Greece has secured a
four-month reprieve from eurozone creditors at a last-ditch summit in Brussels,
heading off imminent default and a traumatic rupture of monetary union.
The Syriza government
in Athens gains bridging finance to avert a crunch as budget coffers run dry
and capital flight reaches €1bn a day. Greek officials confessed privately that
the country is on the brink of insolvency. It was likely to exhaust its limit
on emergency liquidity from the European Central Bank as soon as Tuesday,
risking a run on the banking system and a financial collapse.
The Greeks now have a
stay of execution until the end of June, when the drama is likely to be
repeated. Greece must repay €6.7bn to the European Central Bank in July and
August, an impossible task without a fresh EU-IMF programme or something
similar.
Eurogroup finance
ministers have softened demands for yet further austerity, accepting that
fiscal tightening should fit “economic circumstances”, the core Greek
condition. This is a victory for Syriza on a crucial point. “It is a balanced
agreement. It will help Greece to get on its feet again,” said the EU economics
commissioner, Pierre Moscovici.
The text said the
Greeks “reiterate their unequivocal commitment to honour their financial
obligations to all their creditors fully and timely”.
“The Greek authorities
commit to refrain from any rollback of measures and unilateral changes to the
policies and structural reforms that would negatively impact fiscal targets,
economic recovery or financial stability, as assessed by the institutions,” it
said.
Jeroen Dijsselbloem,
the head of the Eurogroup, sweetened the bitter pill with a promise that there
is “flexibility in the programme and we will make the best use of it."
Greece's finance
minister, Yanis Varoufakis, said his country had defeated the "exorbitant
demands" of the Troika for more austerity, a regime he once called fiscal
waterboarding. "We have averted many years of suffocating primary
surpluses that would destroy our industrial base," he said.
Describing the
Eurogroup statement on fiscal policy as "constructive ambiguity", he
implied that Greece will henceforth work out its budget plans with the
professionals at the IMF - "which holds views that I personally agree
with" - rather than submitting to the creditor powers.
He insisted that
Greece had won the right to determine its own reforms, and will launch these
reforms as a "weapon against the deep malignancies of the Greek
economy".
"We are no longer
following a script given to us by external agencies. Once you have a
relationship of equals, the co-operation can be a lot more fruitful," he
said.
Greece will work with
the various components of the EU-IMF Troika, although the term as such will be
dropped. Syriza must prepare a list of reforms by Monday. The deal will be
rushed through German Bundestag and other national parliaments over coming
days.
The breakthrough
followed five hours of “corridor diplomacy” as Mr Dijsselbloem and Christine
Lagarde from the International Monetary Fund shuttled messages back and forth
to the German and Greek delegations.
[…] The Eurogroup had
previously demanded that Greece comply fully with the Troika’s targets for a
rise in the primary budget surplus from 1.5pc of GDP in 2014, to 3pc this year,
and 4.5pc next year, even though officials at the IMF and the Commission admit
that it makes no economic sense. This would leave no room for Syriza to pay for
its poverty programmes, and leave the economy trapped in deflation.
Mr Varoufakis told The
Telegraph before the meeting that Greece had already endured a greater fiscal
squeeze than any modern country in peace-time and remains stuck in depression.
“There is no macro-economic argument that can be made for further fiscal
tightening. The only reason for doing so is out of ideology or on punitive
grounds. All we are seeking is a way to end the debt-deflation cycle,” he said.
We may have to wait another four months to learn whether Greece has genuinely
attained this.
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