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Eurozone summit offers third bailout to Greece
July 13, 2015, 1:57 pm
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Eurozone leaders have agreed to offer Greece a third bailout, after marathon talks in Brussels. Amid one of the worst crises in the EU's history, the head of the European Commission said the risk of Greece leaving the eurozone had been averted.

Greek Prime Minister Alexis Tsipras said that after a "tough battle", Greece had secured a "growth package" and debt restructuring. There will not be a 'Grexit'," said European Commission chief Jean-Claude Juncker, referring to the widespread fear that if there had been no deal, Greece could have crashed out of the euro.

"In this compromise, there are no winners and no losers," he said. "I don't think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement."

Jeroen Dijsselbloem, the head of the eurozone group of finance ministers, said the agreement included a €50 billion Greece-based fund that will privatize or manage Greek assets. Out of that €50 billion, €25 billion would be used to recapitalize Greek banks, he said.

Eurozone finance ministers are due to meet later on Monday to discuss providing "bridge financing" that would cover Greece's short-term needs.

Parliaments in several eurozone states have to approve any new bailout. "The road will be long, and judging by the negotiations tonight, difficult," German Chancellor Angela Merkel said on Monday morning. French President Francois Hollande said the agreement had allowed Europe to "preserve integrity and solidarity".

Key points of the Greek deal

The risk of Grexit - a Greek exit from the euro - has not gone away. So what are the key points of the deal? The Greek parliament must immediately adopt laws to reform key parts of its economy - by Wednesday. The reforms include: streamlining the pension system, boosting tax revenue - especially from VAT, liberalizing the labor market, privatizing the electricity network, extending shop opening hours.

The eurozone agrees in principle to start negotiations on a loan package for Greece worth €82 billion-86 billion.

The loan will come mainly from the European Stability Mechanism (ESM) - the eurozone bailout fund - but the International Monetary Fund will also be asked to make a contribution from March 2016.

A new trust fund will be set up, managed by Greece, with €50bn of Greek assets. Half will be used to fund the recapitalization of Greek banks, the other half will go towards reducing Greece's debt mountain - by privatizing assets - and investing in Greece.

Greece will get short-term bridge financing to avoid bankruptcy. The amount is estimated to be €7 billion by next Monday and another €5 billion by mid-August.

Out of the total ESM loan about €10 billion will be used immediately to recapitalize Greek banks . The European Central Bank and eurozone finance ministers will tightly monitor Greek compliance with the bailout conditions.

Negotiations on the ESM bailout will begin only after the plan is approved by the parliaments of Finland, Germany and Greece.

The eurozone is ready if necessary to extend the repayment period of Greek debt (by debt rescheduling), but debt will not be written off (so no "haircut").

The European Commission will try to mobilize €35 billion - outside the ESM loan - to help Greece with growth and job creation.

 

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