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The terms imposed after marathon talks through the night on Sunday are far harsher than those rejected by Greek voters in a landslide referendum a week ago.
The terms imposed after marathon talks through the night on Sunday are far harsher than those rejected by Greek voters in a landslide referendum a week ago.
Greek premier Alexis Tsipras faced a furious backlash from own Syriza party on Monday night after yielding to draconian demands from Europe's creditor powers, and agreeing to let foreign surpervisors to take control of his country.
The bitter climb-down clears the way towards an €86bn rescue package and the renewal of emergency liquidity for the Greek banking system, once Greece's parliament has voted for pension cuts, tax rises and a raft of other measures by Wednesday. This is the first of a series of deadlines as the country is kept on a tight leash.
The terms imposed after marathon talks through the night on Sunday are far harsher than those rejected by Greek voters in a landslide referendum a week ago, and risks shattering democratic consent in Greece. It has left Europe bitterly divided along North-South lines of cleavage, severely testing the political cohesion of monetary union.
"Greece has been devastated and humiliated. Europe has showed itself Pharisaical, incapable of leadership and solidarity," said Romano Prodi, the former Italian prime minister.
An independent fund will take control of €50bn of Greek state assets, collateral to prevent Syriza reneging on the deal at a later date. Three-quarters of this will be used to recapitalise the Greek banks and repay debt.
Comment: A loan to repay a loan debt you already have? The proper term is loan-sharking.
International inspectors will have the power to veto legislation. The radical-Left Syriza government will be forced to repeal a raft of laws passed since it took power in January, stripping away the last fig leaf of sovereignty.
"It is unconditional surrender. We get serious austerity with no debt relief. We will have foreign supervisors crawling over everything," said Costas Lapavitsas, a Syriza MP and one of 40 or so rebels who plan to abstain or vote against the deal, mostly from the Left Platform.
"They are telling us that from now on, they are going to govern the country. I am afraid there is going to be a real fight about this. There is a groundswell of anger and it is now perfectly clear to a lot of people that the only way out of neo-colonial servitude is to break free of monetary union," he said.
The Independent Greeks party (ANEL) in the ruling coalition called the deal a "German coup" and said it would not have anything to do with it. The government is close to collapse.
Mr Tsipras gave in after being locked in all-night talks with German Chancellor Angela Merkel and French president Francois Hollande, an ordeal described by one EU official as psychological "water-boarding".
He was left with a grim choice as Greek banks ran out of cash and after two weeks of capital controls had brought industry to a halt. Food companies warned that the country will start to run out of beef and other imported meats within days and could face serious food shortages by the end of the month unless the banking system is reopened, and firms can pay foreign suppliers once again.
The European Central Bank has yet to lift its freeze on emergency liquidity for the Greek financial system. The banks will remain shut through Wednesday.
There is no guarantee yet that Greece will receive a fresh tranche of funds. The first raft of measures merely open the door for another set of gruelling talks to secure a package from the eurozone bail-out fund (ESM), with yet more sweeping demands.
In the meantime, Greece will need €12bn in bridging finance to clear its arrears to the IMF - now €2bn after missing a fresh payment - and to cover debt repayments in July and in August. This is likely come from the European Commission currency stabilization fund, which ropes in Britain and other non-euro states.
Mr Tsipras sought to put the best possible face on the deal, insisting that he had prevented "the transfer of public property abroad, financial asphyxiation and the collapse of the banking system".
He claimed that Greece had secured a debt restructuring, yet the summit text offers no more no more than a vague promise, despite intense pressure from the US Treasury and the International Monetary Fund for serious relief.
The creditors mention a "possible" extension of maturities at a later date, but only once the Greeks have delivered on a long string of prior measures. The creditors made similar noises in 2012 but failed to deliver.
Alexis Tsipras, Greece's prime minister
Christian Odendahl and John Springford from the Centre for European Reform said the new bail-out "resolves nothing" and is likely to fall apart even if it gets through the Greek parliament. It repeats the errors of previous packages that imposed self-defeating levels of fiscal contraction. "A fresh round of consolidation will raise the Greek debt-GDP ratio, not lower it," they said.
"Germany's strategy is clear: impose harsh conditions on any government that seeks to change the austere rules of the game, knowing that electorates in Greece and elsewhere are terrified of the leap into the unknown that would be exit from the euro," they said.
"The bailout's economic incoherence will lead the agreement to unravel eventually. Grexit is still very much on the table."
Peter Kazimir, the Slovak finance minister, said Greece is paying the price for indulging in a "Greek Spring" under the Syriza movement, a view widely shared in the former Communist states of central Europe and the Baltics, as well as in Finland, Holland and Germany.
Yet this is matched by a widespread feeling in Italy and France that Germany abused its hegemonic power in the eurozone to push a narrow, mean-spirited agenda, a regret shared by much of the German Left and the country's pro-European wing.
"Even if a deal can eventually be reached to keep Greece in the euro area, the ramifications of this weekend's incredible bloodletting will have long-term consequences," said James Nixon from Oxford Economics.
"The damage done to relations between France and Germany may prove irredeemable, while the German suggestion that Greece be granted a short term euro area surely shatters the principle that membership of the euro area is irrevocable.
"The sight of Greece effectively being hung out to dry will surely trigger a popular backlash against austerity. That fault line may now become more exposed with the political establishments of the European south lining up against the governments of the North."
Comment: Mr. Evans-Pritchard has been quite prophetic in his analysis of the ongoing Greek crisis. This from two years ago: