Greece reaches deal with creditors, avoids euro exit after all-night talks

The deal includes commitments from Tsipras to push a drastic austerity program including pension, market and privatization reforms through parliament by Wednesday. In return, the 18 other eurozone leaders committed to start talks on a new bailout program that should stave off the imminent collapse of the Greek financial system.

“The decision today keeps Greece in conditions of financial stability, it gives the possibility of recovery,” Tsipras said. “At the same time though, we knew from before, that it would be an agreement whose implementation is difficult.”

Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets to be sold off to pay down debt.

Tsipras will now have to rush legislation through parliament this week to convince his 18 partners to release bridging funds to avert a state bankruptcy and just to begin negotiations on a three-year loan.

In a sign of how hard it may be for Tsipras to convince his own Syriza party to accept the deal, Labor Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.

The Greek leader also dropped resistance to a full role for the International Monetary Fund in the proposed bailout, which Merkel has declared essential to win parliamentary backing in Berlin.

Merkel said the deal would affect pensions and prompt privatization among other reforms.

“The basic principles which we always followed to rescue the euro are there,” she said, “namely on the one side solidarity among member countries, and on the other side the responsibility of the country where changes need to take place.”

Merkal said that the deal was reached despite the recent loss of "the most valuable currency, namely trust in each other.” Asked whether she trusted Greece to implement the painful package, she said: “It will be a long and difficult road.” 

She acknowledged that Germany had dropped a demand that the agreed summit document state explicitly that Greece should have to take a “time out” from the euro zone if it did not meet the conditions for the bailout.

But, she said, “We don't need a Plan B because the Plan A was approved.”

The Greek government made a request last week for a three-year, $59.5 billion financial rescue from Europe's bailout fund. During negotiations, its creditors indicated that Greece will need tens of billions more than that to stay solvent.

Greek banks have been closed for nearly two weeks and there were fears they were about to run dry due to a lack of extra funding by the European Central Bank, meaning Athens would have had to print its own currency and effectively leave the euro.

A Cypriot official said the creditors would look into bridge financing for Greece later Monday, suggesting that the political decision could pave the way for the European Central Bank to extend emergency liquidity assistance to Greek banks. Without it, they risk running out of cash this week. The official spoke only on condition of anonymity because he was not authorized to discuss the deal publicly.

Athens had infuriated its creditors with actions including a short-notice referendum on July 5 in which Greeks overwhelmingly rejected previous bailout terms offered by its creditors.

If the summit had failed, Greece would have be staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and in time exit the European monetary union.

Tsipras said on arrival in Brussels on Sunday he wanted “another honest compromise“ to keep Europe united. Instead, he was subjected to a 15-hour humiliation by leaders furious that he had spurned their previous bailout offer on more favorable terms in June and held a referendum last week to reject it.

Al Jazeera with wire services