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

The deal calls for Greece, already reeling from austerity measures, to cut back even further under tough reforms

Greece reached a deal with its European creditors Monday that avoided an exit from the euro and the prospect for global financial upheaval that had raised. The deal, reached after haggling throughout the night, calls for Greece — already reeling from harsh austerity measures — to cut back even further. 

French President Francois Hollande said the Greek parliament would convene within hours to adopt the reforms called for in the plan, and he celebrated Greece's continued membership in the euro. 

He said Greece hadn't been looking for “welfare” from other European countries, but for a program that would help its economy grow. Failure to reach an agreement would have undermined the credibility of efforts to construct a more united Europe, he said.

The agreement came after months of often bitter negotiations and a summit that stretched from Sunday afternoon well into Monday morning. Greek Prime Minister Alexis Tsipras, elected in January on an anti-austerity platform, had been holding out for a better deal to sell to his reluctant legislature in Athens this week, even as financial collapse grew closer by the day.

Tsipras agreed to tough reforms in return for a three-year bailout worth up to $96 billion, Greece's third rescue in five years.

A breakthrough came in a meeting between Tsipras, Hollande, German Chancellor Angela Merkel and EU President Donald Tusk, after the threat of expulsion from the euro put intense pressure on Tsipras to swallow politically unpalatable austerity measures.

“We took the responsibility of the decision to be able to avert the harshest outcome,” Tsipras said. “We managed to avert the demand to transfer Greek assets abroad, to avert the collapse of the banking system.” He said that Greece won concessions on restructuring Greece's debt and assured medium-term financing.

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

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