Monday

24th Sep 2018

Deal reached on new Greek bailout

  • The Greek Parliament is expected to vote on prior actions on Thursday. (Photo: EUobserver)

The Greek government and its creditors reached a deal on a third bailout programme on Tuesday morning (11 August).

"An agreement has been reached. Some minor details are being discussed right now", a Greek official told the Reuters press agency.

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“We are very close. There are a couple of very small details remaining on prior actions,” Greek finance minister Euclid Tsakalotos also told reporters in Athens.

The news has not yet been confirmed by Greece's creditors - the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF)

Greek media report that the final issues to be settled included privatisation plans and so-called non-performing loans - loans which are not being repaid to banks.

The creation of a €50 billion privatisation fund requested by Germany to repay Greece's debt and refinance the banks was already a major sticking point at a July euro-summit in Brussels.

According to the Kathimerini newspaper, differences over non-performing loans were about whether to create a 'bad bank', as demanded by the Greek government, or to bundle them and sell them off, as requested by the creditors.

Prior actions

The Greek parliament is expected to be recalled from its summer recess to vote on the prior actions on Thursday.

According to Kathimerini, the actions include the phasing out of early retirement, scrapping tax breaks for islands by the end of 2016, the deregulation of the energy market, and the implementation of already planned privatizations.

The exact amount of the bailout was not known Tuesday morning, but discussion were on a programme of up to €86 billion.

Talks had started on 27 July, after the Greek parliament voted two sets of reforms requested by creditors. A last round of discussions was held all weekend and for almost 23 hours from Monday to early Tuesday.

Greece needs a first tranche of bailout funds before 20 August, when it is due to repay €3.2 billion to the ECB.

A few hours before Tuesday's deal was announced, a first agreement was reached on primary budget targets - the budget balance before debts are repaid.

In 2015, according to the deal, Greece will be able to run a primary deficit of 0.25 percent of GDP. In 2016, it will be required a primary surplus of 0.5 percent, 1.75 percent in 2017, and 3.5 percent in 2018.

These targets take into account the decline of the Greek economy since the start of the year, and especially since capital controls were imposed at the end of June.

In previous discussions between Greece and the creditors, in June, the primary budget targets were a 1 percent surplus in 2015 year, 2 percent in 2016, 3 percent in 2017, and 3.5 percent in 2018.

Obstacles

Several obstacles remain before Greece can effectively receive the bailout, however.

First, the deal will have to be endorsed by eurozone finance ministers, either at a meeting or by conference call probably on Friday.

Then it will have to be ratified by several eurozone parliaments, including the German Bundestag.

Doubts remain about Germany's willingness to sign a bailout agreement before all issues are settled.

"The principle 'thoroughness over speed' applies here in particular", Stefan Seibert, the spokesman of chancellor Angela Merkel, told reporters on Monday.

The issue of Greek debt is another obstacle to overcome.

It was not clear on Tuesday morning if the IMF would participate in the bailout. It earlier said several times it would not do so if there was no restructuring of the debt, which it considers unsustainable.

But Germany, which is opposed to any haircut, wants the IMF to participate.

On Monday, Slovakia's prime minister Robert Fico also said he would refuse any restructuring of Greek debt.

"Slovakia will not remit a single cent on Greek sovereign debt, as long as I am prime minister", Fico said in an interview to Austria's Der Standaard.

Doubts emerge on IMF participation in Greek bailout

The IMF has indicated it won't take part in a third bailout for Greece unless a deal is reached on debt relief. Meanwhile the Greek PM has a called a September party congress on the bailout.

Merkel 'skeptical' about Greek bailout deal

Germany is still casting doubts on its readiness to endorse the agreement reached by Greece and the creditors and might try to get more concessions from Athens.

Greek deal puts Tsipras in straitjacket

The 29-page document agreed with Greece's creditors outlines wide-ranging reforms of the Greek economy and administration with tight deadlines and fiscal targets.

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