Greece will receive a third bailout worth €86 billion following a bruising battle in Brussels that sees it remain inside the euro for now.
But the deal was described by Prime Minister Joseph Muscat as worse than the one Greeks rejected in a recent referendum. Greece will receive the bailout money over three years in a bid to halt its financial meltdown and start it on the path of recovery.
In return, creditors demanded strictly supervised draconian economic reforms, which are expected to create political and social turmoil for Greek Prime Minister Alexis Tsipras’s far-left Syriza party.
During the longest European summit on record, the EU appeared at its most divided for decades as Greece and its 18 eurozone partners negotiated – and at times argued acrimoniously – before an agreement was finally hammered out.
Greece may have been humiliated- Muscat
The acrimony reached its apex at around 6am on Monday, according to The Financial Times, when German Chancellor Angela Merkel and Mr Tsipras rose from their chairs and headed for the door, resigned to a Grexit.
“Sorry, but there is no way you are leaving this room,” European Council president Donald Tusk reportedly said.
Amid a breakdown in trust, creditors demanded that Greece pushes the reforms through parliament by tomorrow, and only after that would the bailout details be discussed.
The rescue – Greece’s third since 2010 – should secure its place in the euro, at least for now. Had it crashed out, the unprecedented event would have shaken Europe to its core.
A German proposal to give Greece a “time out” – a suspension from the euro for five years until it gets its house in order – was left out of the final deal.
Following an entire night of negotiations, Dr Muscat said Greece could have walked off with a much better deal if it had agreed to the programme presented before the referendum.
Greeks had taken the cue from their own government and overwhelmingly rejected the austerity measures proposed by the creditors. But surprisingly, Syriza returned to the negotiating table with equally tough, if not tougher, counter-proposals.
“There were things [during the negotiations] we could have done away with. I think that winning in negotiations is good but the adversary shouldn’t be humiliated. I fear that Greece might have been humiliated,” Dr Muscat said.
Apart from the €177 million it has already loaned to Greece, Malta and the other eurozone countries will not be forking out any money to bail Greece out again, because the new funds will come from the European Stability Mechanism.
During talks Malta demanded a clear commitment that no debt haircuts would take place, though it agreed to be “flexible” on a number of conditions as well as on a timetable for the implementation of action.
“We wanted to protect our interests, but we also looked at the European project. I can’t understand what some of the more hawkish countries could have achieved by demanding more,” Dr Muscat said, amid claims Germany and other countries were too harsh on Greece.
Apart from the measures listed below, Greece will have to establish a new fund to sell off valuable assets to help repay its new bailout and refinance its banks.
To remain afloat, Greece needs between €82 billion and €86 billion, €7 billion of which by July 20.
Minimum requirements
• Greece will request continued IMF support from March 2016.
• Greece to pass, by tomorrow, measures that include simplifying VAT rates and applying tax more widely, cutting back on pensions and making the national statistics agency independent.
• By July 22 introduce measures to overhaul its civil justice system and implement EU bank bail-in rules.
Set clear timetable for the following measures:
• Ambitious pension reform.
• Product market reform.
• Privatise electricity transmission network.
• Review collective bargaining, industrial action and collective dismissals.
• Strengthen financial sector, including action on non-performing loans and eliminate political interference.
Take the following action:
• Privatisation, involving transfer of assets to independent fund in Greece designed to raise €50 billion, three-quarters of which would be used to recapitalise banks and to decrease debt.
• Cut costs of public administration and reduce political influence over it. First proposal to be provided by July 20.
• Ensure creditor approval for key legislation before submitting to public consultation or parliament.