Huge bailout for Greece agreed ‘in principle’

Athens, Greece (AFP) — Greece on Tuesday announced it had reached the outline of a deal for an international bailout worth 85 billion euros ($94 billion) that it hopes will save its economy from financial collapse.

The European Commission said Athens and its creditors had reached a technical agreement “in principle” on a bailout — the third since 2010 — after marathon talks stretching into the early hours.

“What we don’t have is a political agreement,” said Commission spokeswoman Annika Breidthardt, hours after Athens suggested the deal was all but done.

Greece and its creditors — the EU, the European Central Bank, the eurozone bailout fund and the International Monetary Fund — are under pressure to finalise the deal by August 20 when Athens must repay some 3.4 billion euros to the ECB.

The outline for the deal comes after months of acrimonious negotiations between the creditors and Greece’s radical-left government, which came to power promising an end to years of painful austerity demanded in exchange for the cash.

Investors reacted with relief to news of the outline deal, with shares in Athens rising 2.14 per cent after three straight days of gains.

Both sides said details remained to be hammered out, but a Greek government source said Prime Minister Alexis Tsipras was seeking an emergency session of parliament on Thursday — with all lawmakers required to attend — to ratify the deal.

Tsipras is under pressure from many in his radical-left party Syriza who say the new accord will pile further austerity on a weakened economy and goes against the party’s campaign pledges.

But should Tsipras win the crucial vote, Eurozone finance ministers could be asked to approve the deal on Friday.

The Kathimerini newspaper said the Greek government would have to immediately implement 35 measures before the deal can kick in.

These include energy market deregulation, changes to shipping taxes, price cuts in generic drugs, a review of the social welfare system and phasing out early retirement, the daily said.

The talks saw Athens committing to a primary deficit of 0.25 percent of output in 2015, and a surplus in 2016, a finance ministry source said.

In 2016 the country will have to meet a primary surplus — the balance not including debt service — of 0.5 percent, followed by 1.75 percent in 2017 and 3.5 percent in 2018, the source added.

The government said in a statement that the creditors had agreed to a “mild adjustment” on fiscal targets that will help foster growth and save some 20 billion euros.

It said Greek banks — which were forced to shut down for three weeks as panicked customers withdrew billions of euros, fearing for the safety of their deposits — would immediately receive 10 billion euros from the package, and will be fully recapitalised by the end of the year.

The statement assured there was “absolutely no risk of a haircut on deposits”, apparently ruling out the possibility that authorities could raid people’s savings to pay off some of the country’s enormous debts.

European Council spokeswoman Breidthardt said the Economic and Financial Committee, which coordinates EU-wide economic policy, was making a conference call to all 28 member states to enable them “to take stock” of the accord.

An EU source stressed it was still not certain that a bailout agreement will be reached by August 20, leaving open the possibility that Athens might need emergency funding to pay its ECB debt.

“We might need a few days’ bridging (funding),” the source told reporters on condition of anonymity.

“In that case, we need all the member states” to approve such a loan, the source added, in another potential headache for negotiators.