Greece’s commitments, Ms. Merkel said, a fund will be created to take control of assets owned by the Greek government, with the idea of selling them to help pay down the country’s debt and finance investment programs within Greece. That fund would be “to the tune of” €50 billion, she said, a figure that seemed ambitious given the slow pace of previous privatization efforts.
Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments. The Greek government had resisted a continued role for the I.M.F., seeing the fund’s involvement as unwanted meddling.Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments. The Greek government had resisted a continued role for the I.M.F., seeing the fund’s involvement as unwanted meddling.
The Greek Parliament will also be required to approve the terms of the agreement “without delay,” according to the document released on Monday morning. One of the sticking points in the negotiations over the weekend had been a demand that the Parliament sign off on any deal by Wednesday, but that requirement appears to have been relaxed. The Greek Parliament will also be required to approve the terms of the agreement “without delay,” according to the document released on Monday morning. The agreement requires passage of many of the changes by Wednesday and others by next week.
During the marathon negotiation session, Mr. Tsipras, the Greek prime minister, struggled to reach compromises on economic overhauls that the creditors demanded but that his left-wing government may find difficult to sell at home after Greek voters overwhelmingly rejected softer terms in a referendum just a week ago.
The agreement will call for Greece to raise taxes in some cases, pare pension benefits and take various other measures meant to reduce what critics see as too much bureaucracy and too many market protections that keep the Greek economy from operating efficiently.The agreement will call for Greece to raise taxes in some cases, pare pension benefits and take various other measures meant to reduce what critics see as too much bureaucracy and too many market protections that keep the Greek economy from operating efficiently.
The agreement specifies that Greece must address a broad array of issues long pushed by the creditors, from requiring the government to produce more reliable economic statistics to overhauling the regulations for businesses including pharmacies, bakeries and ferries and changing the rules for labor unions and strikes.
A bleary-eyed Mr. Tsipras, speaking to reporters here on Monday, tried to put a positive spin on what might be seen as an almost total capitulation by Athens to creditors’ demands for tough austerity. He said that the threat of Greece being forced out of the eurozone had been avoided and a promise of debt relief and growth funds had been secured.A bleary-eyed Mr. Tsipras, speaking to reporters here on Monday, tried to put a positive spin on what might be seen as an almost total capitulation by Athens to creditors’ demands for tough austerity. He said that the threat of Greece being forced out of the eurozone had been avoided and a promise of debt relief and growth funds had been secured.
“We gave a tough battle for six months and fought until the end in order to achieve the best we could, a deal that would allow Greece to stand on its feet,” Mr. Tsipras said. “We faced hard decisions, tough dilemmas,” he said, adding that the Greek authorities finally “assumed the responsibility of averting the extremist ambitions of the most conservative circles in Europe.”“We gave a tough battle for six months and fought until the end in order to achieve the best we could, a deal that would allow Greece to stand on its feet,” Mr. Tsipras said. “We faced hard decisions, tough dilemmas,” he said, adding that the Greek authorities finally “assumed the responsibility of averting the extremist ambitions of the most conservative circles in Europe.”
But any easing of Greece’s debt repayment obligations would not include something Greece had previously made a condition of any deal: a so-called haircut, or reduction of the overall debt, which is more than €300 billion. The document issued on Monday made its resistance to that demand clear in one sentence: “The Euro Summit stresses that nominal haircuts on the debt cannot be overtaken.”But any easing of Greece’s debt repayment obligations would not include something Greece had previously made a condition of any deal: a so-called haircut, or reduction of the overall debt, which is more than €300 billion. The document issued on Monday made its resistance to that demand clear in one sentence: “The Euro Summit stresses that nominal haircuts on the debt cannot be overtaken.”
In an acknowledgment by the other eurozone countries that Greece’s battered economy and high unemployment need some relief, the agreement provides for €30 billion in development funds being made available through various European Union programs, if a final bailout deal goes through.In an acknowledgment by the other eurozone countries that Greece’s battered economy and high unemployment need some relief, the agreement provides for €30 billion in development funds being made available through various European Union programs, if a final bailout deal goes through.
Donald Tusk, the president of the European Council, who had convened the summit meeting, announced the agreement on his Twitter account shortly before 9 a.m. He later used his Twitter account to write that steps would be pursued “to swiftly take forward the negotiations” on the latest bailout.Donald Tusk, the president of the European Council, who had convened the summit meeting, announced the agreement on his Twitter account shortly before 9 a.m. He later used his Twitter account to write that steps would be pursued “to swiftly take forward the negotiations” on the latest bailout.
He added that eurozone finance ministers would “as a matter of urgency discuss how to help” Greece meet its short-term financing needs. That appeared to be a reference to ensuring that Greece, which is nearly bankrupt, can make large payments to lenders including the European Central Bank that are due in the coming weeks.He added that eurozone finance ministers would “as a matter of urgency discuss how to help” Greece meet its short-term financing needs. That appeared to be a reference to ensuring that Greece, which is nearly bankrupt, can make large payments to lenders including the European Central Bank that are due in the coming weeks.
Despite the agreement, Greek banks are expected to remain closed this week. The banks are acutely short of cash and Greek depositors may soon find it difficult to withdraw even small sums from A.T.M.s.Despite the agreement, Greek banks are expected to remain closed this week. The banks are acutely short of cash and Greek depositors may soon find it difficult to withdraw even small sums from A.T.M.s.
To reopen, the banks would need more emergency loans from the European Central Bank. But the central bank might be wary of providing additional emergency cash until the agreement receives approval from the Greek Parliament. The Governing Council of the central bank was to discuss Greece during a conference call on Monday, a person with knowledge of the meeting said.
European stocks rose and the bond market calmed on Monday morning just moments after European leaders said they had reached a deal. There was no euphoria, however, as investors waited to see how the tough agreement would be put in place.European stocks rose and the bond market calmed on Monday morning just moments after European leaders said they had reached a deal. There was no euphoria, however, as investors waited to see how the tough agreement would be put in place.
But in Athens, news of the agreement was met with a mixture of joy and wariness. Many people were having their midmorning coffee and others were standing in the ubiquitous lines at A.T.M.s when the news came out that after a week of agony, and a weekend of all-nighters in the Athenian Parliament and the Eurogroup meetings, a deal had been reached.
Miltiades Macrygiannis, proprietor of an antiques store in Athens, Art and Craft Interiors, said he was hopeful and relieved that a so-called Grexit — a Greek exit from the eurozone — appeared to have been avoided. But he was also disgusted.
“It’s simple: We wasted five months,” Mr. Macrygiannis said. In the end, he added, the austerity measures that had to be taken appeared to be worse than what the creditors had been willing to give five months ago, when the new Greek government took office.