News of the agreement following a marathon 24-hour negotiating session at Athens’ Hilton hotel was not immediately confirmed by the eurozone creditors and promptly triggered scepticism in Berlin, where the deputy finance minister said the talks were not yet concluded and that fundamental questions on Greece remained to be answered.
The leftist government of Prime Minister Alexis Tsipras which has U-turned on bailout policy since capitulating to eurozone leaders at another all-night summit in Brussels last month hopes to push a raft of reforms through parliament on Thursday, paving the way for eurozone finance ministers to bless the deal and unlock rescue funds by August 20, when Athens has to pay €3.2bn to the European Central Bank.
Greece’s finance minister Euclid Tsakalotos.
“Finally, we have white smoke,” a Greek finance ministry official told Reuters in Athens as the negotiating teams emerged bleary-eyed from the hotel after all-night talks. “An agreement has been reached. Some minor details are being discussed right now.”
The Greek finance minister, Euclid Tsakalotos, confirmed that “two or three small issues” were still open.
Kathimerini newspaper published a list of 35 “prior actions” that the Greeks committed to legislating on before any funds could be disbursed. They included raising the retirement age, phasing out preferential tax treatment for many Greek islands, scrapping fuel subsidies for farmers, and raising taxes for shippers.
It was not clear when Athens could tap the first funds from a bailout expected to total around €86bn over three years. Nor was the size of the first disbursement revealed. The Greeks are hoping for €25bn.
Given the dire state of the Greek economy and new figures predicting a slump of up to 2.3% this year, the creditors from the ECB, the European commission, the International Monetary Fund and the Luxembourg-based bailout fund, the European Stability Mechanism, appeared to have backed down on setting a key metric for the deal: the level of the primary budget surplus – the balance of revenue over spending when debt servicing costs are left out.
The Greeks said the primary surplus target was set at 0.25% of GDP for this year, rising to 3.5% by the end of the three-year bailout. In earlier failed negotiations the creditors insisted on 1% for this year.
Tsipras has been keen to wrap up the talks on Greece’s third bailout in five years as quickly as possible, with the Greek team said to have been unusually helpful and co-operative given the rancour and recrimination that have characterised relations.
It is believed that Tsipras is pushing for a quick deal not least for political purposes, with his popularity likely to wane the longer the situation remains unresolved and capital controls remain in place. A quick deal may also enable him to risk early elections to secure his base and rid himself of far-left rebels in his Syriza movement who reject the rescue terms and would prefer Greece to quit the euro.
Whether Berlin accedes to Tsipras’ game plan is another question. Angela Merkel’s government has consistently stressed that the fine print of a three-year programme is too important to be rushed and that it would prefer to drag the negotiations out while granting Athens €5bn in bridging finance to meet the 20 August payment.
Chancellor Merkel was said to re-emphasise these points in a telephone conversation with Tsipras on Monday. The leading hawk on Greece, the German finance minister, Wolfgang Schäuble, is likely to query the deal when the Eurogroup committee of eurozone finance ministers meet to review it, possibly on Friday.
His deputy, Jens Spahn, contradicted the news from Athens. “There are negotiations still going on in Athens,” he told German television. “A three-year programme has to be thoroughly negotiated.”
He stressed that the terms of the new bailout went beyond Greek budgetary arithmetic and had to explain how “Greece would earn its money” in the years ahead.
If Tsipras’ political agenda favours speed, Merkel’s political problems dictate prudence and patience. Scepticism runs deep among her Christian Democrats about the Greek bailout which has to be endorsed by the Bundestag. She faces a possible backbench revolt after a major row erupted after her whips threatened to punish any rebels by turfing them off key parliamentary committees.