CASTLEBAR, Ireland (Reuters) - Greece’s banking system would have collapsed within days had Athens not compromised significantly and struck a funding agreement with euro zone ministers, Irish Finance Minister Michael Noonan said on Saturday.
Greece secured a four-month extension to euro zone funding, which will stave off bankruptcy and a euro exit provided it comes up with promises of economic reforms by Monday.
“The biggest threat to Greece was that their banking system would go belly up next Wednesday,” Noonan told national broadcaster RTE at his Fine Gael party’s annual conference.
“It’s the first set of discussions to ensure Greece doesn’t collapse next week. Once you get them into the safe space for the next four months, there’ll be another set of discussions which will effectively involve the negotiation of a third programme for Greece.”
Greek Prime Minister Alexis Tsipras said on Saturday that the agreement cancelled austerity commitments made by a previous conservative-led government to the International Monetary Fund and European Union.
However Athens was forced to accept the conditional extension of the bailout and still has to deal with the troika, renamed in the deal as “the three institutions”.
Ireland embraced public spending cuts and tax hikes in taking a similar bailout in 2010 after a property crash fuelled twin fiscal and banking crises. Its economy is now recovering, albeit unevenly.
Noonan, who supported the hard line taken by German finance minister Wolfgang Schaeuble in the talks, said there was very little head room for concessions.
“Their political problem is that this a reversal of their election position. There is absolutely nothing on the table that could be considered a concession ... They’re now compromising and compromising quite significantly,” Noonan said.
“All that has been agreed is a process which allows them to continue with a programme along the lines of the programme they have already.”
Reporting by Padraic Halpin; Editing by Ruth Pitchford