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 After a 23-hour session that began Monday morning, exhausted Greek
officials emerged in a central Athens hotel to announce the two
sides had agreed on terms of the three-year agreement barring a
couple of minor issues that were being ironed out.
"Finally, we have white smoke," a finance ministry official said.
"An agreement has been reached."
Finance Minister Euclid Tsakalotos confirmed only "two or three
small issues" were pending. Greek shares rose, with the banking
index surging 6 percent, while two-year bond yields fell more than 4
percentage points.
The deal reached by creditor institutions still needs political
approval from euro zone member countries.
European Commission President Jean-Claude Juncker would hold talks
later on Tuesday with German Chancellor Angela Merkel and French
President Francois Hollande, commission spokeswoman Annika
Breidhardt said in Brussels.
"The institutions and the Greek authorities achieved an agreement in
principle on a technical basis. Now as a next step, a political
assessment will be made."
An agreement would close a painful chapter of aid talks for Greece,
which fought against austerity terms demanded by creditors for much
of the year before relenting under the threat of being bounced out
of the euro zone.
After a deal in principle last month on keeping Greece in the euro,
the latest round of talks began in Athens three weeks ago to craft
an agreement covering details of reform measures, the timeline for
their implementation and the amount of aid needed.
A Greek Finance Ministry official said the pact would be worth up to
85 billion euros $94 billion) in fresh loans over three years. Greek
banks would get 10 billion euros immediately and would be
recapitalized by the end of the year.
Greek officials have said they expect the accord to be ratified by
parliament on Wednesday or Thursday and then vetted by euro zone
finance ministers on Friday. This would pave the way for aid
disbursements by Aug. 20, when a 3.2 billion euro debt payment is
due to the European Central Bank.
Facing a revolt from the far-left of his leftist Syriza party, Prime
Minister Alexis Tsipras is expected to once again rely on opposition
support to push the package through parliament. Once the deal is
ratified, Tsipras is expected to tighten his grip over the party by
facing down rebels at a party congress next month before considering
early elections.
Even then, doubts remain about whether a leftist government elected
on a pledge to reverse austerity can implement the punishing terms
of an agreement that critics say compromises the government's basic
principles.
Popular misgivings about funneling yet more money to Athens run deep
in Germany, the euro zone country that has contributed most to
Greece's two bailouts since 2010.
Berlin had cautioned that the talks must focus on "quality before
speed", raising questions about whether it would seek to slow down
the process by insisting on strict conditions attached to any aid.
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"We're talking about a program for three years, it needs to be
negotiated thoroughly," Deputy Finance Minister Jens Spahn told
Germany's ARD television shortly before the deal was announced. "It
must be convincing that it's not just about Aug. 20."
STICKING POINTS
The latest round of talks with inspectors from four creditor
institutions - the European Commission, European Central Bank, the
European bailout fund and the International Monetary Fund -
progressed smoothly in Athens, in contrast to acrimonious
negotiations during most of the year.
In talks that dragged through Monday night, the sides reached
agreement on the three main sticking points - dealing with
non-performing loans held by banks, setting up an asset sales fund,
and deregulation of the natural gas market.
Athens wanted to set up a "bad bank" to take on the problem loans,
while creditors want them bundled and sold to distressed debt funds.
It was not immediately clear how that was resolved.
Officials had also argued over how to set up a sovereign wealth fund
in Greece designed to raise 50 billion euros from privatizations,
three-quarters of which would be used to recapitalize banks and to
reduce the debt.
A few technical details on measures - such as a law governing
individual bankruptcies - that Greece must pass before getting aid
were still being discussed between technical experts from both
sides, another Greek official said.
The overnight talks also found common ground on final fiscal targets
that should govern the bailout effort, aiming for a primary budget
surplus -- which excludes interest payments -- from 2016, a
government official said.
Adapted from an earlier baseline scenario, the targets foresee a
primary budget deficit of 0.25 percent of gross domestic product in
2015, and surpluses of 0.5 percent in 2016, 1.75 percent in 2017,
and 3.5 percent in 2018, the official said.
(Additional reporting by Karolina Tagaris and Lefteris Papadimas;
Writing By Michele Kambas and Deepa Babington; Editing by Peter
Graff)
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