Greece says euro zone deal cancels austerity commitments

Athens must negotiate long-term deal before extension runs out in early summer

Greek Prime Minister Alexis Tsipras has said a funding agreement struck with euro zone ministers cancelled austerity commitments made by a previous conservative-led government to international creditors.

After often ill-tempered negotiations, Greece secured late on Friday a four-month extension to euro zone funding, which will avert bankruptcy and a euro exit, provided it comes up with promises of economic reforms by Monday.

“Yesterday we took a decisive step, leaving austerity, the bailouts and the troika,” Mr Tsipras said in a televised statement. “We won a battle, not the war. The difficulties, the real difficulties ...are ahead of us.”

Mr Tsipras and his Syriza party won power last month on promises to end Greece’s EU/IMF bailout programme and end cooperation with the hated “troika” - inspectors from the European Commission, European Central Bank and IMF who have monitored Greece’s compliance with its austerity and reform commitments.


Instead Athens was forced to accept the conditional extension of the bailout and still deal with the troika, renamed in the deal as “the three institutions”.

Nevertheless, he said: “Yesterday’s agreement with the Eurogroup ... cancels the commitments of the previous government for cuts to wages and pensions, for firings in the public sector, for VAT rises on food, medicine.”

Mr Tsipras, a radical left-winger, had been under heavy pressure to secure a deal as Greeks have been pulling huge sums out of the country’s banks, fearing the talks with euro zone finance ministers would fail and Greece would be cast adrift as the bailout had been due to expire on February 28th.

Without naming names, he attacked conservatives at home and in the euro zone. “Yesterday we averted plans by blind conservative powers, within and outside the country, to asphyxiate Greece on February 28th”, he said.

“Greece achieved an important negotiating success in Europe. We showed determination and flexibility and in the end, we achieved our basic goal,“ said Mr Tsipras.

About €1 billion fled Greek bank accounts on Friday due to savers’ fears that Athens might have to halt such withdrawals or prepare to reintroduce a national currency. Greece says Friday’s extension should calm such fears.

This added to an estimated €20 billion ($23 billion) that Greeks have withdrawn since December, when it became clear that the radical Syriza party of Mr Tsipras was likely to win power in last month’s parliamentary elections.

Faced with the risk of a chaotic bank run on Tuesday after a long holiday weekend, finance minister Yanis Varoufakis stressed that the deal should calm savers.

“It is quite clear that the reason why we had a deposit flight was because every day, even before we were elected, Greeks were being told that if we were elected and we stayed in power for more than just a few days the ATMs will cease functioning,” he told reporters in Brussels on Friday.

“Today’s decision puts an end to this fear, to the scaremongering.”

Last month’s election of Syriza on promises to reverse austerity policies dictated by Greece’s EU/IMF bailout programme raised huge expectations among the public.

But under Friday’s deal with euro zone finance ministers, Athens agreed to an extension of the bailout it had promised to scrap, and accepted oversight by the hated “troika” of officials from the European Commission, European Central Bank and International Monetary Fund, albeit under a new name.

However, the deal did open the possibility of lowering a target for Greece’s primary budget surplus, which excludes debt repayments, freeing up funds to ease what Mr Tsipras calls the nation’s “humanitarian crisis”.

Spokesman Mr Sakellaridis acknowledged that the deal, which is conditional on euro zone ministers accepting Greece’s economic reforms plans on Monday, was only a first step. He also admitted the difficulty for a government which is less than a month old in negotiating with heavyweight European ministers.

“These last three weeks were tough weeks for a new government which - let’s not kid ourselves, we’re not trying to fool anyone - hasn’t got the relevant experience,” he said.

“The real battle begins now,” he added. “It is a battle that will be extremely critical for the course of the country over the next few years.”

German finance minister Wolfgang Schaeuble said Greek politicians used to being in opposition had to wake up to the demands of office.

“Being in government is a date with reality, and reality is often not as nice as a dream,” the conservative veteran said, stressing Athens would get no aid payments until its bailout programme was properly completed. “The Greeks certainly will have a difficult time to explain the deal to their voters.”

Athens must now negotiate a long-term deal with the euro zone before the extension runs out in the early summer.