The government in Athens and its creditors have reached a deal that will shore up Greece’s place in the eurozone after marathon overnight talks.
After 31 hours of acrimonious discussions spread over one tense weekend, a breakthrough came early on Monday morning. Donald Tusk, the head of the European Council, announced that the 19 leaders of the eurozone had unanimously reached agreement.
He said they were “all ready to go” on a new programme for Greece under the eurozone bailout fund, the European Stability Mechanism, adding that Athens had signed up to “serious reforms”.
But the hard-fought political deal is only the start of yet another round of talks to hammer out the technical details of a bailout plan that could be worth up to €86bn (£61bn) for Greece.
In order to get these desperately needed funds, the radical left government of Alexis Tispras had to submit to draconian economic reforms that the Greek people had rejected in a referendum barely a week before.
Greece has promised to pass laws introducing controversial economic reforms by Wednesday. These include reforming the VAT system, overhauling pensions and signing up to plans that ensure immediate spending cuts in the event of breaching creditor-mandated budget targets.
Athens has also agreed to sell off state assets worth €50bn, with the proceeds earmarked for a trust fund supervised by its creditors. Half the fund will be used to recapitalise Greek banks, while the remaining €25bn will pay down Greek debts.
Tsipras did manage to win a concession that the fund should be managed from Greece, not Luxembourg, as envisaged in a German plan, but the rules will be drawn-up by Greece’s creditors – the troika that Tsipras vowed to throw off, but only succeeded in renaming as “the institutions”.
These institutions – the European commission, International Monetary Fund andEuropean Central Bank – have also asked Athens to come up with a plan to “de-politicise” its civil service by next Monday.
In another humiliating climbdown, Athens could be forced to reverse measures it passed upon assuming power deemed to run counter to the bailout philosophy. Potentially, this could mean firing the government cleaners that Syriza rehired with such fanfare.
Paul Krugman, the Nobel-prize winning economist and prominent critic of austerity in Greece, said the creditors’ demands on Greece “went beyond harsh into pure vindictiveness, [leading to the] complete destruction of national sovereignty [with] no hope of relief”.
“It’s a grotesque betrayal of everything the European project was supposed to stand for,” he wrote several hours before the final deal emerged. As the talks dragged on through Monday night, #ThisIsaCoup became the top trending topic on Twitter in Greece, Germany, the UK and Ireland.
Echoing a widespread view on social media, one financial analyst claimed the deal was worse than the 1919 Treaty of Versailles that crushed Weimar Germany with debt and paved the way for the second world war.
Marc Ostwald of ADM Investor Services argued that the eurozone creditor countries wanted “to completely destroy Greece”.
Asked about the Versailles analogy, German Chancellor Angela Merkel said: “I never make historical comparisons.” She added that the Greek programme was “nothing special”, apart from the sums of money involved, and in line with other bailout schemes devised for Spain and Portugal.
The president of the European commission, Jean-Claude Juncker, rejected criticism that Greece’s creditors had been too harsh. “I don’t think that the Greek people have been humiliated and I don’t think the other Europeans were losing their face. It’s a typical European arrangement.”
While recriminations continue to swirl, Greece urgently needs cash to stave off bankruptcy. Athens has to find €7bn by next Monday and a further €5bn by mid-July.
Eurozone finance ministers, who have been stuck on a loop of emergency meetings for three-and-a-half weeks, will reconvene again at 15.00 in Brussels (14.00 BST) to discuss emergency bridge finance to tide over the Greek government while further talks on the €86bn bailout grind on.
Although EU leaders trumpeted the avoidance of Grexit, in the communique they made clear the deal could still unravel. “The risks of not concluding swiftly the negotiations remain fully with Greece.”
Greece’s parliament is expected to push through the controversial reform package by Wednesday, paving the way for parliaments in other eurozone members to ratify the agreement. The Bundestag and Finnish parliament are among several legislatures that must approve eurozone bailout programmes.
Finland is expected to reject any further bailout for Greece to avoid a schism that could topple its two-month-old government.