After convening for about 17 hours of negotiation on Greece, European Council President Donald Tusk remarked that they have finally reached an “agreekment.”
According to a press statement from the European Commission, the Euro Summit has agreed to begin negotiations on a support program for Greece under the European Stability Mechanism (ESM). The said program comes with “strict conditions” and is made up of a growth and employment package that amounts to €35 billion.
Though everything that has been agreed upon is still subject to the approval of various national parliaments including the Greek parliament, this represents a step forward in ensuring Europe as well as the rest of the world that there will be no Grexit happening. In fact, Jean-Claude Juncker, the President of the European Commission, has declared, “There will not be a ‘Grexit’…I am satisfied both with form and substance of the agreement.”
Meanwhile, Eurogroup President Jeroen Dijsselbloem admitted that during the negotiations, “trust was a key issue, but we also worked very hard on a number of issues regarding reform, the fiscal situation, the debt problems and financing needs.” He added, “We were able to agree on a lot of these issues, putting in extra effort on all sides to get Greece back on track. We prepared a report which contained a number of open issues and submitted it to the Summit.”
As part of the agreement in the Euro Summit, the ESM program for Greece requires continued support from the International Monetary Fund, in terms of monitoring and financing, from March 2016. In addition, IMF Director of Communications Gerry Rice has also said, “Following on the Managing Director’s participation in the discussions on Greece held in Brussels over the weekend, she briefed the IMF’s Executive Board on the outcome as reflected in the Eurozone Leaders’ statement published earlier today. The IMF stands ready to work with the Greek authorities and the European partners to help move this important effort forward.”
Meanwhile, IMF Managing Director Christine Lagarde has also issued a very brief statement as she left the Euro Summit:
Video from European Commission
According to a statement from the European Summit following the negotiation, “The Greek government needs to formally commit to strengthening their proposals in a number of areas identified by the Institutions, 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.”
Such areas include pension reforms, product market reforms, energy market privatization, alignment of the Greek labor market with European (and international) best practices, decisive action on non-performing loans, reduction in costs of the Greek administration as well as a privatization program that will see some valuable Greek assets transferred to an independent fund to monetize assets.
With regard to the privatization program, Dijsselbloem explained, “Assets will be transferred to this fund, and the fund will monetise these assets, either through privatisation or by investing those assets. That money will be used to help reduce debt. It will also be used for the repayment or recapitalisation of banks.”
He added, “The fund will also contribute to the repayment of those capitalisation needs. In addition, once the 25 billion euros needed for recapitalisation is repaid, 50% of the remainder will be used for debt reduction, and 50% for investment in Greece.”
Dijsselbloem believes that this is significant in addressing the sustainability of Greece’s debt while supporting its growth.
Meanwhile, as far as the timetable goes, Dijsselbloem says, “So over the next two days the focus of attention will be on the Greek Parliament. As soon as they have completed the legislative process, the other national parliaments will get to work, and hopefully by the end of the week we can take a decision on mandating the institutions to draw up an agreement.”
Meanwhile, following the Euro Summit, Greece Prime Minister Alexis Tsipras has said, “We have been fighting hard for six months now, and we fought until the end to achieve the best possible outcome, an agreement that will enable the country to get back on its feet, and for the Greek people to be able to continue to fight.”