Greece reached an accord with creditors on the terms of a third bailout, paving the way for national parliaments to vote on the deal before an Aug. 20 payment falls due to the European Central Bank.
After almost two weeks of intensive talks, the four institutions representing Greece’s creditors — the ECB, the International Monetary Fund, the European Commission and the European Stability Mechanism rescue fund — forged an initial agreement on measures from pension changes to taxes that will unlock about 85 billion euros ($94 billion) in funds for Greece.
The talks successfully wrapped up in the early hours of Tuesday, with Finance Minister Euclid Tsakalotos telling reporters that just “one or two very small details” remain, in comments broadcast on Skai TV. European Union governments will hold a call later Tuesday to “take stock,” European Commission spokeswoman Annika Breidthardt said in Brussels, declining to give further details of the package.
Greek Prime Minister Alexis Tsipras’s government needs a quick release of about 20 billion euros to create a buffer for its banks and to make loan payments. Before that can happen, agreement on the technical aspects of the deal must be followed with a “political agreement,” according to Breidthardt.
Greece’s parliament must now pass a package of reforms agreed on with creditors before a meeting of euro-area finance ministers tentatively scheduled for Friday. A draft of the memorandum of understanding contains 35 measures including steps to clamp down on early retirement, opening up energy and pharmaceuticals markets, and changes to taxes for shipping firms among others, Kathimerini newspaper reported, citing a copy of the draft. These must be passed immediately, with more measures to follow in October, it said.
The deal will be submitted to the Greek parliament later on Tuesday with lawmakers due to vote on it Thursday, ERT TV reported.
The Athens Stock Index rose 1.6 percent at 1:48 p.m. local time after increasing 2.1 percent Monday in anticipation that a deal was near. The yield on Greece’s 2.1 billion euros of 3.375 percent notes due 2017 plunged 352 basis points to 14.7 percent. That’s down from a high this year of 63.3 percent in July.
“The good news is that Greece has given up its confrontational strategy and seems to be willing to collaborate with its creditors,” said Peter Vanden Houte, an economist at ING Bank NV in Belgium. “However, the economic situation has strongly deteriorated over the last eight months, making the fiscal consolidation still quite a challenge in a country that is tired of austerity.”
The two sides agreed to target a primary budget deficit of 0.25 percent of gross domestic product in 2015, a 0.5 percent surplus for 2016, 1.75 percent surplus for 2017 and 3.5 percent in 2018, the Greek government said in an e-mailed statement. That amounts to 20 billion euros less than previous targets, according to the statement.
Officials in Germany, which is among the euro-area countries that must vote on the agreement, reacted cautiously to the three-year deal in the absence of details.
“One needs to look closely and then we’ll ask the Bundestag for approval when the common understanding is that this will hold for three years,” Jens Spahn, a deputy to German Finance Minister Wolfgang Schaeuble, said on ARD television. “It has to be convincing that it isn’t just about Aug. 20 and an installment payment, but really about how, together with the Greeks, we can have a lasting solution.”
Erik Nielsen, global chief economist at UniCredit Bank AG, said that people are “too pessimistic” on the likelihood of the deal succeeding.
“I don’t know if it’s going to work but I wouldn’t write it off,” Nielsen said in a Bloomberg Television interview on Monday.
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