After months of acrimony, Greece clinched a bailout agreement with its European creditors yesterday that would, if implemented, secure the nation’s place in the euro and avoid financial collapse.
However, the terms of the deal would be painful both for Greeks and their government, which since its election in January had vowed to stand up to the nation’s creditors and reject the budget cuts they have been demanding.
Before it can get 85 billion euros (US$93.86 billion) in bailout cash and support for its banks to reopen, the Greek government must pass austerity measures that include sales tax increases and pension and labor market reforms.
Photo: AFP
Greece faces a tight timetable to implement reforms — a reflection of how little its creditors trust the government. Greek Prime Minister Alexis Tsipras infuriated his European partners last month when he called for a vote against reforms the creditors have proposed.
Greeks voted against the plans, but are likely to be horrified that they now face tougher measures.
Both sides acknowledged the bitterness that marked the talks and kept them negotiating nine hours past a Sunday midnight deadline.
“Trust needs to be rebuilt,” German Chancellor Angela Merkel said, adding that with the deal, “Greece has a chance to return to the path of growth.”
In a first step toward getting its bailout loans, the Greek government must pass a set of measures into law by tomorrow that include an increase in the sales tax and reform of the pension system.
In later weeks, Greece must open to competition industries that have long been protected, such as the energy sector. Labor laws are to be made more flexible.
If it meets these requirements, Greece is to get a three-year rescue program and a commitment to restructure its debt, which is unsustainably high at about 320 billion euros, or about 180 percent of annual GDP.
Tsipras said that because of these concessions, yesterday’s deal — despite the austerity measures — is better for Greece than the plans Greeks rejected in the ballot.
“We managed to avoid the most extreme measures,” Tsipras said. “Greece will fight to return to growth and to reclaim its lost sovereignty.”
Greeks seemed mainly relieved that the country was not facing financial collapse.
Pensioner Kostas Lambos said things would be “difficult in the beginning,” but people had to understand the severity of the situation.
“This was a necessary step for the country to emerge from the dead ends that had been created in the last few years,” he said.
French President Francois Hollande said the Greek parliament would convene within hours to adopt the reforms called for in the plan and he celebrated Greece’s continued membership in the euro.
Losing Greece would have been akin to losing “the heart of our civilization,” Hollande said.
The creditors said they would help Greece manage its debt payments in the short term since any bailout was not imminent.
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