After marathon negotiations that started yesterday afternoon, Greece and Europe presented a compromise this morning. A Grexit appears to be averted for now. The Greek parliament still has to debate the agreement, and various other national parliaments also have to approve the agreement.
"After 17 hours of negotiations, we have finally reached an agreement," Donald Tusk, president of the European Council, said this morning. "One can say that we have 'agreekment'. Leaders have agreed in principle that they are ready to start negotiations on an ESM programme, which in other words means continued support for Greece."
The agreement contains various measures, a number of which with a deadline. The tax system and VAT have to undergo change, and the pension system has to be addressed. In addition, the economy needs to be reformed according to OECD guidelines, the energy market has to be privatized further, and the labour market modernized. Read the full agreement here.
Greek Prime Minister Tsipras now has to defend the agreement in the Greek parliament, which has to agree with the measures. Other European parliaments, including those of the Netherlands, Finland, Germany, Austria, Slovakia and Estonia, also have to give their consent before talks about an ESM programme (European Stability Mechanism) can begin.
"Courageous decision" and building trust
European leaders immediately responded to the agreement. According to Tsipras, the reforms will unavoidably plunge Greece into a recession, but he also said that the Greeks took responsibility in rejecting the most extreme demands of the conservatives in Europe. The 50 billion fund with Greek state assets as security, for instance, will not be moved to Luxembourg, but will stay in Athens. And Tsipras has reportedly gained mid-term funding, as well as eventual debt relief.
President Hollande is fairly optimistic. He calls it an "historic" and "courageous decision" by the Greeks. Chancellor Merkel and Belgian Prime Minister Michel point out that the trust in the country has to be rebuilt. Dutch Prime Minister Rutte, who will break a campaign promise should more money go to Greece, calls it a "very complicated delivery."
Greek banks
Today, the Eurogroup, the consultative body of European Finance ministers, starts with further development of the plan. Greece needs 7 billion euros on July 20, and another 5 billion in August, to fulfil its commitments.
The Greek banks will reportedly open again tomorrow. The ECB supports the banks with 2 billion euros. Payment transactions will probably remain limited though. The 60 euro withdrawal limit will remain in force, and transactions to other countries will likely remain limited until a definitive agreement has been reached on the support programme. That way, a bank run will be prevented.