Lagarde welcomes Greek debt deal

To qualify for its third bailout in five years, Greece must agree to sweeping changes to the way it manages its economy.

Greece must pay the European Central Bank some 3.4 billion euros on August 20 and is hoping the agreement on a new bailout will provide the funds.

“In sum, an appropriate combination of extension of maturities and grace periods for principals and interests would allow to bring Greece debt back to a sustainable level in gross financing needs terms without the need for a nominal haircut as stated by the Euro Summit of 12 July”, it added.

The country’s prime minister Alexis Tsipras has come under intense criticism from hardliners within his own radical left Syriza party for capitulating to creditor demands to introduce the austerity measures, many of whom voted against the bill.

But when Germany’s finance minister threatened to bounce the nation out of the eurozone, the government folded.

Greece’s ruling Syriza party is edging towards a formal split this afternoon, hours before rebel leftist politicians plan to vote against a new bailout deal to keep the country afloat.

A spokesman for the German government described a deal on Friday as a “desirable but not foregone conclusion”.

In fact, Greece will likely depend on concessional funding from official sources in the years ahead – funding that is conditional on reforms, not debt ratios.

“The fact that there’s been so much focus on crisis in the United States right at the early stages of the global financial crisis and with Europe, is going to lead to a sense that there has to be a broader pool for the leadership role”, he told the BBC.

“We have no breakdown at this stage”. Accordingly, Greece carried out capital controls for three weeks: banks closed; the stock market was suspended; medicine and food lacked; tourism industry had fallen by 40 percent.

The Hellenic Statistical Authority in Athens said gross domestic product rose 0.8 percent, as it revised up its estimate for the first quarter to show stagnation.