The momentum appeared to be behind Greece striking a deal with its creditors for a €53.5bn three-year bailout in a dramatic somersault for the Athens politicians.
But the eurozone politicians were also changing their tune with the Germans coming around to reducing the cost of the €195bn already lent to the Greeks by the EU through lengthening maturities.
The Greek parliament appeared set to accept the deal that cuts pensions, increases Vat and corporation tax, reinstates privatisation, and cuts military spending over the next 18 months.
The cuts and increases go deeper and are estimated to amount to €13bn in total compared to the €8bn in the final Juncker package they turned down.
But it could buy them the €53.5bn loan, debt reprofiling, and more time to reach the 3% budget primary surplus, compared to the previous deal that would have given them just a five-month extension for €15.5bn.
The Greek prime minister Alexis Tsipras, whose behaviour was considered erratic by his fellow EU leaders over the past five months, appeared to be in the position of a man whose plan was coming together nicely.
He told his Syriza party members that the ‘no’ vote he had successfully campaigned for to the austerity package in last Sunday’s referendum did not give him a mandate for a Grexit.
He was also counting on support from Greek businesses and the public, after more than two weeks of being shut out of their banks and staring into the abyss of national bankruptcy, while at the same time the vast majority wanted to remain in the euro.
After the 4,000-word proposal arrived with the institutions before the midnight deadline on Thursday, the debt sustainability analysis and an assessment of the figures in the draft programme were carried out yesterday and were discussed in a conference call by IMF head Christine Lagarde, ECB president Mario Draghi and European Commission president Jean Claude Juncker.
This morning the euro working group will complete its examination of the details ahead of the eurozone ministers meeting in the afternoon.
Applying for an ESM loan needs everyone to agree and there were some positive signals yesterday from some of those most opposed to Greece, including Slovakia, that demanded they leave the euro in previous meetings. If the ministers approve the deal the EU leaders’ meeting on Sunday may be cancelled.
The German Bundestag was on standby to return to vote next week and a number of other parliaments may also vote and vote again at the conclusion of negotiation, provided all goes smoothly, within two weeks.
The amount Greece is applying for — €53.5bn — is less than the €60bn the IMF said they would need, and it does not include money to recapitalise their banks —which Reuters quote a senior Greek banker as saying would cost €10bn-€14bn.
The eurozone finance ministers, if they agree to open negotiations on an ESM loan, will likely then discuss finding funds for Greece to pay its creditors — most urgently the €4.2bn to the ECB on July 20. It is expected that the €3.2bn due to Athens from profits on Greek bonds purchased by the ECB will be released and the balance will be found, possibly in bi-lateral loans from some of the member states.
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