There’s a deal, and it seems Greece won’t be leaving the Euro zone, at least any time soon.
In the end, Europe’s wealthy powers decided to grant Greece a new lifeline in exchange for new budget-cutting and tax-hiking measures, and Greece is slated to avoid a sudden banking collapse that would likely have forced it out of the 15-year-old currency pact.
The agreement in Brussels on Monday likely avoids not only an economy-crushing event but also a major reversal for 60 years of increasing European unity. But the story is far from over, with Greece in line for years of economic adjustment (read: pain), and many new doubts about the long-term potential of the Euro zone and its capacity to turn the continent into the United States of Europe
Here are the basics of what’s happening, how we got here, and what it means for Greece, Europe and the rest of the global economy.
1. What’s the situation right now?
After a marathon negotiating session, Europe’s leaders came to an agreement on a deal to continue financial assistance to Greece in exchange for significant concessions. It’s a complicated, and still somewhat tenuous, accord.
What Greece must do
By Wednesday, Greece’s ruling party, Syriza, must pass a host of policy changes as a show of good faith. Those include cuts to public pensions and sales tax increases demanded by Europe to increase Greek budget surpluses.
What Europe will do
In coming days, Europe will advance a loan of 10 billion euros to help Greece make a 3.5 billion euro payment due to the International Monetary Fund on July 20 and keep its banking system alive. Germany will vote on the agreement as soon as Friday.
This is not part of the formal agreement, but it’s widely assumed that the European Central Bank, which has been funding Greek banks with emergency loans, will continue that help in light of the deal.
After Greece passes initial reforms, Greece will receive up to 77 billion more euros over three years. About a third of that will be used to strengthen its banking system, which has been shut down for two weeks amid rapidly declining deposits.
Europe will also commit to review Greece’s total debt burden, potentially giving the country more time to pay it back. But Greece will not get the reduction in face value of the debt that it has asked for.