The programme is said to offer €13bn worth of cuts, tax increases, and changes to their laws, in exchange for a loan of about €80bn that would allow the country pay the IMF and ECB and keep it in the euro.
The Greek government agreed to the programme during a four-hour meeting yesterday evening.
Prime Minister Alexis Tsipras will discuss the plan when he meets his party’s MPs this morning. Not all are expected to approve the measures.
There were optimistic signs from Germany during the day with Chancellor Angela Merkel confirming she would support reprofiling the €194bn already borrowed from the EU’s rescue funds. Her finance minister, Wolfgang Schäuble, told a conference in Frankfurt he agreed with the IMF assessment that Greece’s debt was not sustainable but said that a haircut — cutting the total amount owed — could not happen under EU laws.
This is a major issue for Greece and for the IMF, while Athens has indicated it would not ask for this to be agreed immediately but would be willing to accept an assurance that the EU will work towards it.
A decision to open negotiations on a new loan from the European Stability Mechanism must be approved by eurozone finance ministers at a special meeting in Brussels tomorrow and will go to a summit of eurozone leaders and then a meeting with all 29 EU leaders on Sunday.
It needs unanimity and apart from Germany, Slovakia and Estonia have been especially hostile. The Bundestag has to give permission to Greece to agree to start negotiations on a new programme and would vote again on the final deal, as will several other parliaments including that in Athens.
The sustainability of Greece’s debt is to be assessed today, commission vice-president Valdis Dombrovskis confirmed.
The total debt figure, which includes bilateral loans from some EU countries, bonds, and money owed to private investors, is believed to total around €323bn, which stands at about 175% of GDP and well above the 120% the IMF wants it to be by 2020.
The new bailout programme includes a commitment to reform the tax collection and pensions systems, moves which are seen as long overdue.
Mr Tsipras has said these reforms will be frontloaded. He will bring legislation to the Greek parliament next week — this is seen as a step towards gaining credibility with eurozone finance ministers and leaders.
One of the first measures he will have to take is to reverse his move of bringing the tax inspectorate under the finance ministry, as a tax collection system independent of the politicians is seen as key and best practice.
If the response is positive, attention will turn to where to find the €4.2bn which had been owed to the ECB on July 20, and possibly paying the IMF the €1.8bn it was due last month. This could come from ministers releasing around €3.2bn due to Greece from ECB bond profits but additional money would be needed in addition.
If the proposals are rejected, attention will turn to humanitarian aid and a parallel currency.