After several days of delay, the coalition partners that make up the Greek Government have reached a deal on the conditions accompanying its second 130-billion euro bailout.
The agreement and endorsement by Greece's main political parties was confirmed by the European Central Bank President, Mr Mario Draghi, on Thursday afternoon. It came just ahead of a meeting of Euro Zone Finance Ministers on Thursday evening.
Hopes for a deal on the cuts “required by the troika of the International Monetary Fund, the European Commission and the European Central Bank for the bailout agreement” have risen and receded over the past few days. Deadline after deadline passed, with the three parties failing to reach an agreement. The 300 million euros of proposed cuts to pensions proved particularly divisive.
The European Commission had expressed its frustration, while the German Chancellor, Ms Angela Merkel, warned that there would be no aid package without the conditions being met. Next month, Greece must refinance a 14.5-billion euro debt or face default.
Now, a new agreement has been reached on alternative measures to the pension cuts, according to press reports. (An official statement confirming the exact nature of the agreement was unavailable at the time of going to press.)
While the agreement is a significant step forward, there remain a number of hurdles, including an agreement to the proposals by other Euro Zone nations as well as the Greek Parliament. So far, the market reaction has been muted; the German DAX was up 0.8 per cent, while the euro gained 0.2 per cent against the US dollar in mid-afternoon trading.
The second round of the bailout has proved particularly divisive in Germany, though the extent of the second round of cuts could sway critics, argues Mr Holger Schmieding of Berenberg Bank. “The very fact that the second programme for Greece is seen as very harsh will make it easier for German Chancellor Merkel to persuade the sceptics in her centre-right coalition to approve it,” he says in a note. “Barring any last-minute hitch, Europe may soon have defused the Greek issue for a while.”