(EBS) – Euro zone leaders clinched a deal with Greece on Monday (July 13) to negotiate a third bailout to keep the near-bankrupt country in the euro zone after a whole night of haggling at an emergency summit.
“Leaders have agreed in principle that they are ready to start negotiations on an ESM programme, which in other words means continued support for Greece. Euro summit has unanimously reached agreement. All ready to go for ESM programme for Greece with serious reforms and financial support,” European Council President Donald Tusk told journalists at a news conference in Brussels, referring to the European Stability Mechanism bailout fund.
“There are strict conditions to be met. The approval of several national parliaments including the Greek parliament is now needed on negotiations on an ESM programme to formally begin. Nevertheless the decision gives Greece the chance to get back on track with the support of European partners. It also avoids the social, economic and political consequences that a negative outcome would have brought,” he added.
However, the tough conditions imposed by international lenders led by Germany could bring down Prime Minister Alexis Tsipras’ leftist government and cause an outcry in Greece. Even before the final terms were known, his labour minister went on state television to denounce the terms.
EU officials said Tsipras finally accepted a compromise on German-led demands for the sequestration of Greek state assets to be sold off to pay down debt. The terms of the agreement were not immediately known.
The Greek leader also dropped resistance to a full role for the International Monetary Fund in a proposed 86 billion euro ($95.78 billion) bailout, which German Chancellor Angela Merkel has declared essential to win parliamentary backing in Berlin.
However, in a sign of how hard it may be for Tsipras to convince his own Syriza party to accept the deal, Labour Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.
Tsipras will now have to rush swathes of legislation through parliament this week to convince his 18 partners to release bridging funds to avert a state bankruptcy and just to begin negotiations on a three-year loan.
If the summit had failed, Greece would have been staring into an economic abyss with its banks closed and on the brink of collapse and the prospect of having to print a parallel currency and in time exit the European monetary union.
Six sweeping measures including spending cuts, tax hikes and pension reforms must be enacted by Wednesday (July 15) night and the entire package endorsed by parliament before talks can start, the leaders decided.
In almost the only concession after imposing a tough set of terms on Tsipras, Germany dropped a proposal to make Greece take a “time-out” from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.