Euro zone strikes deal with Greece after all-night talks

EURO zone leaders made Greece surrender much of its sovereignty to outside supervision yesterday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency.

The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece.

“Clearly the Europe of austerity has won,” Greece’s Reform Minister George Katrougalos said.

“Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks. So it is an agreement that is practically forced upon us,” he told BBC radio.

If the summit had failed, Greece would have been staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and in time, exit the European monetary union.

“The agreement was laborious, but it has been concluded. There is no Grexit,” European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining.

He dismissed suggestions that Tsipras had been humiliated even though the final euro summit statement insisted repeatedly that Greece must henceforth subject much of its public policy to prior agreement by bailout monitors.

“In this compromise, there are no winners and no losers,” Juncker said. “I don’t think the Greek people have been humiliated, or that the other Europeans have lost face it is a typical European arrangement.”

Tsipras himself, elected five months ago to end five years of suffocating austerity, said he and his team had “fought a tough battle” and had to make difficult decisions. He said he had secured an improved promise of debt restructuring and “averted the plan for financial strangulation”.

Greece won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years, along with an assurance that euro zone finance ministers would start within hours discussing ways to bridge a funding gap until a bailout – subject to parliamentary approvals – is finally ready.

That will only happen if he can meet a tight timetable for enacting unpopular reforms of value added tax, pensions, quasi-automatic budget cuts if Greece misses fiscal targets, new bankruptcy rules and an EU banking law that could be used to make big depositors take losses.