EU President Donald Tusk said on Monday that eurozone leaders had reached a unanimous deal to offer Greece a third bailout and to keep it in the eurozone after 17 hours of marathon talks.
The agreement, if adhered to, will unlock 80 billion euros in bailout aid for Greece. Although sources in Athens had said the deal was “very bad”, they appeared to have little choice other than to bow to the EU demands.
The U.K. Telegraph reports that the deal offered to Greece is to implement a series of austerity measures by Wednesday or to face suspension from the eurozone. European leaders led by German Chancellor Angela Merkel insisted that the breakdown in trust between Greece and its creditors could only be rebuilt on the back of immediate action by the Greek government.
The alternative for Greece is a suspension from the eurozone as it will not be in a position to meet its financial commitments with the bailout funds. Part of the package consists of 25 billion euros for the Greek banking sector which is in dire straits and under grave threat of collapse.
Meanwhile, the reforms that have to be passed by the Greek parliament include hikes in the VAT rate, a scaled up privatization program as well as pension cuts and restructuring in the pension system. The implementation of the privatization program will see Greek state assets worth 50 billion euros transferred into an external fund and sold off under the supervision of EU officials based in Brussels.
Greece would also be obliged to accept international debt inspectors from the EU, the IMF and the ECB to keep a watch on the progress achieved following the implementation of the agreement.
The latest report from BBC news on Monday morning is that the European Commission Chief Juncker said, “There will be no Greek exit (from the eurozone)”, referring to fears that Greece might leave the eurozone.
Greek Prime Minister Tsipras finds himself in a tight spot after telling Greek voters to reject the EU demands and then having to accept their implementation. The irony for Tsipras is that he had to rely on the votes of the opposition after a number of his own ministers went against him in the Greek parliament to get acceptance of the tougher measures needed. He has said that he will probably call for an early election in Greece.
Meanwhile, markets in Shanghai, Sydney and Tokyo were all positive on Monday morning their time as news of the Greek deal with the EU filtered in. Tokyo was up 1.5%, Sydney up 0.64% while Seoul was up 1.25%.
The euro (EUR) retreated slightly on the news in Japanese trading, moving from the Friday close of $1.1149 in New York to trade at $1.1136, after dropping to $1.1089 earlier in the day.
Agence France-Press reported that Steven Englander, the global research head of Group-of-10 currency strategy at Citigroup, said, “Market reaction to the euro is surprisingly muted.”