Accord on Greek bailout: Eurogroup
Greek prime minister agrees to tough terms demanded by European finance ministers

The agreement between Greece and its creditors on Monday was cautiously welcomed by the White House and by Number 10 Downing Street.

U.K. Prime Minister David Cameron: "What's in Britain's interest is that there is stability in the eurozone and there isn't the threat of uncertainty and instability."

"And I think this deal gives that sort of stability a chance. But obviously there is long way to go to put into place all the things that have been agreed."

In Washington, White House press secretary Josh Earnest said the agreement reflected a commitment by Greece’s creditors to "provide financial support and help create a path for Greece to return to growth and achieve debt sustainability."

Although there are still some important decisions and steps to be taken, Earnest said the U.S was hopeful that all sides would make the difficult decisions and follow through on the important work that needs to get done.

Dutch Prime Minister Mark Rutte, who participated in the negotiations, was also cautious about next steps. "The rescue package is possible but it will be step by step,’ he told a press conference on Monday. ‘The whole package must be embraced politically. Only then can negotiations begin and these could take weeks. We are not prepared to undo the principles of monetary union."

Agreement makes severe demands of Greece

At a press conference in Brussels on Monday, eurogroup leader Jeroen Dijsselbloem outlined the accord, which was later released to the press.

"The eurogroup takes note of the urgent financing needs of Greece which underline the need for very swift progress in reaching a decision on a new agreement: these are estimated to amount to €7 billion ($7.8 billion) by July 20 and an additional €5 billion by mid-August.”

Today's document also placed emphasis on Athens clearing its arrears with the International Monetary Fund.

The first step, Dijsselbloem said, is for the Greek parliament to legislate on the economic reforms agreed to in the accord.

Athens must adopt a series of priority measures, including value-added tax reform, tax reforms and pension reforms. This should take place by Wednesday.

But the Greek parliament must also adopt stringent reforms in the near future including the modernization of the Greek administration, improvement of coordination with European institutions, and a wave of privatizations of Greek government assets.

Money obtained from privatizations will be transferred to a €50 billion fund to be set up. The fund will monetize them by privatization or running them. It will be used to help recapitalize banks.

The fund will be based in Athens – creditors had originally demanded that it be located in Luxembourg.

Creditors also imposed further conditions on: adoption of more ambitious product market reforms, including Sunday trade; sales periods; pharmacy ownership; milk; bakeries; [over-the-counter pharmaceutical products in a next step], as well as the opening of closed professions (e.g. ferry transportation).

Energy market reforms are also to be imposed; Greece must proceed with the privatization of the electricity transmission network operator ADMIE.

The Greek government has been told to undertake rigorous reviews of collective bargaining, industrial action and collective dismissal.

The government must adopt the necessary steps to strengthen the financial sector, including decisive action on non-performing loans and measures to strengthen governance of the Hellenic Financial Stability Fund and the banks – in particular by eliminating any possibility for political interference especially in appointment processes.

Once the €25 billion needed for recapitalization of the banks is repaid, the remaining funds will be used to bring down debt by 50 percent, and the other 50 percent for the Greek government to reinvest into Greece, Dijsselbloem said.

The International Monetary Fund will play a central role in the administration of the deal.

There is a possibility of including bridge financing for Greece, Dijsselbloem added, and that this will be considered by the eurogroup this week.

"Trust was a very key issue; we looked at reforms, debts, financials needs. We were able to agree on all these issues to get Greece back on track," Dijsselbloem said.

But German Chancellor Angela Merkel made clear on Monday that a restructuring of Greek debt, one of the top Greek government demands, would not happen. "It's out of the question," she told the press after the announcement.

All eyes turn today to the Greek parliament, which must both ratify the accord, and begin passing economic reform legislation.

Last Modified: 2015-07-14 11:40:31
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