Greek Prime Minister Alexis Tsipras agreed to European demands in order to immediately qualify for up to $95 billion of aid Greece needs to remain in the Euro Zone. These agreements were reached at a summit taking place in Brussels lasting more than 17 hours. The summit agreement averted a worst-case outcome for Greece as Greek banks have been shut for the past two weeks and the country is quickly running out of money.
The summit was essentially Greece’s last chance to stay in the euro. Lawmakers in Athens have until Wednesday to pass into law European creditors’ demands including integrating value-added taxes, widening the tax base to increase revenue and squelching pension costs. The summit agreement established the basis for negotiations on aid to Greece which includes greater than $27.6 billion to recapitalize its stuttering financial infrastructure.
Greece’s government accepted basically every condition imposed by its creditors as it accepted all crucial points. These conditions that Tsipras grudgingly accepted include several provisions from the country’s two previous bailouts and a new demand for the Greek government to transfer $55.2 billion of state assets to a holding company. This holding company will seek to either sell or generate cash from the state assets.
Creditors rejected Tsipras’ request to reduce the face value of Greek debt by approximately $342 billion.
The terms Tsipras agreed to are much harsher than those he convinced Greek voters to reject a week ago. Last week’s vote appears to have been a huge mistake as the conditions Greece now has to meet are much tougher and will make it harder for both sides to deliver on the deal. Additionally, creditors will now return to Athens will full access to Greek ministers and a veto over current, relevant legislation, intrusions which Tsipras has long rejected.
Tsipras stated that the deal reached will prevent the banking system from collapsing but that it will inevitably harm the Greek economy. His return to Greece will likely include a political backlash that may require him to organize a nationally united government or call for new elections. This would result as Tsipras has greatly backed away from his campaign promises to lift Greek wages and enrich the Greek economy.
While Greece put up a hard fight over the past six months in order to reach an agreement which would allow the country to get back on its feet, it ultimately had to agree to the deal reached in Brussels. Nikos Filis, the parliamentary spokesman for Tsipras’ governing party stated that Greece brutally pressured during the negotiations and accused Germany of “tearing Europe apart” for the third time in the past century.
Greece’s banks remain shut and financial controls will remain as they are when the banks reopen, possibly this week, if Greek lawmakers agree to the deal.