After a 17-hour marathon meeting of euro zone leaders, Greece and its international creditors struck a conditional deal for the country to receive a possible 86 billion euros ($95 billion) over three years if the Greek Parliament agrees and abides by new reforms.
“Given the need to rebuild trust with Greece, the Euro Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures,” according to the Euro Summit statement that was posted on CNN’s website.
The measures, which need to be approved by the Greek Parliament by Wednesday, include the streamlining of the country’s valued-added tax system and the broadening of its tax base to increase revenue, as well as upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform program.
By next Monday, the Greek Parliament also needs to approve additional reforms, including modernizing the government’s collective bargaining and other labor practices, and beginning the privatization of its banks.
Most notably, the conditional deal to receive a third bailout requires that the country’s assets be transferred to an independent fund, which would monetize the assets “through privitization and other means” in order to make the scheduled repayment of the new loan. The fund would be managed by the Greeks under the supervision of “the relevant European institutions.”
“The Greek government needs to formally commit to strengthening their proposals in a number of areas…, with a satisfactory, clear timetable for legislation and implementation, including structural benchmarks, milestones, and quantitative benchmarks, to have clarity on the direction of policies over the medium-run,” according to the Euro Summit.
“Clearly the Europe of austerity has won,” Greece’s Reform Minister George Katrougalos told BBC radio, reported in Reuters. “Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks. So it is an agreement that is practically forced upon us.”
But European Commission President Jean-Claude Juncker responded that there were no winners and no losers in the agreement.
“I don’t think the Greek people have been humiliated, nor that the other Europeans have lost face,” he said. “It is a typical European arrangement.”
Paul Roderick Gregory wrote in Forbes that the EU’s actions follows established practices of bankruptcy proceedings.
“A court-appointed receiver is, in effect, put in charge of restructuring the bankrupt company’s assets, liabilities, and operations with the charge of getting it back to where it can stand on its own two feet,” Gregory said. “Greece is being given this chance.”
Moreover, the Euro Summit agreement will likely deter other countries with “tottering public finances in similar need of reform” from following in Greece’s footsteps, he said
“After seeing Greece’s terms, it is doubtful that Cyprus, Portugal, or Spain will wish to do what Greece did,” Gregory said.
As part of the deal, euro zone finance ministers will discuss on Monday how to keep Greece financed during the time it will need to agree to a bailout, but none of the options appear easy, officials told Reuters.