Greece agrees on broad terms of new bailout package

Author: Associated Press
Published: Updated:

ATHENS, Greece (AP) – Greece has agreed on the broad terms of a new three-year bailout package with international creditors, with a few last details expected to be ironed out Tuesday.

Finalizing quickly the deal for about 85 billion euros ($93 billion) in new loans would prevent the country from defaulting on its debts next week and secure its future in the euro.

“We are very close. Two or three very small details remain,” Finance Minister Euclid Tsakalotos said as he emerged Tuesday morning from all-night discussions with the creditors’ negotiators.

The European Commission, a key negotiator in the talks, confirmed the progress.

“The institutions and the Greek authorities achieved an agreement in-principle on a technical basis and talks are still ongoing on finalizing details,” said Annika Breidthardt, the Commission’s spokeswoman for economic affairs. She said the details were expected to be cleared up Tuesday.

She noted that an agreement still requires approval from higher-level representatives, and that senior finance officials from the 28 EU nations would hold a conference call later Tuesday.

Greece’s government is hoping to push an agreement through parliament this week, ahead of a meeting between eurozone finance ministers on Friday.

Germany, the largest single contributor to Greece’s two previous bailouts and among the toughest negotiators so far, remained cautious on the timing. “We will have to examine the results that come in the course of today,” deputy finance minister Jens Spahn told n-tv television.

Investors cheered the news of progress.

Greece’s government borrowing rates fell, a sign investors are less worried about a default. The 2-year bond yield dropped by 4.2 percentage points to 14.73 percent. The Athens Stock Exchange, which reopened recently after being shut for five weeks during the most severe part of Greece’s financial crisis, was up 2.2 percent in midday trading.

Cash-strapped Greece needs more money by Aug. 20 at the latest, when it has a debt repayment of just over 3 billion euros to make to the European Central Bank.

A draft of the agreement cited by the Greek daily Kathimerini said the deal included a package of more than 30 measures that would have to be voted on in Greece’s Parliament immediately, followed by a second package of measures to be adopted from October onwards.

The government released some technical details of the deal, saying it had agreed to have a 0.25 percent government deficit this year and a 0.5 percent surplus next year, when not counting the cost of servicing debt.

Greece has agreed to achieving so-called primary surpluses of 1.75 percent in 2017 and 3.5 percent in 2018, the government said in an emailed note.

The pledges mean the country has avoided having to impose budget savings worth about 20 billion euros, it said.

“This practically means that with the current agreement there will be no fiscal burden – in other words new measures – in the immediate future,” the note read.

Banks will be strengthened with new cash infusions by the end of the year and will have an immediate boost of “at least 10 billion euros,” it said. The government insists this means there is no longer any danger that the banks may have to raid bank deposits to restore their financial health.

The government also said that banks will not make repossessions and auctions of primary residences will not occur within 2015.

The deal is opposed by many in the governing left-wing Syriza party, who say the spending cuts go against the government’s pledges when it was elected in January.

Syriza lawmaker and dissenter Costas Lapavitsas said he would not vote in favor of the new deal in Parliament.

“Left-wing governments must take left-wing actions,” he said on private Mega television.

Greece has relied on international bailouts worth a total 240 billion euros ($263 billion) since it was unable to borrow on bond markets in 2010. To secure the loans, successive governments have had to implement a series of spending cuts, tax hikes and reforms.

While the austerity has reduced budget overspending, the measures compounded a deep recession and fuelled record high unemployment. Figures next week are expected to confirm that Greece’s recession deepened in the second quarter.

Though the government was elected on a staunchly anti-austerity platform in January, it has been forced into a policy U-turn after bailout talks came close to collapse last month.

While Greece’s parliament ratified further tax hikes and reforms, the rebellion by hardline Syriza lawmakers has left Prime Minister Alexis Tsipras’ party with only a nominal parliamentary majority. It depends on opposition backing to pass key creditor-demanded legislation.

That has stoked talk that Tsipras will call early elections soon after the bailout deal is signed. Tsipras still retains strong personal support in opinion polls, which show Syriza heading for a potentially big victory.

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