This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/world/2015/aug/11/greece-and-lenders-agree-new-bailout-deal-says-finance-ministry-official

The article has changed 7 times. There is an RSS feed of changes available.

Version 2 Version 3
Greece and lenders agree new bailout deal, finance minister says Greece and lenders agree new bailout deal, finance minister says
(about 3 hours later)
Greece and its international lenders clinched a multibillion-euro bailout agreement on Tuesday after all-night talks, officials said, raising hopes that aid can be disbursed in time for a major debt repayment due in days. The Greek government announced it has struck an ambitious bailout deal with creditors aimed at securing around €86bn (£61bn) over three years in return for radical economic reforms to be pushed through parliament as early as this week.
After a 23-hour session which started on Monday afternoon, exhausted Greek officials emerged in a central Athens hotel to announce that both sides had agreed details of the deal, although a couple of minor issues remain. News of the agreement following a marathon 24-hour negotiating session at Athens’ Hilton hotel was not immediately confirmed by the eurozone creditors and promptly triggered scepticism in Berlin, where the deputy finance minister said the talks were not yet concluded and that fundamental questions on Greece remained to be answered.
Related: Greece close to clinching €86bn bailout deal – liveRelated: Greece close to clinching €86bn bailout deal – live
“Finally, we have white smoke,” a finance ministry official said. “An agreement has been reached. Some minor details are being discussed right now.” The leftist government of Prime Minister Alexis Tsipras which has U-turned on bailout policy since capitulating to eurozone leaders at another all-night summit in Brussels last month hopes to push a raft of reforms through parliament on Thursday, paving the way for eurozone finance ministers to bless the deal and unlock rescue funds by August 20, when Athens has to pay €3.2bn to the European Central Bank.
The Greek finance minister, Euclid Tsakalotos, confirmed that “two or three small issues” remain pending. “Finally, we have white smoke,” a Greek finance ministry official told Reuters in Athens as the negotiating teams emerged bleary-eyed from the hotel after all-night talks. “An agreement has been reached. Some minor details are being discussed right now.”
The pact is expected to be worth up to €86bn (£61bn) in fresh loans for debt-ridden Greece, although there was no immediate confirmation of its size. The Greek finance minister, Euclid Tsakalotos, confirmed that “two or three small issues” were still open.
Greek officials have said they expect the accord to be ratified by parliament on Wednesday or Thursday and then be vetted by eurozone finance ministers on Friday. This would pave the way to aid disbursements by 20 August, when a €3.2bn debt payment is due to the European Central Bank. Kathimerini newspaper published a list of 35 “prior actions” that the Greeks committed to legislating on before any funds could be disbursed. They included raising the retirement age, phasing out preferential tax treatment for many Greek islands, scrapping fuel subsidies for farmers, and raising taxes for shippers.
A deal would close a painful chapter of aid talks for Greece, which fought against the terms of austerity demanded by creditors for much of the year before relenting under the threat of being bounced out of the eurozone. It was not clear when Athens could tap the first funds from a bailout expected to total around €86bn over three years. Nor was the size of the first disbursement revealed. The Greeks are hoping for €25bn.
Still, popular misgivings run deep in Germany, which has contributed most to Greece’s two bailouts since 2010, about funnelling yet more money to Athens. Given the dire state of the Greek economy and new figures predicting a slump of up to 2.3% this year, the creditors from the ECB, the European commission, the International Monetary Fund and the Luxembourg-based bailout fund, the European Stability Mechanism, appeared to have backed down on setting a key metric for the deal: the level of the primary budget surplus – the balance of revenue over spending when debt servicing costs are left out.
During talks, the sides agreed on final fiscal targets that should govern the bailout effort, aiming for a primary budget surplus – which excludes interest payments – from 2016, a government official said. The Greeks said the primary surplus target was set at 0.25% of GDP for this year, rising to 3.5% by the end of the three-year bailout. In earlier failed negotiations the creditors insisted on 1% for this year.
Adapted from an earlier baseline scenario, the targets foresee a primary budget deficit of 0.25% of GDP in 2015, a 0.5% surplus from 2016, 1.75% in 2017, and 3.5% in 2018, the official said. Tsipras has been keen to wrap up the talks on Greece’s third bailout in five years as quickly as possible, with the Greek team said to have been unusually helpful and co-operative given the rancour and recrimination that have characterised relations.
The mountain of non-performing loans in the Greek banking sector were among the sticking points. Athens wanted to set up a “bad bank” to take on the problem loans, while creditors want the loans bundled and sold to distressed debt funds. It was not immediately clear how that was resolved. It is believed that Tsipras is pushing for a quick deal not least for political purposes, with his popularity likely to wane the longer the situation remains unresolved and capital controls remain in place. A quick deal may also enable him to risk early elections to secure his base and rid himself of far-left rebels in his Syriza movement who reject the rescue terms and would prefer Greece to quit the euro.
Officials had also argued over how to set up a sovereign wealth fund in Greece designed to raise €50bn from privatisations, three-quarters of which would be used to recapitalise banks and to reduce the debt. Whether Berlin accedes to Tsipras’ game plan is another question. Angela Merkel’s government has consistently stressed that the fine print of a three-year programme is too important to be rushed and that it would prefer to drag the negotiations out while granting Athens €5bn in bridging finance to meet the 20 August payment.
Both sides had agreed to deregulate Greece’s natural gas market, finance ministry sources said. Chancellor Merkel was said to re-emphasise these points in a telephone conversation with Tsipras on Monday. The leading hawk on Greece, the German finance minister, Wolfgang Schäuble, is likely to query the deal when the Eurogroup committee of eurozone finance ministers meet to review it, possibly on Friday.
His deputy, Jens Spahn, contradicted the news from Athens. “There are negotiations still going on in Athens,” he told German television. “A three-year programme has to be thoroughly negotiated.”
He stressed that the terms of the new bailout went beyond Greek budgetary arithmetic and had to explain how “Greece would earn its money” in the years ahead.
If Tsipras’ political agenda favours speed, Merkel’s political problems dictate prudence and patience. Scepticism runs deep among her Christian Democrats about the Greek bailout which has to be endorsed by the Bundestag. She faces a possible backbench revolt after a major row erupted after her whips threatened to punish any rebels by turfing them off key parliamentary committees.