Athens is required to undertake harsh reforms, rolling back legislation introduced by leftist government.
The austerity measures that Greece agreed to on Monday in return for a bailout to stave off a euro exit involve some of the harshest terms Athens has faced in five years of rescue programs. Here are the key points of the statement issued by Eurozone leaders after 17 exhausting hours of talks, with many far-reaching steps for Greece to take:
By July 15, the radical left government of Prime Minister Alexis Tsipras must get parliamentary approval for four key pieces of legislation, in order to “rebuild trust” with the Eurozone, the document said. It must reform Greece’s notoriously complex Value Added Tax (VAT) system, and increase revenue by broadening the tax base. It must also improve the “long term sustainability” of the pension system and protect the legal independence of Greece’s national statistics agency, so that government fiscal data is reliable. Finally, it must create an independent fiscal authority and a mechanism to automatically reduce spending if budget targets are missed.
“Ambitious” reforms must be implemented to Greece’s generous pension system, which has already suffered under previous bailouts. Market reforms affecting Sunday shopping, sales periods, milk and bakeries and pharmacy ownership must be implemented. The Greek government must also privatize the electricity transmission network operator ADMIE and review and modernize collective bargaining, industrial action, and collective dismissals while focusing on strengthening the financial sector.
Greece will park assets for privatization worth up to 50 billion euros in a special fund based in Athens. Some 25 billion of that will go toward recapitalizing Greek banks left near empty due to a limiting of emergency European Central Bank funds. It will also help reduce its debt mountain, and go towards investment.
The asset fund will be set up in Greece under Greek government management but under the supervision of European institutions. Greece opposed initial plans to base the fund in Luxembourg.
Greece must de-politicize the administration under E.U. monitoring—a measure critics say is designed to remove officials from Tsipras’s leftist Syriza party from their positions.
Return of the Troika
Greek officials must “fully normalize working methods with the Institutions, including necessary work on the ground in Athens.” This is code for a return of the Troika, the creditor institutions of the European Commission, European Central Bank and International Monetary Fund responsible for monitoring Greece’s two previous bailouts, whose officials were kicked out of Greece by Tsipras after his election amid widespread loathing. The government must also consult with the Troika on “all draft legislation in relevant areas.”
Greece must reverse laws brought in by the Syriza government since the election that run counter to the country’s earlier bailout arrangements in 2010 and 2012, except for a key humanitarian law.
The third bailout fund for Greece could amount to between 82 billion and 86 billion euros. Eurozone leaders agreed to take note of “urgent financing needs” to meet debt payments of 7 billion euros by July 20 including a huge ECB loan and another 5 billion by mid-August.
Ten to 25 billion euros should be set aside for bank recapitalization or liquidation.
In response to Greek pleas for a reduction in a mountain of debt worth nearly 180 percent of its GDP, Eurozone finance ministers are “ready to consider… possible additional measures” including longer grace and payment periods. This would be considered after a first review of a new Greek bailout program, possibly in October. But any “haircuts” which would write off debt are ruled out.
The International Monetary Fund, which was involved in the previous two Greek bailouts, must be involved in any new program “as a precondition.”
The European Commission is ready to lend Greece 35 billion euros until 2020 to boost jobs and growth.