Greece agrees deal with creditors

Published: Saturday 21st February 2015 by The News Editor

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Following weeks of recrimination and distrust, Greece and its creditors in the 19-nation eurozone reached an agreement on extending the country’s rescue loans.

The move should dramatically ease concerns that Greece was heading for the euro exit as soon as next month.

The agreement had looked a long way off on Thursday when one German official compared Athens’ request for more time to the infamous Trojan Horse.

It will mean that Greece will avoid going bankrupt, at least over the four months of the extension. It should also mean that capital controls will not be needed and that Greek banks will have enough money to stock up their ATMs.

To get the money though, the Greek government has one more hurdle to clear.

On Monday, it must present a series of unspecified economic reforms measures that are deemed acceptable by creditors and rooted in Greece’s previously enacted bailout agreement – something the government had promised not to do.

Still, the Greek government will be the author of the reforms pursued and that represents a change from the past five years when Greece has relied on rescue money to avoid going bankrupt and was effectively ordered to enact a series of austerity measures.

“We have established common ground again,” said Jeroen Dijsselbloem, the eurozone’s most senior official, after the meeting in Brussels.

And Greek finance minister Yanis Varoufakis said the deal allows both Greece and Europe “to turn a page … As of today, we are beginning to be co-authors of our destiny”.

He conceded the Greek government would be “in trouble” if the reform measures, which are likely to include a series of measures to tackle corruption and tax evasion are not backed by representatives from the European Central Bank, International Monetary Fund and European Commission – previously known as the troika.

However, he insisted they “won’t be shot down by the institutions”.

If the list of reforms is sanctioned, then it will be further detailed and agreed upon by the end of April.

Yesterday’s agreement was clinched just a week before Greece’s 240 billion-euro (£156 billion) bailout programme expires and is aimed at buying time for both sides to agree on a longer-term deal to ease the burden of the bailout loans.

The Greek government is not getting the time it requested on Thursday.

Instead of the six-month bailout extension it asked for, it is getting four – and with Greece having to make big debt repayments after the new cut-off point, that is a sign that its creditors aren’t willing to give Athens free rein.

Still, following weeks of tense negotiations in the wake of the election of the new left-wing Greek government, the final deal showed an element of compromise by both camps.

Brinkmanship was just one of the games that was referenced over the past few weeks of discussion.

More often than not, it was German finance minister Wolfgang Schaeuble, who was the bulwark against the Greek government’s ambitions.

But he emerged from yesterday’s meeting in conciliatory mood, saying: “This is an important step forward.”

As well as presenting a list of reforms by Monday, the Greek government has committed to honouring its financial obligations to all creditors “fully and timely”.

In addition, it has promised to make sure that it continues to post primary fiscal surpluses – what is left in the budget after debt-related payments.

However, it looks as if the government has managed to convince creditors to reduce the amount of that surplus in response to the worsening economic outlook for Greece this year.

In the statement outlining the broad thrust of the agreement, the eurogroup said “the economic circumstances in 2015” will be taken “into account”.

Greece also made the concession to not take any measures that might negatively impact budget targets, economic recovery or financial stability. Previously, it had sought to loosen its budget somewhat.

Published: Saturday 21st February 2015 by The News Editor

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