After some 17 hours of summit talks eurozone leaders announced a new deal to rescue Greece - a third bailout.
Euro zone leaders clinched a deal with Greece on Monday July 13,2015 to negotiate a third bailout to keep the near-bankrupt country in the euro zone after a whole night of haggling at an emergency summit
What is the European Stability Mechanism(ESM)?
The risk of Grexit - a Greek exit from the euro - has not gone away. So what are the key points of the deal?
Euro zone leaders clinched a deal with Greece on Monday July 13,2015 to negotiate a third bailout to keep the near-bankrupt country in the euro zone after a whole night of haggling at an emergency summit
What is the European Stability Mechanism(ESM)?
- Eurozone's only permanent bailout fund - financed by all 19 member states
- Launched in Oct 2012, total lending capacity is €500bn
- Only lends if borrowing country agrees to fulfil strict economic conditions
- ESM made loans to rescue banks in Spain (€41.3bn) and Cyprus (€9bn)
- Germany is biggest ESM contributor (€190bn)
- Like IMF loans, ESM loans don't add to lenders' national debt
- ESM bailout takes at least three weeks to organise
The risk of Grexit - a Greek exit from the euro - has not gone away. So what are the key points of the deal?
- The Greek parliament must immediately adopt laws to reform key parts of its economy - by Wednesday. The reforms include: streamlining the pension system and boosting tax revenue - especially from VAT
- A commitment to liberalise the labour market, privatise the electricity network and extend shop opening hours
- The eurozone agrees in principle to start negotiations on a loan package for Greece worth €82bn-€86bn (£59bn-£62bn; $91bn-$96bn) spread over three years
- The loan will come mainly from the European Stability Mechanism (ESM) - the eurozone bailout fund. But the International Monetary Fund will also be asked to make a contribution from March 2016
- A new trust fund will be set up, managed by Greece, with €50bn of Greek assets. It is a mechanism for paying off part of the total ESM loan. Half of the €50bn will be used to fund recapitalisation of Greek banks, the other half will go towards reducing Greece's debt mountain - by privatising assets - and investing in Greece.
- Greece will get short-term bridge financing to avoid bankruptcy - separate from the ESM. The amount is estimated to be €7bn by next Monday and another €5bn by mid-August
- Out of the total ESM loan about €10bn will be used immediately to recapitalise Greek banks - but the banks may need €25bn in total
- The European Central Bank, eurozone finance ministers and the IMF will tightly monitor Greek compliance with the bailout conditions
- Negotiations on the ESM bailout will begin only after the plan is approved by the parliaments of Finland, Germany and Greece
- The eurozone is ready if necessary to extend the repayment period of Greek debt (by debt rescheduling), but debt will not be written off (so no "haircut")
- The European Commission will try to mobilise €35bn - outside the ESM loan - to help Greece with growth and job creation.
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