Euro zone leaders made Greece surrender much of its sovereignty to outside supervision yesterday in return for agreeing to talks on an 86 billion euro bailout to keep the near-bankrupt country in the single currency.
The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity.
“Clearly the Europe of austerity has won,” Greece’s Reform Minister George Katrougalos said. “Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks.”
The Iskra website, which echoes the views of Tsipras’s chief party opponent, the eurosceptic Energy Minister Panagiotis Lafazanis, did not pull its punches.
Greece would become a “debt colony” in a “German-supervised EU,” the hardline leftist outlet said.
Tsipras, the 40-year-old former Communist who stormed to power in January with promises to halt austerity, has the unenviable task of enacting what critics have called the most “humiliating” of Greece’s three bailouts since 2010.
With around a fifth of his radical left Syriza party likely to oppose him, Tsipras will probably need to rely on pro-European opposition lawmakers to push through measures.
If the summit on Greece’s third bailout had failed, Athens would have been staring into an economic abyss with its banks on the brink of collapse and the prospect of having to print a parallel currency and exit the euro.
Greece however aims to reopen its banks on Thursday, bankers said. Facing a wave of withdrawals, the banks closed two weeks ago.
“The agreement was laborious, but it has been concluded. There is no Grexit,” European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining.
Greece won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years. As part of the deal, euro zone finance ministers discussed yesterday how to keep Greece financed during the time it will need to agree a bailout, officials said.
Athens must meet a tight timetable for enacting unpopular reforms of value added tax, pensions, budget cuts, bankruptcy rules and an EU banking law that could be used to make big depositors take losses.
German Chancellor Angela Merkel said she could recommend “with full confidence” that the Bundestag authorise the opening of loan negotiations once the Greek parliament has approved the entire program and passed the first laws.
Even after Greece and its European partners reached a deal on a third aid programme, it must still be approved by eight different national parliaments. And the German Bundestag will even get to vote on it twice.
Tsipras returned to Athens on Monday and was expected to meet aides and coalition partners. Facing a Wednesday deadline, he can put all the required measures in one parliamentary bill.
In Greece, relief was mixed with anger at Germany, with many referring to the deal as a pyrrhic victory.
Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets worth 50 billion euros – including recapitalized banks – in a trust fund beyond government reach, to be sold off primarily to pay down debt.
In a gesture to Greece, some 12.5 billion euros of the proceeds would go to investment in Greece, Merkel said.
The Greek leader had to drop his opposition to a full role for the International Monetary Fund (IMF) in the next bailout, which Merkel had insisted on to win parliamentary backing in Berlin.
Six sweeping measures including spending cuts, tax hikes and pension reforms must be enacted by Wednesday night and the entire package endorsed by Greece’s parliament before talks can start.
Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favourable terms in June and held a referendum last week to reject it.
Even if this week’s rescue succeeds, EU diplomats question whether Greece will stay the course on a three-year programme.
Euro zone finance ministers were tasked with finding sources of immediate bridge funding for Greece to prevent it defaulting on a key payment to the ECB next Monday.
Greece needs 7 billion euros by July 20 when it must make a bond redemption to the ECB and 12 billion euros by mid-August when another ECB payment falls due.