A final Euro Summit statement, released hours after night-long negotiations concluded Monday in Brussels, confirmed that the Greek government -- in exchange for a three-year bailout worth up to 86 billion euros ($96 billion) -- has agreed to implement tough, wide-ranging reforms.
Earlier, following the marathon talks, Greek Prime Minister Alexis Tsipras said that while his government faced “difficult decisions,” the new deal “averted a plan of a financial choking and banking collapse.”
According to the statement, Tsipras would now have to rush key measures on pension reforms, tax increases and a debt repayment fund through Greece's parliament by Wednesday. Once this is done, bridging loans would be released to enable the debt-ridden Greek government to repay 3.5 billion euros ($3.9 billion) to the European Central Bank (ECB) by July 20.
“The risks of not concluding swiftly the negotiations remain fully with Greece,” the statement warned.
— EU Council Press (@EUCouncilPress) July 13, 2015
Here are the key takeaways from the seven-page statement:
The eurozone has, in principle, agreed to start negotiations with Greece for a new loan package worth 82 billion euros to 86 billion euros ($91 billion to $96 billion).
The Greek parliament has until July 15 to pass measures to streamline VAT (value-added tax) rates, broaden the tax base, cut back on pensions and ensure “full legal independence” of the country’s national statistics agency. These demands are similar to the ones outlined in an earlier “compromise” proposal leaked Sunday.
Additionally, Greece would have to lay out a timetable detailing measures to: introduce product market reforms, privatize the electricity transmission network, eliminate political interference and overhaul non-performing loans.
No “haircut” or reduction of Greeks debts would be offered. However, the debts might be restructured once Greece has introduced all of its promised reforms.
Greece will also get short-term “bridge financing” to avoid bankruptcy. Eurozone finance ministers are due to meet later on Monday to discuss providing these funds, Donald Tusk, president of the European Council, announced after the summit. According to some estimates, Greece needs nearly 7 billion euros ($7.7 billion) over the next month to continue to pay off its debts.
A key point -- and one of the contentious issues in Greece’s protracted negotiations with its creditors -- relates to the establishment of a 50 billion euro asset fund. Half of this will be used for the recapitalization of Greek banks, while the other half will be used for investments and to reduce the country’s debt and Greece's debt mountain -- through “privatizations and other means.”
While most of the loan would come from the European Stability Mechanism (ESM) -- the eurozone’s bailout fund -- the International Monetary Fund (IMF) will also be asked to make a contribution from March 2016, when its current bailout program ends.
“A euro area Member State requesting financial assistance from the ESM is expected to address, wherever possible, a similar request to the IMF. This is a precondition for the Eurogroup to agree on a new ESM program,” the statement said.
Additionally, the European Commission would also attempt to mobilize up to 35 billion euros ($38 billion) -- outside of the ESM loan -- to fund investment and boost economic activity in Greece.
The final deal would need to be ratified by national parliaments, which is likely to happen before the end of the week, according to media reports.
“The Greek government needs to formally commit to strengthening their proposals in a number of areas identified by the Institutions, with a satisfactory clear timetable for legislation and implementation, including structural benchmarks, milestones and quantitative benchmarks,” the statement said.