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Sunday, October 23, 2016

BRUSSELS (Reuters) – Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros 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 and could fracture his government and cause an outcry in Greece.

“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. So it is an agreement that is practically forced upon us,” he told BBC radio.

If the summit had failed, Greece would have been staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and exit the European monetary union.

“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.

He dismissed suggestions that Tsipras had been humiliated even though the summit statement insisted repeatedly that Greece must now subject much of its public policy to prior agreement by bailout monitors.

“In this compromise, there are no winners and no losers,” Juncker said. “I don’t think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement.”

Tsipras himself, elected five months ago to end five years of suffocating austerity, said he had “fought a tough battle” and “averted the plan for financial strangulation”.

Greece won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years, along with an assurance that euro zone finance ministers would start within hours discussing ways to bridge a funding gap until a bailout – subject to parliamentary approvals – is finally ready.

That will only happen if he can meet a tight timetable for enacting unpopular reforms of value added tax, pensions, budget cuts if Greece misses fiscal targets, new 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 authorize the opening of loan negotiations with Athens once the Greek parliament has approved the entire program and passed the first laws.

The secretary-general of Merkel’s conservatives said the Bundestag was likely to vote on Greece on Friday.


Asked whether the tough conditions imposed on a desperate Greece were not similar to the 1919 Versailles treaty that forced crushing reparations on a defeated Germany after World War One, Merkel said: “I won’t take part in historical comparisons, especially when I didn’t make them myself.”

The deterioration of the Greek economy since Tsipras won office in January, and particularly in the last two weeks, had led to a much higher financing need, she said.

One senior EU official calculated the cost to the Greek state of the last two weeks of political and economic turmoil at 25 to 30 billion euros. A euro zone diplomat said the full damage might be closer to 50 billion euros.

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 in the next bailout, which Merkel had insisted on to win parliamentary backing in Berlin.

In a sign of how hard it may be for Tsipras to convince his own Syriza party to accept the deal, Labour Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.

Six sweeping measures including spending cuts, tax hikes and pension reforms must be enacted by Wednesday night and the entire package endorsed by parliament before talks can start, the leaders decided.

In almost the only concession after imposing its tough terms on Tsipras, Germany dropped a proposal to make Greece take a “time-out” from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.

Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favorable terms in June and held a referendum last week to reject it. Only France and Italy worked to try to soften the terms being imposed on Greece.


Some diplomats questioned whether it was feasible to rush the package through the Greek parliament in three days. Tsipras is set to sack ministers who did not support him and make dissident Syriza lawmakers resign their seats, people close to the government said.

Even if this week’s rescue succeeds, many EU diplomats question whether an unstable Greece will stay the course on a three-year program.

Merkel, whose country is the biggest contributor to euro zone bailouts, said from the start that she would drive a hard bargain against a backdrop of mounting opposition at home to more aid for Greece.

The final sticking point was Germany’s insistence on an independent external trust fund to control state assets for privatization. Berlin initially wanted to use a structure in Luxembourg managed by its own national development bank, KfW, but eventually relented.

One diplomat said that was tantamount to turning Greece into a “German protectorate”. But Merkel declared the matter a “red line” for Germany.

Euro zone finance ministers were tasked with finding sources of immediate bridge funding for Greece if it passed the laws, to prevent it defaulting on a key payment to the ECB next Monday.

Finance ministers said Greece needed 7 billion euros of funding by July 20, when it must make a crucial bond redemption to the ECB, and a total of 12 billion euros by mid-August when another ECB payment falls due.

The ECB maintained emergency funding for Greek banks to keep them just afloat this week, a banking source said. But the finance ministry in Athens said the banks would remain shut for now.

(Reporting by Alastair Macdonald, Andreas Rinke, Tom Koerkemeier, Philip Blenkinsop, Julia Fioretti, Alexander Saeedy, Robert-Jan Bartunek and Julien Ponthis in Brussels, George Georgiopoulos and Lefteris Karagiannopoulos in Athens; Writing by Paul Taylor; editing by Anna Willard and Giles Elgood)

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  • Alvin Harrison


    Last week I suggested that the Greeks drop out of the Eurozone and go it alone. Free themselves of the leech bankers and default on their loan. Go back to their own currency, and suffer the hardship…but eventually be masters of their own destiny.

    I am being too simplistic you say. I don’t understand finance. Well yea….I do. You see the finance for a nation is really not much different than for an individual. Here’s what happened. Greece borrowed too much money from the bank and could not pay it back. They lived high on the hog for a while, but beyond their means….So the banks threatened to cut up their credit cards. So Greece went to a debt consolidation firm and worked out a deal to pay back the money with a bit more credit to be allowed. Of course the bank played hardball…but they really wanted the deal to go through because if it didn’t they would lose all the money Greece owed them.

    Oh, no doubt it would have been tough on the Greeks to default. REALLY tough. But when they emerged from the other end, which they would have eventually, they would be free from the banks stranglehold on their money supply and policy. The toughness would have been the cost of the stupid Eurozone deal they entered in to begin with and the cost of years of borrowing to support a lifestyle they could not afford.

    America take heed. We are the Greeks waiting to happen. At some point we will have to pay for what we are borrowing from the Federal Reserve…you know, that PRIVATE bank that doles out our money. At some point we will have to pay it all back…which is impossible. So they will have us and can dictate what we must do to avoid the severe hardship involved in defaulting. The cost will be complete slavery….worse than now.

    What do individuals do when this happens . They default, live with relatives or on the street a while…. live within their means and hopefully learn a lesson. Why it takes getting to this point for countries or individuals to see the handwriting on the wall or to learn from others I will never figure out.

    • S.J. Jolly

      Greece, like the USA, needs to get the uber-rich to pay their fair share of taxes. Those guzzling multiple $1,300 bottles of champagne certainly could afford to pay a luxury tax on them.

    • Theodora30

      And the banks gave them loans fully aware of Greece’s problems. Making risky loans is as bad as taking them but creditors never see it that way.

  • Dominick Vila

    There is going to be a high price to pay for Tsipras agreeing to more austerity measures than those that have already been implemented, and that are causing so much pain and misery to the average Greek person. It takes a lot of nerve to ask people who are going to bed hungry to tighten their belts, and that’s exactly what the EU masters told a country on the verge of financial and economic collapse.
    What Greece needs is investment in infrastructure and industrialization, designed to improve its competitiveness and create good jobs. An economy with a demographic problem like Greece, where about half of the population is retired, and with an economy that relies on tourism to exist, is doomed to failure.
    I think it is important to mention that the latest bailout is actually designed to protect European investors, and the IMF, rather than the Greek people. There are things that could and should be done, such as raising the retirement age, but it is totally unrealistic to ask a country without natural resources, or enough government revenues to provide for its population, to repay debt that is simply prolonging the inevitable.

  • FT66

    Kudos to the writer of this article at least he shows the flag of Greece is still intact. I have been watching out of the country TV News, all the time they talk about Greece, they show Greece flag torn in many pieces while flying. It’s sad Greeks have been stabbed in their backs. They have gone through tough times and still don’t know when this saga will be over. Their inexperienced Prime Minister has sold their souls. Was there any need of telling them vote NO and came empty-handed home after lengthy negotiations? Was he aware what he was doing before, during and after? Is this man the right person for them? I don’t think so.

  • Rippie

    Well, here is the buttkick cost of socialism out of control. You just can’t have big pensions for people retiring young, huge vacations and all the rest without actually paying for them in work and money.

    So, the Piper has returned and demanding to be paid.

    Frankly, last month’s deal was much better AND did not have the disastrous losses of the last couple of weeks compounded into the mix.

    PM Tsipras is now stuck with the gargantuan task of having to steer the country out of trouble, on a roadmap he has no control of the route.

    He will surely see the gov’t crumble around him and be powerless to do anything afterwards, but the Greeks will tough it out and get through it, even if they most likely will try to recall Tsipras.

    Sometimes, wishes and dreams don’t cut it. When you have to pay your bills, you have to make some unpleasant choices. If not, others will make even more unpleasant ones for you.

    Tsipras is not in an enviable position.

  • S.J. Jolly

    Bottom line, Greece has a choice between trying to repaying the German bank loans, and seeing their government collapse, or of stiffing the German banks and seeing their economy collapse.
    The only politician able to easily fix this problem would be King Minas, of the golden touch fame.