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Greece Reaches Bailout Deal with International Creditors Greece Reaches Bailout Deal with International Creditors
(35 minutes later)
Greece and its international creditors said on Tuesday that they had reached a preliminary deal allowing the country to receive crucial bailout payments in exchange for promises to raise taxes and cut social spending. ATHENS — Greece and its international creditors said on Tuesday that they had reached a preliminary deal allowing the country to receive crucial bailout payments in exchange for promises to raise taxes and to further cut pensions and social spending.
The agreement — the culmination of months of talks — paves the way for the transfer of 7 billion euros, or about $7.6 billion, of emergency funds to Athens. It also comes before a series of elections in France, Britain and Germany in the coming days and months, with European officials eager to avoid giving fuel to far-right parties. The agreement — the culmination of months of talks — paves the way for the transfer of more than 7 billion euros, or about $7.6 billion, of emergency funds to Athens. It also comes before a series of elections in France, Britain and Germany in the coming days and months, with European officials eager to avoid giving fuel to far-right parties.
Under the terms of the agreement, which is subject to the approval of eurozone finance ministers, Greece will make changes to its labor and energy markets, cut pension payouts and increase taxes, Finance Minister Euclid Tsakalotos, said, according to Reuters. Under the terms of the agreement, which is subject to the approval of eurozone finance ministers and the Greek Parliament, Athens will make changes to its labor and energy markets, cut pension payouts and increase taxes.
“There was white smoke,” he was quoted as saying, alluding to the method the Vatican uses to signal an agreement when selecting a new pope. The Athens News Agency quoted him in a similar way. “There was white smoke,” Euclid Tsakalotos, the country’s finance minister, told reporters after 12 hours of talks in the Greek capital, alluding to the method the Vatican uses to signal when a new pope has been selected. “The negotiation has finished.”
“The way has now been paved for debt relief talks,” Mr. Tsakalotos said, according to Reuters. The talks focused on economic overhauls including further pensions cuts, tax increases and changes to the labor market. But they stalled at times as a result of disagreements between European officials and the International Monetary Fund over Greece’s economic prospects and its ability to meet budget targets.
As part of the deal announced on Tuesday, Athens agreed to raise the equivalent of 2 percent of gross domestic product by cutting pensions further in 2019, and increasing tax receipts by reducing the income threshold at which taxes must be paid.
Yielding to creditors’ demands to make the labor market more competitive, the deal also makes it easier for businesses to fire employees.
Pierre Moscovici, the European commissioner for economic and financial affairs, said in a statement that the deal was “a very positive development.”Pierre Moscovici, the European commissioner for economic and financial affairs, said in a statement that the deal was “a very positive development.”
“It is time to turn the page on this long and difficult austerity chapter for the Greek people,” he said. “With this agreement, we need now to write a new story of stability, jobs and growth for Greece and for the euro area as a whole.”“It is time to turn the page on this long and difficult austerity chapter for the Greek people,” he said. “With this agreement, we need now to write a new story of stability, jobs and growth for Greece and for the euro area as a whole.”
Further discussions will include ways of decreasing Greece’s debt. Greece’s debt first became a serious threat during the global financial crisis, and the country has relied on bailouts since. In return, Athens has had to push through painful austerity measures to reduce its debt, which stands at nearly 180 percent of gross domestic product.
The country’s debt first became a serious threat during the global financial crisis, and the country has relied on bailouts since. In return, Athens has had to push through painful austerity measures to reduce its debt, which stands at 180 percent of gross domestic product.
That has resulted in hefty cuts to pensions and benefits for ordinary Greeks, as well as efforts to increase the number of people in the country who pay taxes.That has resulted in hefty cuts to pensions and benefits for ordinary Greeks, as well as efforts to increase the number of people in the country who pay taxes.
But the measures have hit hard: Unemployment is above 25 percent, and the economy has shrunk by a fifth since the financial crisis. But the measures have hit hard: Unemployment is close to 25 percent, and the economy has shrunk by a fifth since the financial crisis.
The government must now draft legislation bundling together all the measures and push it through Parliament before eurozone finance ministers meet on May 22. As with similar bills in the past, they are expected to become law, but the government of Alexis Tsipras, the leftist prime minister, retains a majority of just three in the 300-seat chamber, and opinion polls show its popularity falling.
If the measures are enacted, eurozone finance ministers — collectively known as the Eurogroup — are expected to approve the disbursal of bailout funds for Athens to make a debt payment that is due in July.
They are also expected to discuss debt relief and targets for Greece’s primary surplus, or budget surplus not counting debt financing. Both issues are points of contention between the International Monetary Fund, which advocates easing the country’s debt burden, and European Union leaders, notably Germany.