PHEW. It seems an economic crisis in Greece has been narrowly averted by a unanimous agreement, that was reached after 17 hours of discussions in Europe overnight.
But while Eurogroup ministers and financial traders around the world heave a sigh of relief, for Greece, the work is only just beginning.
A statement from the Euro Summit overnight said rebuilding trust between Greek and Eurogroup leaders is crucial following weeks of brinkmanship that left many contemplating whether Greece really would crash out of the single currency.
Now, in order to stay, Greece has to pass a series of major reforms swiftly through parliament to demonstrate their commitment to change. That will let them unlock the emergency loans they so badly need.
Here’s what’s on the to-do list for the next 24 hours:
• Streamline the VAT system;
• Broaden the tax base to increase revenue;
• Improve the long-term sustainability of the pension system;
• Ensure legal independence of the Greek statistics office;
• Implement major spending cuts
In addition, by 22 July they have to:
• Adopt a Code of Civil Procedure, which is a major overhaul of the civil justice system;
• Meet the bank recovery and resolution directive, which is a way of dealing with banking crises across the EU.
Someone put the kettle on.
Once these measures are in place, Greece will be able to sign a Memorandum of Understanding with the Eurogroup leaders which will provide a three-year bailout worth up to $A128 billion (€86 billion).
That’s in addition to $A357 billion (€240 billion) the country has received over the last five years, and will include an emergency bridging loan necessary to meet another $A10 billion (€7 billion) payment Greece owes to its creditors by July 20.
Once the initial changes have been signed off, Greece will then have to commit to a swathe of reforms designed to modernise everything from labour relations to pensions and trading hours. It will have to implement changes to pharmacy ownership, bakeries, privatise its electricity network and update labour market policies in line with ‘best practice’ in the European Union.
The deal will also see the establishment of an independent fund — to be located in Greece and managed by Greek authorises under supervision — that will monetise Greek assets through privatisation.
European leaders also stressed Greeks would not be given a ‘nominal haircut’ on their debt, but would potentially be eligible for extra measures to smooth the path for sustainable repayments in future.
Greek Prime Minister Alexis Tsipras framed the deal as a win that prevented the collapse of the financial system.
“The agreement calls for tough measures. However, we prevented the transfer of public property abroad, we prevented the financial asphyxiation and the collapse of the financial system — this was planned to the last detail — having recently been designed to perfection, and in the process of being implemented,” he said, while urging people to fight to rid the country of vested interests.
“Greece needs radical reforms in favour of social forces, and against the oligarchy that have led to the country’s current state. And this commitment to this new effort begins tomorrow.”