Prime Minister Alexis Tsipras returned to face a mutiny withinhis coalition after he surrendered to European demands for actionto qualify for up to 86 billion euros (US$95 billion) of aid Greeceneeds to stay in the euro.

Tsipras arrived back in Athens to confront lawmakers from hisSyriza-led bloc who rebelled this weekend when he sought theirendorsement for spending cuts, pensions savings, and tax increases.He met with his closest aides to chart the path ahead, as the Greekparliament faced a Wednesday deadline to pass into law key creditordemands including a value-added tax overhaul, broadening the taxbase to increase revenue and curbing pension costs.

With the threat of defections rippling through his bloc, Tsipraswill “have to change his administration and clear out hard-linersand radicals from his party,” as well as rely on opposition supportto pass the necessary measures, said Eurasia Group analysts MujtabaRahman and Federico Santi. “But it is a tough call to determine howTsipras will go about doing this.”

Attention is shifting to the parliamentary hurdles ahead beforeGreece can even begin negotiations with creditors to access a thirdinternational bailout in five years. The euro fell as the scale ofthe challenges sank in and the European Central Bank (ECB) held offfrom expanding its aid for Greek lenders.

“There's a vista of division within the party, part of Syrizaofficials and lawmakers do not accept the tactics followed by ourprime minister,” Yanis Balafas, a Syriza lawmaker close to Tsipras,said in an interview. “What matters now is that the worst-casescenario of a default has been averted.”

After a six-month offensive against German-inspired austeritysucceeded only in deepening his country's economic mess andantagonizing his European counterparts, there was little forTsipras to tout as evidence of a face-saving compromise following arancorous summit in Brussels that ran for more than 17 hours.

“Trust has to be rebuilt; the Greek authorities have to take onresponsibility for what they agreed to,” German Chancellor AngelaMerkel said after the meeting ended Monday morning. “It now hingeson step-by-step implementation of what we agreed.”

'Successful Evaluation'

The conditions that Tsipras swallowed comprised a laundry listof unfinished business from Greece's two previous bailouts and anew demand for the government to transfer 50 billion euros of stateassets to a holding company that will seek to either sell orgenerate cash from them.

Tsipras hailed the fact the fund would be based in Greece, notLuxembourg as had been suggested. He also latched onto the prospectof debt relief, albeit distant, after creditors rejected his pleasfor a cut in the face value of Greek debt of about 310 billioneuros. Merkel said interest-payment grace periods and longermaturities will “be discussed once there is a successful evaluationof the new Greek program.”

While the summit agreement averted a worst-case outcome forGreece, it only established the basis for negotiations on an aidpackage, which would also include 25 billion euros to recapitalizeits weakened financial system.

The Stoxx Europe 600 Index climbed 1.8 percent at 4:43 p.m. inFrankfurt, while the euro dropped 1.2 percent.

As the summit approached its climax in the early hours ofMonday, the main session broke at least four times to allow Tsiprasto confer with associates in Athens, according to one official withknowledge of the talks.

Some leaders threatened to leave between 2 a.m. and 4 a.m. whena deal looked very unlikely given the late hour. By 6 a.m., boththe German and Greek delegations said that a deal was impossibleand prepared to leave, before being urged to give it one last push,according to a separate EU official.

The terms are significantly tougher than those Tsipras labeled“blackmail” when he persuaded Greek voters to reject them in areferendum a week ago. In addition to requirements on pensions andsales taxes, measures that Tsipras accepted last week, the leadersdemanded that creditor representatives return to Athens with fullaccess to ministers and a veto over relevant legislation,intrusions that he has long rejected.

“We had to succeed,” said French President Francois Hollande.“If Greece had left the euro zone, what would the world havesaid?”

With the banks staying closed on Monday, the ECB's GoverningCouncil kept the cap on Emergency Liquidity Assistance unchanged,signaling a desire to wait for Greek lawmakers to approve reformsfirst.

Tsipras said that the deal had prevented the banking system fromcollapsing but will inevitably harm the economy.

“We put up a hard fight for the past six months and we fought tothe end in order to get the best out of it, to get a deal whichwill allow the country to stand on its feet and the Greek people tokeep fighting,” Tsipras said in Brussels.

–With assistance from Nikos Chrysoloras and Marcus Bensasson inAthens, Kevin Costelloe, Patrick Donahue, James G. Neuger,Stephanie Bodoni, Ott Ummelas, Radoslav Tomek, Esteban Duarte,Jonathan Stearns, Mark Deen, David De Jong and Karl Stagno Navarrain Brussels, Angela Cullen in Frankfurt, Elco van Groningen inAmsterdam and Neil Denslow in London.

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