Greece, lenders clinch bailout deal af­ter marathon talks

The Pak Banker - - FRONT PAGE -

Greece and its in­ter­na­tional lenders reached a multi-bil­lion euro bailout agree­ment on Tues­day af­ter talk­ing through the night, of­fi­cials said, po­ten­tially sav­ing the coun­try from fi­nan­cial ruin.

The agree­ment, reached af­ter a 23-hour ses­sion of talks, must still be adopted by Greece's par­lia­ment and euro zone coun­tries. The sin­gle cur­rency bloc's fi­nance min­is­ters are due to meet on Fri­day, giv­ing time to fi­nal­ize the deal be­fore a ma­jor debt re­pay­ment next week.

The ne­go­ti­a­tions ap­peared to have re­solved all the main out­stand­ing is­sues, af­ter Greece's left­ist gov­ern­ment ef­fec­tively ca­pit­u­lated last month to cred­i­tors' de­mands for deep aus­ter­ity mea­sures in or­der to re­ceive loans.

"Fi­nally, we have white smoke," a Greek Fi­nance Min­istry of­fi­cial said af­ter ex­hausted Greek of­fi­cials emerged in a cen­tral Athens ho­tel to an­nounce the two sides had agreed on terms. "An agree­ment has been reached."

Fi­nance Min­is­ter Eu­clid Tsakalo­tos con­firmed only "two or three small is­sues" were pend­ing. Greek shares rose, with the bank­ing in­dex surg­ing 6 per­cent, while twoyear bond yields fell more than 4 per- cen­t­age points.

"The in­sti­tu­tions and the Greek author­i­ties achieved an agree­ment in prin­ci­ple on a tech­ni­cal ba­sis. Now as a next step, a po­lit­i­cal as­sess­ment will be made," Euro­pean com­mis­sion spokes­woman An­nika Brei­d­hardt said in Brus­sels. Still, of­fi­cials in skep­ti­cal north­ern Euro­pean coun­tries re­mained cau­tious, pend­ing fi­nal ap­proval of the deal.

"There re­mains work to be done with de­tails," said Fin­land's Fi­nance Min­is­ter Alexan­der Stubb. "We must take one step at a time. Agree­ment is a big word."

Com­mis­sion Pres­i­dent JeanClaude Juncker was due to hold talks later on Tues­day with Ger­man Chan­cel­lor An­gela Merkel and French Pres­i­dent Fran­cois Hol­lande.

Ap­prov­ing the agree­ment would close a painful chap­ter of aid talks for Greece, which fought against aus­ter­ity terms de­manded by cred­i­tors for much of the year be­fore re­lent­ing un­der the threat of be­ing bounced out of the euro zone.

Af­ter a deal in prin­ci­ple last month, the latest round of talks be­gan in Athens three weeks ago to craft an agree­ment cov­er­ing de­tails of re­form mea­sures, the timeline for their im­ple­men­ta­tion and the amount of aid needed.

A Greek Fi­nance Min­istry offi- cial said the pact would be worth up to 85 bil­lion eu­ros ($94 bil­lion) in fresh loans over three years. Greek banks would get 10 bil­lion eu­ros im­me­di­ately and would be re­cap­i­tal­ized by the end of the year. An EU diplo­mat said the agree­ment was worth be­tween 82 bil­lion and 85 bil­lion eu­ros.

Greek of­fi­cials have said they ex­pect the ac­cord to be rat­i­fied by par­lia­ment on Wed­nes­day or Thurs­day and then vet­ted by euro zone fi­nance min­is­ters on Fri­day. This would pave the way for aid dis­burse­ments by Aug. 20, when a 3.2 bil­lion euro debt pay­ment is due to the Euro­pean Cen­tral Bank.

Fac­ing a re­volt from the far-left of his left­ist Syriza party, Prime Min­is­ter Alexis Tsipras is ex­pected to once again rely on op­po­si­tion sup­port to push the pack­age through par­lia­ment. Once the deal is rat­i­fied, Tsipras is ex­pected to tighten his grip over the party by fac­ing down rebels at a party congress next month be­fore con­sid­er­ing early elec­tions.

Even then, doubts re­main about whether a left­ist gov­ern­ment elected on a pledge to re­verse aus­ter­ity can im­ple­ment the pun­ish­ing terms of an agree­ment that crit­ics say com­pro­mises the gov­ern­ment's ba­sic prin­ci­ples.

Pop­u­lar mis­giv­ings about fun­nel- ing yet more money to Athens run deep in Ger­many, the euro zone coun­try that has con­trib­uted most to Greece's two bailouts since 2010.

Ber­lin had cau­tioned that the talks must fo­cus on "qual­ity be­fore speed", rais­ing ques­tions about whether it would seek to slow down the process by in­sist­ing on con­di­tions at­tached to aid.

"We're talk­ing about a pro­gram for three years, it needs to be ne­go­ti­ated thor­oughly," Deputy Fi­nance Min­is­ter Jens Spahn told Ger­many's ARD tele­vi­sion shortly be­fore the deal was an­nounced. "It must be con­vinc­ing that it's not just about Aug. 20."

The latest round of talks with in­spec­tors from four cred­i­tor in­sti­tu­tions -- the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank, the Euro­pean bailout fund and the In­ter­na­tional Mon­e­tary Fund -- pro­gressed smoothly in Athens, in con­trast to ac­ri­mo­nious ne­go­ti­a­tions dur­ing most of the year.

In talks that dragged through Mon­day night, the sides reached agree­ment on the three main stick­ing points - deal­ing with non-per­form­ing loans held by banks, set­ting up an as­set sales fund, and dereg­u­la­tion of the nat­u­ral gas mar­ket.

Athens wanted to set up a "bad bank" to take on the prob­lem loans, while cred­i­tors want them bun­dled and sold to dis­tressed debt funds. It was not im­me­di­ately clear how that was re­solved.

Of­fi­cials had also ar­gued over how to set up a sov­er­eign wealth fund in Greece de­signed to raise 50 bil­lion eu­ros from pri­va­ti­za­tions, three-quar­ters of which would be used to re­cap­i­tal­ize banks and to re­duce the debt.

A few tech­ni­cal de­tails on mea­sures -- such as a law gov­ern­ing in­di­vid­ual bank­rupt­cies -- that Greece must pass be­fore get­ting aid were still be­ing dis­cussed be­tween tech­ni­cal ex­perts from both sides, another Greek of­fi­cial said. The overnight talks also found com­mon ground on fi­nal fis­cal tar­gets that should gov­ern the bailout ef­fort, aim­ing for a pri­mary bud­get sur­plus -- which ex­cludes in­ter­est pay­ments -- from 2016, a gov­ern­ment of­fi­cial said.

Adapted from an ear­lier base­line sce­nario, the tar­gets fore­see a pri­mary bud­get deficit of 0.25 per­cent of gross do­mes­tic prod­uct in 2015, and sur­pluses of 0.5 per­cent in 2016, 1.75 per­cent in 2017, and 3.5 per­cent in 2018, the of­fi­cial said.

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