A last-minute deal

Greece blinks, and prevents 'Grexit' for now

After 17 hours of negotiations that were unusually tense even by the high standards set in Europe recently, the elected leaders of Europe agreed on the broad parameters of a third bailout package for the embattled Greek economy. Time was running out; the Greek government was close to another default. In the end, faced with the explicit threat of "Grexit" - which the German finance minister introduced as a possibility for the first time into the official documents on Saturday - Greek Prime Minister Alex Tspiras finally blinked. He agreed to a slate of reforms - to be initiated immediately - that represent a substantial retreat from the position staked out by his left-wing Syriza party for the past months. By Wednesday, the Greek government will have begun the process to amend its value-added tax legislation and conduct pension and spending reforms. Other reform - of labour and financial markets - has also been promised. In addition, Mr Tsipras gave in to what will be seen by many members of his party as an assault on Greek sovereignty: in the final agreement, the International Monetary Fund will closely supervise the domestic economy, and public administration will be overhauled under the equally sharp eye of the European Commission. And 50 billion euro of Greek assets will be handed over, in a German demand, to a special fund that will be dedicated solely to paying off debt. In return, the Europeans will hand over an estimated 82-86 billion euro to the near-bankrupt government in bailout funds, in a process yet to be negotiated.

Mr Tsipras' late show of statesmanship might come at a price. It is far from certain whether he will be able to get this package through his parliament without fundamentally restructuring his government - allowing the radical left wing of his young party to leave, and propping up his majority with the support of the more moderate, Europe-friendly traditional parties. But he had backed himself into a corner, to an extent. In rejecting an earlier offer that was nearly identical to this one, and calling a referendum in which he demonstrated that his hard line had the support of most Greeks - he alienated most of Europe's leaders. Instead of the traditional antagonist of Germany, small European countries from Finland to Slovenia to the Slovak Republic - some of which are considerably poorer than Greece - lined up to attack Mr Tsipras, his government, and even his country's 50-year record of failed reform. In the end, faced with markets untroubled with the possibility of Grexit, an implacable Europe, and growing concern at home about the inability to withdraw cash from banks, Mr Tsipras found his options limited.

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This is far from a permanent settlement. It still has to leap through various hoops - in the German and Greek parliaments, for example, as well as elsewhere. However, it is the first acknowledgement by the Left of the Greek political spectrum that fundamental structural reform is necessary. Some argue that this is the death-knell for the European project, as it shows democratic legitimacy being suborned by economic necessity. Others point out that it shows how the price of economic integration is closer political integration and how the near-unanimous views of Europe's elected leaders cannot be ignored by Greece's elected leaders. However, whether this is a step forward for Europe or not will crucially depend on how the various conditions outlined in Monday's agreement are fulfilled by Greece and how their implications pan out.