World Economy

Greece Agrees on Broad Terms of New Bailout Package

Greece Agrees on Broad Terms of New Bailout PackageGreece Agrees on Broad Terms of New Bailout Package

Greece has agreed on the broad terms of a new three-year bailout package with international creditors, with a few last details expected to be ironed out by late Tuesday.

Finalizing quickly the deal for about €85 billion ($93 billion) in new loans would prevent the country from defaulting on its debts next week and secure its future in the euro, AP reported.

“We are very close. Two or three very small details remain,” Finance Minister Euclid Tsakalotos said as he emerged Tuesday morning from all-night discussions with the creditors’ negotiators.

The European Commission, a key negotiator in the talks, confirmed the progress. “The institutions and the Greek authorities achieved an agreement in-principle on a technical basis and talks are still ongoing on finalizing details,” said Annika Breidthardt, the Commission’s spokeswoman for economic affairs. She said the details were expected to be cleared up soon.

She noted that an agreement still requires approval from higher-level representatives, and that senior finance officials from the 28 EU nations would hold a conference call later Tuesday.

Greece’s government is hoping to push an agreement through parliament this week, ahead of a meeting between eurozone finance ministers on Friday.

Germany, the largest single contributor to Greece’s two previous bailouts and among the toughest negotiators so far, remained cautious on the timing. “We will have to examine the results that come in the course of today,” deputy finance minister Jens Spahn told n-tv television.

Investors cheered the news of progress.

  Borrowing Rates Fall

Greece’s government borrowing rates fell, a sign investors are less worried about a default. The 2-year bond yield dropped by 4.2 percentage points to 14.73%. The Athens Stock Exchange, which reopened recently after being shut for five weeks during the most severe part of Greece’s financial crisis, was up 2.2% in midday trading.

Cash-strapped Greece needs more money by Aug. 20 at the latest, when it has a debt repayment of just over €3 billion to make to the European Central Bank.

A draft of the agreement cited by the Greek daily Kathimerini said the deal included a package of more than 30 measures that would have to be voted on in Greece’s Parliament immediately, followed by a second package of measures to be adopted from October onwards.

The government released some technical details of the deal, saying it had agreed to have a 0.25% government deficit this year and a 0.5% surplus next year, when not counting the cost of servicing debt.

Greece has agreed to achieving so-called primary surpluses of 1.75% in 2017 and 3.5% in 2018, the government said in an emailed note. The pledges mean the country has avoided having to impose budget savings worth about €20 billion, it said.

“This practically means that with the current agreement there will be no fiscal burden–in other words new measures–in the immediate future,” the note read.

Banks will be strengthened with new cash infusions by the end of the year and will have an immediate boost of “at least €10 billion,” it said.