Closed Live – Eurozone leaders reach Greece deal

Eurozone leaders have reached an €86bn deal on a Greek bailout after all-night talks in Brussels. The timetable is for the Greek parliament to pass a slew of legislation by Wednesday, the deal will then be put to some eurozone parliaments – notably Germany’s Bundestag – and then negotiations will begin with creditor institutions over the exact size of the bailout .


Katie Martin has pulled together some market reaction and analyst musings to the record-breaking summit:

Currencies markets have responded with the Gallic shrug that is becoming so typical, even despite the big jump in the euro at the end of last week, based on hopes for a deal. Right now, the euro is steady at $1.1135.

Bond markets are at least mildly rumbled, though. Italian, Spanish and Portuguese bonds are all sharply weaker, though it’s worth remembering that the market is only just waking up. German Bunds are a little stronger, a classic sign of nerves. The 10-year Bund now yields 0.873 per cent, up by 0.02 percentage points.

Kit Juckes, a macro strategist at SocGen, describes the German-led approach towards Greece as “my way or the highway”:

What have we learned? Mostly, that trust once lost, is not easily regained. We’ve also confirmed that not all the other Eurozone countries’ governments want Greece to remain in the club.

The sad thing is that the absurdity can’t hide the awful economic reality that is imposed on the Greek economy; It’s going backwards every day this goes on.

It speaks volumes for the foreign exchange market’s state of mind that it has reacted calmly to the latest developments. The euro is down a little against the yen. The euro is still inside its recent range against the dollar.

Rabobank:

The headlines this morning are shocking: Germany has told Greece to surrender fiscal sovereignty to it, or be forced out of the Euro. That kind of demand is usually the privilege of a conqueror not a trade partner.

Barclays:

The conditions put forward are very tough and might be seen as unacceptable to Greek citizens. Our view is that there is still a high risk that an agreement is not reached in time to avoid a Greek exit from the euro.

Ulrich Leuchtmann, Commerzbank:

The heads of government of the euro zone countries are still in their meeting. They have perseverance, that much is certain. The euro’s reaction to the impasse – it is hard to believe – is a small gap to the downside for the third consecutive time, and for the third time the gap was quickly closed.

It remains to be seen what would be better for the European single currency medium to long term – Grexit or not. However, it is quite surprising that an increasing number of politicians have returned to painting a horror scenario in case of a Grexit. So far the FX market has not fallen for that.


From the Belgian PM: What does it really mean?

https://twitter.com/CharlesMichel/status/620482680023588864


And from the Cypriot government spokesman:

https://twitter.com/Christodulides/status/620482752744398848


The currency markets have been roused from their slumbers:

https://twitter.com/FerroTV/status/620485069862477824


Anne-Sylvaine Chassany, one of the FT’s reporters in Brussels, is still a wee bit cautious:

https://twitter.com/ChassNews/status/620485746596671488


Emoticon

Hollande, Merkel and Tsipras have reached a compromise deal and they’ve put it to the other Eurozone leader, who – not surprisingly – have approved it, reports Anne-Sylvaine Chassany from Brussels.


Katie Martin reports that marekts are reacting as you’d expect:

In response, German government bonds are now very slightly weaker on the day, suggesting weaker demand for safe retreats. ‘Peripheral’ debt, from Spain, Italy and Portugal is picking up after an early drop.


More from Katie Martin on bond market movements:

Yields on the 10-year German debt are up by a respectable 0.07 percentage points to 0.966 per cent.

‘Peripheral’ debt, from Spain, Italy and Portugal is picking up fast after an early drop. Ten-year yields are up between 0.085 and 0.11 percentage points on each of them.


The Euro is now well up from overnight lows, at $1.1175.


Meanwhile, the equity markets are bullish, reports Michael Hunter:

The Xetra Dax 30 is up 1.5 per cent, the FTSE 100 in London is up 0.9 per cent and the region-wide FTSE Eurofirst 300 is up 1.2 per cent.

Banks are leading the way on Europe’s international index.

Societe Generale is up 2.4 per cent. BNP Paribas is up 2 per cent.

Deutsche Bank is up 1.7 per cent. 66 words


Tusk is now having a press conference.


Tusk says:

“The decision gives Greece the chance to get back on track with the support of its European partners.
“I welcome the progress and the constructive progress of Greece that brings back trust among European partners.
“Eurogroup will work with institutions to swiftly move forward the negotiations.”


Jean-Claude Juncker is now talking, in French:

“We have reached an agreement.. There is no Grexit. On form and substance we are satisfied on what we have achieved.
Alongside the need for fiscal consolidation, we should never forget the need that in Greece there is the need for growth and jobs.


Jeroen Dijsselbloem, Dutch finance minister and Eurogroup president, is now talking:

The Greek parliament will very quickly legislate on a number of issues and bring back trust in a number of issues

He mentions product markets and labour markets as areas needing reform.

The fund will monetise assets either by privatisation or by running the assets and try and make money through them. It will be used to repay debt and the recapitalisation of banks.

Approx the €25bn that will be needed to recapitalise the banks. Money made from the fun thereafter will be used to stimulate growth and reduce debt.

Eurotroup will meet this afternoon, after he has had some sleep.

Total agreement will need Greek parlaimentary approval. That will be the trigger for the other national parliaments to act. Their timetables will be their decision but hopes to be wrapped up by Friday.

Then the formal European Stability Mechanism negotiations will start with the institutions.

“Hopefully by the end of the week we can take the mandate to the institutions to draw up a deal”.


Now open to questions:

First is on bridge financing. Dijsselbloem says that will be discussed by the Eurogroup this afternoon.


Next question is on the guarantees fund.

Dijsselbloem says the target for the fund is €50bn. A board of governance will draw up which assets will be included. It will be based in Greece.


Juncker rejects accusation that the eurozone has staged a coup.

“In this compromise there are no winners and no losers. It’s a typical European arrangement.”

That’s the end of the press conference


Merkel is now giving a press conference.

Coming to it a bit late (translation not great).

She mentions the ESM programme, that so-called “prior actions” must be carried out by July 15. These include changes in Greece such as the statistical office in Greece, VAT guidelines that help banks carry out their work.

She repeats that the Greek parliament has to approve first on prior actions, then on the whole agreement, then the institutions will certify the agreement, then the Bundestag will hold an extraordinary meeting to vote.

Complete overall of the pensios system, overhaul of the products market, changes in privatisation, changes in the labour market.


Merkel

She says the whole deal is €86-87bn over three years. How can debt sustainability be achieved?

She discusses the fund discussed by Dijsselbloem.

€2.5bn of the fund will go to direct investments.

“We need to support the programme but in the past, when it was about implementation there was quite considerable difficulty in realising the programme”.

“We need to make sure what happens in Greece is in line with the other programme [read bailout] countries.”


Merkel:

€25bn needed for recapitalising the banks.

The Eurogroup stands ready to take additional measures, such as extending grace periods and maturities.

A nominal haircut is out of the question for us.

Once the parliamentary approval has been given we can discuss the ESM financing.

“All in all the advantages outweigh the disadvantages. There is a broad array of supports, which if they are implements allows Greece to return to the growth parth. It will be an arduous route but it will be worth it.”


On to questions:

She says Plan A has been realised so we don’t need a Plan B. We always need agreement by the 19.

“We could only have agreed this with Greece. Greece has said time and again it wants to remain in the eurozone.”


Merkel:

the situation in Greece is very tense so there’s a certain amount of interest to go through the necessary steps to make this happen. I have no reason to doubt the plan. the laws that we mentioned here have apparently been prepared already so i think trust can be regained and that this works.”


Merkel:

Finance ministers will deal with the bridging issues.


More on bridge financing:

Merkel puts the ball into the finance minsiters’ court. “It’s clear that the money owed to the ECB has to be found.”

She says there’s no timeframe for the €50bn fund to be set up.


Merkel is asked about when the Bundestag will most likely meet and comparing this deal to others – including the one imposed on Germany in the Treaty of Versailles..

She says it’s similar to deals with Ireland and Portugal, except for the sums involved. Otherwise it’s completely inline with the other agreements.

She refuses to pre-empt the decisions of the Bundestag. She says there’s very good reason not to call back members until those in responsibility in Greece have taken the necessary decisions.

“Greece has a chance to return to growth but there is a long road ahead.”


Merkel is asked about Greek ownership of the deal:

She says it does exist because there’s a compromise of not using the €50bn exclusively for debt redemption but also €2.5bn will be used for growth. We wil lhave to come back to the promises of 2012 regarding grace periods and promulgation of maturities. Now it’s going to be brought forward. There are a number of areas where we accommodated the Greek views.


Tsipras is now talking, but it’s all in Greek and there’s no translation!


Translations of what Tsipras is saying:

“We face difficult decisions. We fought a tough battle. We took the decision to defeat the plans of the most conservative circles.

“We fought the plan that would have meant financial choking and banking system collapse.

“We secured medium-term financing.”


Duncan Robinson has got hold of a copy of the deal. It confirms what we’ve reported:

Greece agreed to hive off €50bn of its assets into an independent fund, which will be based in Greece. Half of this – €25bn – will be put towards recapitalisation of banks, while another €12.5bn will be spent on reducing the country’s vertigo-inducing debt-to-GDP ratio. The remaining €12.5bn will be spent economic stimulus within Greece.

Attitude: There was an understanding in the room that Greece was unlikely to hit the €50bn, according to one person involved in the talks. This means that the main proceeds from any privatisation will go on shoring up Greek banks, he added.


Duncan Robinson adds that the meeting took so long because Tsipras had to keep breaking off and talking to Athens. Tsipras did not kick up that much of a fuss about IMF.


Another quote from Tsipras:

“We need radical reforms to get rid of the old oligarchy. Decisions can bring reforms that will counter recessionary trends.”


The FT’s Peter Spiegel tweets that Tsipras is on his way out of the summit:

https://twitter.com/SpiegelPeter/status/620500577563332609


More from Duncan Robinson:

Greece needs to pay €12bn within the next month to stave off default. Despite more than 31 hours of high level negotiations over the weekend, there was still no agreement on emergency loans. “This key issue is not there,” said one official.


Sky is now playing a Frnacois Hollande press conference from a while ago:

“There is no stability without growth and there is no growth without stability.”

It was not a question of finding a balance but of finding an appropriate path.


More from Hollande:

“The goal was to preserve the unity of the eurozone, to tackle a crisis that had plagued Europe and give Greece hope,” French president Francois Hollande said. “At some point, we thought we might lose a member of the eurozone, but Europe would have retreated, we needed to succeed.

“There was in Germany a rather strong pressure for a Grexit. I refused that solution.”


More market reaction from Nathalie Thomas:

After an initial surge of excitement, the euro is regressing. The common currency jumped up as high as 1.1197 against the US dollar just before eight o’clock London time when the first Tweets started appearing from eurozone leaders suggesting a deal had been done. But the initial excitement has been tempered somewhat, pushing the euro back down to around 1.1105 per dollar.

This is not necessarily a sign of nerves; many investors have been waiting to sell into a deal-fueled euro rally in a return to normal service and a search for higher-yielding bets elsewhere. Portuguese bonds, for example, are holding firm, which suggests traders think this deal will stick.


More from Anne-Sylvaine Chassany, who is watching Hollande:

“France wanted this agreement. The objective was to preserve the unity of the eurozone, to tackle a crise that had plagued Europe and give Greece hope. At some point, one feared that we might lose a member of the eurozone, but Europe would have retreated, we needed to succeed.”

“There was in Germany a rather strong pressure for a Grexit, I refused that solution,” Mr Hollande said.

Mr Tsipras “battled to keep the (privatisation) fund in Greece and I supported him” he said. “Nothing would have been worse than humiliating Greece, Greece didnt seek charity, but solidarity from the eurozone.”

The Greek prime minister also secured a commitment from Angela Merkel on a reprofiling of its debt as well as a revision of its interest payments, Mr Hollande said.


Ok. Time for a deep breath. The flurry of excitement appears to be abating as the key players disappear for a few hours’ kip:

Donald Tusk, the European Council president, has posted his full remarks at the press conference if you want to read them.


Here’s more from Hollande:

“Greece is a country a friend of Europe which wished to enter into Europe after years of dictatorship but all the democratic parties stated that they wanted to stay within the eurozone they might have made another choice but they wanted to remain

“Our duty was to enable them to stay with the eurozone but a solution was to be made possible nothing would have been worse than to keep them within a monetary zone but not allowing for their development

“Had Greece left it would have been said that the eurozone was not capable of developing its capability or solidarity…it would have been said [France and Germany] were not capable. We are to carry a project protecting people, the euro protects countries that are part of this monetary zone. so what would have been said about this dislocation…I wanted to bring this discussion to a successful outcome, to offer Greece what they were expecting…succeed in opening a new era in the construction of Europe. We shall have to strengthen this monetary space, see to it that we are respected, protected, but also allow for more growth.

“It took a lot of time but it was a positive night for Europe. And a positive morning. “


Alex Barker has been listening to the key players as they emerge from the summit.

Jeroen Dijsselbloem, the Dutch head of the eurogroup of finance
ministers, “the Greeks have to move first and show they are credible
and show they mean it.”

On the question of Greece’s ability to finance itself over coming
days, he admitted that he “did not have an easy solution” as it was
“very difficult” to secure financing in a bailout programme. “We will
have to solve that problem later today,” he said, referring to a
meeting of finance ministers on Monday afternoon.

Enda Kenny, the Irish Taoiseach, said Greece facing a “challenging
position” to implement its promises but said Mr Tsipras personally
made clear “he is up for”.

“I was there for the entire meeting,” he added. “It was realistic and
frank and pragmatic.”


More from Hollande:

“What has been granted to Greece? Investment of €35bn… What else? Solidarity has been demonstrated but also monetary solidarity in the form of liquidity.

“What has been asked of Greece? A lot has already been asked in the form of austerity, but this austerity did not give the expected results.

“Nothing would have been worse than to humiliate Greece.”


The FT’s markets team has just published its latest wrap on reaction to the deal:

Financial stocks are leading European equities markets higher after a deal between Greece and its creditors followed all-night talks between eurozone officials in Brussels.



Peter Spiegel is starting to kick the tyres on the deal….

https://twitter.com/SpiegelPeter/status/620508697148719104


The FT’s *Joseph Cotterill has delved into the IMF briefing from June on Greek privatisation.

https://twitter.com/jsphctrl/status/620509721632620544


FT Alphaville has published some thoughts from Deutsche’s Jim Reid – and they show that the part ahead really will be bumpy.

It concludes:

With the lingering effects of the Oxi (No!) vote in the referendum, [Deutsche's George] Saravelos thinks either a minority government or government of national unity need to be formed given the pushback from Syriza party members, and notes Greek press reports of a clear out of opposition party members by Tsipras.


Here are extracts from the official summit statement:

Given the need to rebuild trust with Greece, the Euro Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures. These measures, taken in full prior agreement with the Institutions, will include:

by 15 July
• the streamlining of the VAT system and the broadening of the tax base to increase revenue;
• upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform programme;
• the safeguarding of the full legal independence of ELSTAT;
• full implementation of the relevant provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in particular by making the Fiscal Council operational before finalizing the MoU and introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions;

by 22 July
• the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs;
• the transposition of the BRRD with support from the European Commission. Immediately, and only subsequent to legal implementation of the first four above-mentioned measures as well as endorsement of all the commitments included in this document by the Greek Parliament, verified by the Institutions and the Eurogroup, may a decision to mandate the Institutions to negotiate a Memorandum of Understanding (MoU) be taken. This decision would be taken subject to national procedures having been completed and if the preconditions of Article 13 of the ESM Treaty are met on the basis of the assessment referred to in Article 13.1.


The reaction from the City is starting to flow in. And while eurozone leaders may be euphoric, Jim Leaviss, head of retail fixed interest at investment house M&G, strikes a warning tone. He writes:

A bigger question is, of course, how far has the can been kicked down the road? The deal helps immediate liquidity, but does little to reduce Greece’s debt burden. With a debt to GDP ratio of nearly 180% and without growth, de-levering cannot take place. We will inevitably be back in this same position again within the next few years.


The statement continues, detailing the reforms the eurozone expects from Greece:

- Carry out ambitious pension reforms and specify policies to fully compensate for the fiscal impact of the Constitutional Court ruling on the 2012 pension reform and to implement the zero deficit clause or mutually agreeable alternative measures by October 2015;
- Adopt more ambitious product market reforms with a clear timetable for implementation of all OECD toolkit I recommendations, including Sunday trade, sales periods, pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical products, which will be implemented in a next step, as well as for the opening of macro-critical closed professions (e.g. ferry transportation). On the follow-up of the OECD toolkit-II, manufacturing needs to be included in the prior action;
- On energy markets, proceed with the privatisation of the electricity transmission network operator (ADMIE), unless replacement measures can be found that have equivalent effect on competition, as agreed by the Institutions;
- On labour markets, undertake rigorous reviews and modernisation of collective bargaining, industrial action and, in line with the relevant EU directive and best practice, collective dismissals, along the timetable and the approach agreed with the Institutions. On the basis of these reviews, labour market policies should be aligned with international and European best practices, and should not involve a return to past policy settings which are not compatible with the goals of promoting sustainable and inclusive growth;
- Adopt the necessary steps to strengthen the financial sector, including decisive action on non-performing loans and measures to strengthen governance of the HFSF and the banks, in particular by eliminating any possibility for political interference especially in appointment processes.


And it doesn’t end there. The summit statement continues that the eurozone also expects the following as “minimum requirements” for further negotiations:

- To develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments.
This fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions. In agreement with Institutions and building on best international practices, a legislative framework should be adopted to ensure transparent procedures and adequate asset sale pricing, according to OECD principles and standards on the management of State Owned Enterprises (SOEs);
- In line with the Greek government ambitions, to modernise and significantly strengthen the Greek administration, and to put in place a programme, under the auspices of the European Commission, for capacity-building and de-politicizing the Greek administration. A first proposal should be provided by 20 July after discussions with the Institutions. The Greek government commits to reduce further the costs of the Greek administration, in line with a schedule agreed with the Institutions;
- To fully normalize working methods with the Institutions, including the necessary work on the ground in Athens, to improve programme implementation and monitoring. The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament. The Euro Summit stresses again that implementation is key, and in that context welcomes the intention of the Greek authorities to request by 20 July support from the Institutions and Member States for technical assistance, and asks the European Commission to coordinate this support from Europe;
- With the exception of the humanitarian crisis bill, the Greek government will reexamine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme commitments or identify clear compensatory equivalents for the vested rights that were subsequently created.


Katie Martin has taken a wide look at the currency markets and concluded that the real victor is the US dollar.

This is a dollar thing, and the market’s way of saying that getting the Greek mess out of the way (fingers crossed) gives the US Federal Reserve a clear run at raising interest rates.

Recall that the Fed has been vocal about potential risks from a Greek exit from the euro, leading many to speculate that a Grexit could hold back US rate hikes by at least a couple of months.

Now, last-minute banana skins notwithstanding, Grexit seems to have been avoided, allowing the dollar to climb.


Peter Spiegel has been doing some mental maths:

https://twitter.com/SpiegelPeter/status/620515926920851456


It appears the Brits and the Danes will also get a say on this deal – to a certain extent. Our correspondent Duncan Robinson, in Brussels, reports:

Eurogroup president Jeroen Dijsselbloem, has confirmed that some bridge financing options “could indeed involve all member states, but it is early to say.”


And while Tsipras is trumpeting the prospect of debt relief, it ain’t going to be happening immediately….

https://twitter.com/SpiegelPeter/status/620514639680512000/photo/1


The BBC has interviewed Giorgos Katrougalos, the Greek minister in charge of reform, who said that clearly “the Europe of austerity” had won.

“Either we’re going to accept these draconian measures or it is the sudden death of our economy through the continued closure of our banks. So it is an agreement that is practically forced upon us.”


Adam Chester, head of economic research and market strategy at Lloyds Bank, points out, in the light of the euro falling this morning, that FX markets could be “more sceptical than the equity markets about the prospects of a deal still being struck.”

The FTSE Eurofirst 300 index has jumped 1.6 per cent this morning. And it is not inconceivable that hedge funds and other traders are selling the common currency short to protect themselves from the possibility that the early equities rally will prove to be overdone.
Mr Chester, in an interview with the FT’s Michael Hunter, explains:

Certainly, implementation risk remains high. We suspect, however, it is mostly a reflection of the inverse interplay of the equity and FX markets: as equity investors have sought to buy European equities this morning, many may have looked to hedge the resulting currency exposure by selling, or shorting, the single currency.


Oxford Economics has put out a research note warning that the Greek deal may not hold. They write:

We have long argued that Greece’s economic situation has been deteriorating fast, requiring both a bigger bailout and even tougher austerity measures. But the scale of the capitulation now being forced on Athens is breath-taking, with Greece effectively being asked to give up fiscal sovereignty as the price of staying in the euro area.

Nor is a deal signed and sealed. Greece has until Wednesday to legislate a list of prior actions that go well beyond the boundaries of the proposals rejected in the previous weekend’s referendum. This may stretch the Greek government to breaking point, forcing new elections. The month’s hiatus that would ensue while elections took place would almost certainly see Greece ejected from the euro area.


Oxford Economics is also predicting a backlash against austerity by other southern European states. They write:

The sight of Greece effectively being hung out to dry will surely trigger a popular backlash against austerity. Moreover, that fault line may now become more exposed with the political establishments of the European south effectively lining up against the governments of the European North.


One thing I missed earlier when going through the summit statement. The eurozone is washing its hands of a deal not being implemented – for now.

It concludes:

The risks of not concluding swiftly the negotiations remain fully with Greece.


Poland-based reporters have been picking up this punchy line from the country’s PM:

https://twitter.com/maciejonoszko/status/620514483757318144


So, Alexis Tsipras is smiling, but will that mood last once he returns to the bearpit of his nation’s parliament?


Citi is not raising too many celebratory glasses this morning….

The Eurozone Summit on 12-13 July ended with a compromise proposal after a weekend of negotiations. The proposal includes major prior actions that need to be passed by the Greek parliament to allow a third bailout agreement to be negotiated
We maintain that the most likely outcome is that another bailout will be agreed, but the risk of no deal and short-term Grexit remain significant. In our view, it is not certain whether the Greek parliament will vote in favour of the proposed deal and votes of opposition parties may be needed to obtain a majority in the Greek parliament
The Greek parliament will discuss the deal on 13 July and must pass these actions by 15 July. Some national parliaments will also need to ratify the proposal. ECB-held Greek debt matures on 20 July
Overall, we maintain that Grexit remains the most likely outcome over the next 1-3 years


European Council President Jean-Claude Juncker was looking very exhausted an hour or so ago…..


Here’s the full text of the summit statement, if you want to take your fine toothcomb through it.


BofA Merrill Lynch is returning to the “time out” clause which appeared on an earlier draft last night and is not impressed.

Exit from the currency block is now officially something that can be used as a threat to those that don’t behave the German way. More importantly, it can be temporary which, in principle, would make it more feasible relative to a permanent one. This is a bad idea in our view. It would mean the return of convertibility risk to spreads in the medium run. If the idea of an exit was bad, a temporary one is even worse. The ECB would be there as first line against contagion in the short run. But we had argued in the medium run a move towards more integration would be needed. If we have learned something today is that there is little appetite for more integration.


Our colleagues on the FT comment desk have just published Wolfgang Münchau’s reaction to the deal. Regular readers of his column won’t be too surprised by the headline being ‘Greece’s brutal creditors have demolished the eurozone project’

He concludes:

“Once you strip the eurozone of any ambitions for a political and economic union, it changes into a utilitarian project in which member states will coldly weigh the benefits and costs, just as Britain is currently assessing the relative advantages or disadvantages of EU membership. In such a system, someone, somewhere, will want to leave sometime. And the strong political commitment to save it will no longer be there either.”


Unicredit sums up the main risks to the Greek deal.

The main risks are 1. The Greek parliament does not manage to vote in time. This may happen because the writing of laws can be very time-consuming; 2. The Greek voting goes ahead but even the opposition sustains heavy losses and the measures do not pass. We believe this is a low-probability event.


Holger Schmieding from Berenberg is among the most optimistic on tonight’s deal.

Greece needs reforms to restore trust and emerge from recession. With the imperfect and fragile half-deal struck early this morning, Greece now has a reasonable chance to get exactly that.


The FT’s Martin Sandbu has written about Three unedifying lessons of the Greece deal.

They are:
- The hubris of eurozone politicians
- The belated resurgence of France as a coleader of the European project
- The lack of political independence of the European Central Bank


Eleftheria Kourtali reports from Athens on the reaction to the deal from opposition party To Potami:

Stavros Theodorakis said

[Our] aim is achieved. The country was kept in the Eurozone and the European Union. Alexis Tsipras kept his last promise against all those who wanted us to return to the drachma.

We hope the government and the parliament and the political parties will without any delay and limbo catching and take the decisions they have to take so that Greece passes as soon as possible to a new era.

The deal came very late, it contains very painful measures and will demand unfortunately new sacrifices from the Greek people. This time let’s do it with a plan, with decisiveness and justice. For Greece and for our children.


Citi is not alone in continuing to bet on an eventual Grexit.

Alex White, Europe director at the Economist Intelligence Unit, writes:

“We continue to believe that a Grexit is more likely to occur than not, although we are pushing back the time period in which we expect this to happen. We shift our call from Grexit within the next three months to Grexit before the end of our medium-term forecast period (2019).

“This call is based upon our view that the referendum, and subsequent events, have permanently changed the political dynamics in Greece and the wider region. If the Greek parliament does approve a deal, it will be implementing a package that 62% of the population explicitly rejected a week ago. The chances of successful implementation are low. There are particular questions around how Greece will find the required €50bn in assets for transfer to the European trust.”


Jonathan Loynes at Capital Economics is sounding gloomy over Greece’s future within the eurozone even in the wake of last night’s deal.

A Greek exit from the euro-zone might just have been kicked down the road. But we have said all along that, without major debt relief, any deal for Greece will merely delay the inevitable, and perhaps for not very long.


It seems that the required legislation is likely to pass the Greek parliament – provided not all the Syriza MPs vote against…..

https://twitter.com/YanniKouts/status/620541774998540288


The FT’s investment editor, James Mackintosh has spotted this:

https://twitter.com/jmackin2/status/620544942641786880


FT Alphaville’s Markets Live discussion includes looking at the latest blogpost from Nick Dunbar, described by Paul Murphy as “The guy who first wrote about Greece and Goldman hiding debt together”.

It quotes from Dunbar’s latest blogpost:

“Exactly 12 years ago I wrote about a Greek disappearing act: how in 2001 the country concocted a swap deal with Goldman Sachs to conceal almost €3 billion of debt from its national accounts, to help meet Maastricht ratios. This story refuses to die: a former Goldman banker recently suggested that Greece sue the bank to recover the profits it made on the deal.”


Ferdi has boiled the deal down into 140 characters (in terms of which nation got what):

https://twitter.com/FerdiGiugliano/status/620547418619293696


In spite of tonight’s deal, Société Générale is worried about the long-term future of the euro.

The developments over the past few days have not only come at a high cost to Greece, but also to the euro area. A glance at the front pages of the Monday papers in the euro area tells a depressing story of divide amongst the euro area leaders. As we have highlighted on several occasions, strengthening the institutional framework of the euro area is key for the region’s future growth prospects. Moreover, while we remain confidence that ECB President Draghi will be able to take sufficient measures to quell significant initial financial contagion, we remain concerned by – the slow moving – but potentially more damaging – political contagion.


More reaction from Athens, via Eleftheria Kourtali:

New Democracy leader Evangelos Meimarakis in a written statement noted:

“Unfortunately, at the last minute, we had only the choice for agreement or no agreement that would led to total disaster”.

Meimarakis also noted that “with the agreement Greece got a breather in order with seriousness and responsibility to try to find again its pace in Europe”

New Democracy’s political council will convene to make a first estimation of the measures agreed between the government and the partners to decide on the party’s position in parliament.


Eleftheria Kourtali also reports from Athens that an editorial on the Iskra website, which reflects the views of Syriza’s hardliners, describes the bailout agreement signed by Alexis Tsipras as a humiliation for Greece..

The article says that the agreement reestablishes and extends the guardianship of the Troika and seals “social enslavement”.

It maintains the country’s colonial status under German tutelage of the EU, it notes:

“The Greek people must not become disappointed, on the contrary it must remain stubborn, as it did in the referendum and the countrywide protests for a ‘No’ to the very end. A ‘No’ to clash with the bailout, neo-liberalism and austerity which are institutionalized in the euro zone.”


Eleftheria Kourtali reports that Fofi Genimmata, the president of opposition party PASOK, tweeted: “The government should move quickly, there is no room for other errors. We avoided grexit, there is an agreement that we will evaluate.”

In another tweet, the PASOK leader said that regardless of the difficulties of the agreement, the European Socialists won a victory against the extreme conservative circles.


Eleftheria Kourtali reports that there are plenty of unhappy people in the ruling Syriza party.

The strength of the Greek government’s majority is in question and no-one can blame lawmakers who won’t agree to the terms of a cash-for-reforms deal with the country’s creditors, Greek Labour Minister Panos Skourletis said on state TV ERT.

“Right now there is an issue of a governmental majority (in parliament” .”I cannot easily blame anyone who cannot say ‘yes’ to this deal. We aren’t trying to make this deal look better, and we are saying it clearly: this deal is not us.”


But Syriza is trying to keep its rebellious troops in line, it seems. Eleftheria Kourtali reports that the party’s parliamentary spokesman, Nikos Filis, said that all those who disagreed with the official party line over the last few days should resign.

Speaking on ANT1, Filis made particular reference to the two ministers who did not vote “Yes” during the parliamentary debate on Saturday saying that they should resign and hand over their seats.

Filis also launched an attack against speaker of parliament Zoe Konstantopoulou saying that often she “concurs” in parliamentary procedure with the extreme-right Golden Dawn.


Markets update from Gavin Jackson.

Most of the market reaction to the deal has been in the European equity markets rather than government bonds. The German Dax was up by 1.42 per cent and the French Cac 40 up by 2.07 per cent and the Athens exchange was rising 1.61 per cent.

Sovereign debt markets, on the other hand, have barely reacted at all to the news having already priced in a deal at the back end of last week. Portugal is the only eurozone periphery country other than Greece to see a reduction in yield, but just 2.8 basis points on the 10-year bond.

The Euro, counter-intuitively, has depreciated against the dollar on the news and is now at about 1.11 against the dollar. Market thinking holds that the deal makes it more likely the Federal Reserve will raise interest rates this year, possibly in September.


The FT’s Brussels crew has filed a gripping account of what went on in the summit in the early hours of this morning.

The man who broke the deadlock, it seems, was European Council President Donald Tusk.

As (Tsipras and Merkel) made for the door it was Donald Tusk, the president of the European Council, who moved to prevent the fatigue and frustration from triggering a historic rupture for the eurozone.

“Sorry, but there is no way you are leaving this room,” the former Polish prime minister said.

The article concludes:

In the end, some bleary-eyed diplomats emerged unsure who had prevailed in the marathon session. But they seemed agreed as to who had suffered most.

“They crucified Tsipras in there,” a senior eurozone official who had attended the summit remarked. “Crucified.”


Claire Jones, the FT’s ECB correspondent, reports that the eurozone central bank, has left its emergency liquidity assistance to Greek banks unchanged at €89bn.


Former socialist leader (PASOK) Evangelos Venizelos has also been speaking to reporters about the deal, Eleftheria Kourtali reports from Athens. The former finance minister said:

“We avoided the exit from the eurozone and a total disaster. However, we were forced to accept an exceptionally harsh third bailout, harsher than the previous ones. We were forced to accept tough and humiliating terms. In the situation we had found ourselves in, thank goodness..

“What’s important now, is for Mr.Tsipras taking it upon himself to table the difficult bills. There is a Majority of National Responsibility in Parliament. When we are done with those procedures, we will look into this paradox with the parliamentary majority.”


More from Claire Jones on the ECB decision.

The European Central Bank has maintained Greek banks’ €89bn lifeline as attention turns to Athens, where the Syriza-led government must shepherd a list of reforms through parliament in an attempt to secure fresh aid.

The governing council froze the amount of Emergency Liquidity Assistance the Bank of Greece can provide to the country’s lenders on Monday afternoon, according to an ECB spokesperson.

The ECB holds one of its regular policy-making meetings on Thursday. Before then, the Greek government has pledged to pass a range of economic reforms to help secure fresh aid from its international creditors.

Athens needs that aid to repay €3.5bn to the ECB, which falls due on July 20. It must also cover arrears of €1.5bn with the International Monetary Fund.

Unless policy makers on the governing council are assured that both payments will be made, then they are unlikely to raise the ceiling on ELA. Officials in Frankfurt believe the existing ELA will allow Greek banks to honour depositors’ withdrawals for the next few days.

These withdrawals have been limited to €60 per day, since the ECB froze ELA at €89bn in late June. Before then, the ECB had approved the Bank of Greece’s requests for increases in ELA.


Mark Odell reports that Britain has welcomed the deal which saw Greece pull back from a potentially catastrophic economic collapse.
Prime Minister David Cameron said the agreement between Athens and its eurozone creditors offered the chance of stability in the single currency bloc
With his country teetering on the brink of bankruptcy, Greek prime minister Alexis Tsipras agreed to push through a draconian new austerity plan as the price of remaining in the single currency.
Following all-night talks in Brussels with the leaders of the 19-nation eurozone bloc, Mr Tsipras said he had managed to fend off the “most extreme measures” demanded by Greece’s creditors.
He must now win the backing of the parliament in Athens for fresh pension, market and privatisation reforms less than two weeks after the Greek people overwhelmingly rejected further austerity in a referendum.
Mr Cameron said that it was in Britain’s interest that the deal was now properly implemented.
“What’s in Britain’s interest is that there is stability in the eurozone and there isn’t the threats of uncertainty and instability,” he told reporters during a visit to RAF Coningsby.
“And I think this deal gives that sort of stability a chance. But obviously there is long way to go to put into place all the things that have been agreed.”
Chancellor George Osborne told Sky News: “I think that Britain can give a cautious welcome that the eurozone has stepped back from the brink because it is pretty clear that these problems in Greece and across Europe have an impact on our economy.
“What we really want to see now is this turned into a lasting solution because this risk from Greece hangs over the whole European economy, including Britain.”


Henry Foy has more reaction from Athens.

Harris, a 58-year-old civil servant in the interior ministry, said that he was disgusted by Alexis Tispras’ decision to accept a deal on Monday morning, as he stood surveying newspaper headlines on his lunch break.

“I voted No. We voted No. And he took that to them and made it a yes,” he said, as headlines decried the “humiliation” of Greece by Germany. “We have to leave Europe. It is the only way for us to be free,” he added.

On Mr Tsipras’ Facebook page, thousands had commented on the Greek prime minister’s status update announcing the deal and explaining his decision.

Commenters were largely split between those condemning Mr Tsipras for his capitulation and those hailing his pragmatism to keep Greece in the eurozone.

“You have ignored us, you sold us out in the worst way,” wrote Maria Pappa. “I really feel disgusted by this whole charade and lies at the expense of the Greek people… You asked for a referendum for the no and took it with overwhelming majority of support from people… and then you signed an even worse memorandum.”

But Dimitris Stamatopoulos argued that Mr Tispras had fought for six months to get a deal for Greece.

“He believed in the ideals from the guys that once had built this structure called the European Union. But he saw and we have all seen that there are no longer these ideals anymore and had to decide between total chaos and a huge effort from our nation. The next months for me will be the criterion to judge him.”


The next installment of the Brussels meeting merry-go-round is about to start….

https://twitter.com/SpiegelPeter/status/620579019344490496


We’re hearing that Greek banks are to remain closed for another two days. The situation will be reviewed on Wednesday – when the parliament is due to pass the raft of reforms demanded by the eurozone….


Now the Portuguese appear to be claiming credit for breaking the Brussels stalemate.

Peter Wise reports from Lisbon on details of the negotiating marathon, courtesy of Pedro Passos Coelho, Portugal’s prime minister, who says he came up with the “solution” that led to Athens agreeing to sequestrate €50bn of its assets in a special fund.

The breakthrough in the difficult talks over this fund, he told journalists, was based on his idea that €25bn be used to recapitalise Greek banks and the remainder divided equally between reducing public debt and “financing growth”.

“This was the last remaining question left open in the negotiations and it was resolved on the basis of an idea that I suggested,” he said.

Mr Passos Coelho, seen as a pro-German hardliner in the talks over Greece, said the overall agreement could not be considered a humiliation for Athens. It meant that Greece would receive “almost €86n in a third [rescue] programme, more than Portugal received in its single programme”.

Greece, he added, had already received more than €400bn in bailout loans and pardoned debt, almost 2.5 times its annual gross domestic product. Providing a further €86n in loans could only be considered “an act of responsibility and solidarity”.


And the eurozone finance ministers have started their meeting….

https://twitter.com/alexstubb/status/620585433299308544


Capital markets editor Ralph Atkins has discussed with Richard McGuire, head of rate strategy at Rabobank,why worries over the sustainability of Greek debt remain.


As to which countries’ parliaments will get a say on the deal – most likely later this week – it’s not quite as simple as a simple list, alas.

A senior eurozone official said legislators in Germany, the Netherlands, Finland, Austria, Slovakia, Estonia will all vote, but added that in some countries – such as Germany – the vote is binding, while in others – such as the Netherlands – it is merely advisory.

In Ireland the government decides if parliament gets to vote.

In Slovenia, the agreement will not have to be voted on if the contribution to any package does not exceed the funds already committed to the ESM, but there would be vote if debt restructuring is in the agreement. This also applies to Malta.


Henry Foy in Athens reports that getting Bratislava’s blessing may be a big sticking point.

Slovakia’s finance minister Peter Kazimir has been one of the most vocal of the eurozone hawks, and wrote in an opinion piece for the FT last week that a Greek exit from the eurozone would not be the worst outcome, if it avoided turning “the whole of the eurozone into a zombie state.”

And Prime Minister Robert Fico told the FT as far back as February that he was against further aid for Athens.

“This is a red line for us. It would be impossible to explain to the public that ‘poor’ Slovakia . . . should compensate Greece,” Mr Fico said. “To explain to people that we have to give money to Greece for their salaries and pensions? Impossible. Impossible.”

Mr Fico will know the pitfalls of trying to get approval for a deal. In 2011, furore in the Slovakian parliament over a previous financial aid package for Athens made Bratislava the last capital to approve it, held up the entire process, and saw the government collapse, paving the way for Mr Fico’s ascendency.


Do you think Athens has capitulated by accepting a third rescue package with stringent conditions? Think again, says Gideon Rachman, the FT’s Chief International Affairs Commentator. In this column, he argues it was Berlin who backed down as it put yet more taxpayers’ money at risk, in return for dubious promises of economic reform. Gideon concludes that relations between Germany and the rest of the eurozone are getting progressively worse.

As for the Germans, at the latest summit, they were clearly flirting with “Grexit” — the idea of forcing Greece out of the eurozone. They drew back after numerous warnings, such as the one issued by the foreign minister of Luxembourg, that such a course of action would be “fatal for Germany’s reputation in the EU and the world”. Rather than risk such an outcome, the German government has agreed to yet another bailout for Greece. Yet, in reality, the euro is already poisoning Germany’s attitude towards Europe and Europe’s attitude towards Germany.


For those of you who are wondering what might happen if legislators in any of those eurozone member states, who have to get the bailout through their national parliaments, voted against it, we have done our best to come up with an answer.

Rules on approval of bailouts within the eurozone dictate that a majority of 85 per cent in favour is needed if the “economic and financial stability of the euro area” is threatened. That 85 per cent relates to the weighted voting rights of eurozone member states in the European Stability Mechanism, which in case you don’t remember is designed to provide financial assistance any eurozone state that gets into trouble.

This means that Germany, Italy or France has an effective sovereign veto on any bailout. The smaller countries must club together to block any plan.

Below is a table showing the respective voting rights – the ESM key – which you can use to build your own likely coalitions of the willing or unwilling:


And if you’ve got the time and the inclination, here is the updated ESM Treaty – it only runs to 62 pages – updated after Lithuania joined the eurozone in January


So while the eurozone finance ministers are meeting, Alexis Tsipras has convened a meeting with ministers and closest aides at Maximos Mansion (below), the Greek PM’s official residence, reports the FT’s Eleftheria Kourtali from Athens.

With him are his finance minister Euclid Tsakalotos, deputy minister Nadia Valavani, the parliamentary spokesman of Syriza Nikos Filis, interior minister Nikos Voutsis, and state ministers Alekos Flabouraris and Nikos Pappas, as well as government spokesman Gabriel Sakellaridis and MP Dimitris Vitsas.


Marco Stringa at Deutsche Bank looks at the implications the Greek deal holds for Spain and Portugal.

We do not expect the latest development in the Greek saga to have a major bearing on the forthcoming elections in Spain (or Portugal or Ireland). The fact that euro-exit is now among the options is a double edged sword in the medium term for countries with a high proportion of populist parties.


The eurogroup meeting of finance ministers has just ended with no agreement yet on bridge financing


Alex Stubb Finland’s finance minister summed up one of the problems the eurogroup is facing:

I foresee very difficult negotiations on bridge financing. I certainly have no mandate to give unconditional money.


And the other issue is the fact that Alexis Tsipras, the Greek prime minister, is facing a rebellion within his own party as a growing number of far-left MPs have expressed outrage at the deal, the FT’s Peter Spiegel and Henry Foy report. One senior Syriza MP, Nikos Chountis, announced Monday night he would stand down in protest.

The FT’S Eleftheria Kourtali reminds us that Chountis was one of 15 Syriza MPs who voted in support of the government last Friday to give it a mandate to negotiate but also signed a document stating that said their “yes” vote did not mean they would accept and vote for any deal


The problems are mounting for Alexis Tsipras at home as Panos Kammenos, the leader of Anel, Syriza’s junior partner in the coalition, has said his right-wing party cannot agree to the deal as it is different from the one discussed last week.

The FT’S Eleftheria Kourtali reports that Kammenos said Anel, or the Greek Independent party, will meet tomorrow to decide on its course of action and described the deal as a “coup by Germany” and its allies, Netherland and Finland.

He said Tsipras had no choice but to cave in to the blackmail, adding “Anel will not participate in a government of national purpose.”


In essence, Greek political leaders have said they can pass the required legislation on which any bailout deal is contingent because it has wide support among mainstream opposition lawmakers, who would make up for any defections in the 300-member legislature.

But the backlash from Syriza MPs and Anel has called into question how long Tsipras could survive as prime minister once the legislation was passed.

The prospect of a collapse of Mr Tsipras’ government was weighing on decision-makers in Brussels, where finance ministers were wrestling with how quickly to secure €7bn in bridge financing for Athens so it does not default on a bond owed to the European Central Bank on Monday, Peter Spiegel and Henry Foy report.


Jeroen Dijselbloem head of the eurogroup of finance ministers has been talking and said they have asked a team of experts to look at some unspecified “technical issues” on the bridge financing that have to be resolved.

According to this Tweet by journalist Yannis Karagiorgas, Dijselbloem has said there will be a conference call of the eurogroup at some point tomorrow, once the technical issues have been resolved.

https://twitter.com/IKaragiorgas/status/620637781157642240


Oh and in case you missed this nugget, our very own Peter Spiegel is clearly not planning on any holiday this summer after Jeroen Dijselbloem warned that it could take up to 4 weeks to agree the new bailout deal

https://twitter.com/SpiegelPeter/status/620630405717315584


I’m not too sure this is the time to be talking about further integration of the eurozone but Pierre Moscovici, European Commissioner for economic and financial affairs, taxation and customs, has decided it is:

https://twitter.com/pierremoscovici/status/620633739715067904


James Politi, the FT’s Rome bureau chief, reports on more backlash against Germany.

“German leadership has obviously been called into question,” one Italian official said, who was critical of both chancellor Angela Merkel and Wolfgang Schäuble, the hawkish finance minister.

This weekend showed that there is a real divergence between Merkel and Schäuble, and it’s not just a good cop – bad cop routine. She really has less room for maneouvre than we thought.

He added that Schäuble had really “complicated the negotiations”

The Italian official said now was the time to further deepen eurozone integration.

We need a courageous Germany for that, but they are very rigid and captive to their public opinion

The Italian official said any deepening of eurozone integration could not only be based on convergence with tough fiscal rules, but also needed to boost growth and investment.

Meanwhile, former Italian prime minister and former European Commission president Romano Prodi also lamented the weekend’s turn of events.

We avoided the worst, but not the bad. Greece was humiliated and Europe was incapable of initiative, leadership and solidarity


In case anyone needs a reminder of why the €7bn bridging loan is so important to Greece, then look no further than the €450m repayment due today to the International Monetary Fund, which it is not going to make. And then of course there is the big call next Monday when it has to repay the €3.5bn in bonds to the ECB (along with €600m in interest).
It also has a €1bn repayment due later this week on short-term treasury bills, although because these are held by Greek banks they can be rolled over.
If you want to track what Greece still has to repay, do take a look at our interactive Greek debt tracker


The FT’s Eleftheria Kourtali is hearing that the MPs who belong to the radical left wing of Syriza, known as Left Platform, led by Panagiotis Lafazanis, will not back the legislation that is needed to pass through parliament as a condition of the third bail-out. The MPs, who hold about a third of Syriza’s 149 seats, reached the decision after a closed meeting of the grouping. Energy minister Lafazanis and deputy Labour minister Dimitris Stratoulis told those present they would not resign unless there is a request from the prime minister Alexis Tsipras.


Alexis Tsipras has just left Maximos Mansion, the Greek PM’s official residence, where he had convened a meeting with ministers and aides closest to him earlier today. The FT’s Eleftheria Kourtali in Athens reports that there is a meeting of the policy secretariat of Syriza planned for Tuesday morning at 09:00 (that’s 07:00 BST, 08:00 CEST). I am told the the policy secretariat in more traditional communist parlance is Syriza’s central committee.


The markets have largely reacted favourably to the conditional bail-out deal that could keep Greece in the eurozone, reports the FT’s Dave Shellock.

US and European stocks began the week on a strong note as a wave of relief swept through the markets that Greece and its creditors had finally agreed a conditional deal that could keep the country in the eurozone.

But an early rally for the euro against the dollar quickly ran out of steam as participants looked beyond the reduced risk of “Grexit” and focused instead on policy differentials between the US and the eurozone.


So with most of the main players in this whole saga undoubtedly heading for an early night after the all-weekend marathon, which eventually produced the conditional €86bn bailout deal this morning designed to keep Greece in the eurozone, it is time to wrap up the blog for another day.

Like so many other days in this saga, it all started on an optimistic note with the early morning announcement that a tentative deal for a third Greek bailout had been reached.

But the recriminations did not take long to surface, including a backlash against Germany for taking such a hardline over the weekend.

But it was worse for Alexis Tsipras, the Greek prime minister, who returned home humiliated after having to cave in on almost everything to secure an agreement.

His government began unravelling late on Monday with many of his own MPs, and his junior coalition partner, refusing to back the legislation that needs to pass through the Greek parliament by Wednesday as part of the deal. Support from the larger opposition parties looks likely to see the laws passed but it does raise questions about the stability of the existing ruling coalition.

Furthermore, discussions aimed at securing a €7bn bridging loan, which Greece desperately needs to prevent it from defaulting on a crucial €3.5bn repayment to the ECB early next week, have been put on hold until Tuesday at the earliest.

Even the UK, which is outside the eurzone but was supportive of a deal being reached, has put its oar in, telling its European partners there is no way it will be involved in part-financing the bridging loan for Greece.

Beyond all that, if negotiations on the third bailout do get underway, officials have warned those are expected to take four weeks.

Thanks again for your interest and good night.