Fears of a Grexit finally evaporate as eurozone agrees to discuss a third bailout for Greece – as long as it can implement a raft of severe reforms by July 15
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After a marathon 26-hour summit, one of the biggest threats to the eurozone in its 16-year history seems to be at an end. Greece has reached an agreement with European leaders that will keep in it the euro and open up talks for a third bailout, in return for submitting to a raft of strict austerity measures. If prime minister Alex Tsipras can get the reforms through parliament by July 15 – just two days from now – then discussion will begin toward a new three-year bailout worth £61bn.
In return for this opportunity, Greece will need to rapidly implement pension reforms; measures to liberalise its economy that entail the introduction of Sunday trading hours, sales periods and the deregulation of milk producers and bakers; the privatisation of its electricity infrastructure; modernisation of collective bargaining, industrial action and collective dismissals; and action on non-performing loans. On top of this, the all-clear has been given to a fund that will require the Greek government to sell off valuable public assets as a means of paying off the country's debt. However, contrary to the highly controversial proposal for this fund to be placed in Luxembourg, it will instead reside in Athens.
These terms are seen to be significantly more severe than those demanded by the previous deal, which was rejected in a referendum on July 5 by 61.3% of Greek voters. Indeed they have caused some, such as Marc Ostwald, an analyst for ADM Investor Services, to compare the deal to the Treaty of Versailles, which severely crippled the German economy after the first world war with harsh reparations. But, by accepting the difficult conditions put forth by its creditors, the Greek government has secured a concession on the issue of restructuring its debt, something that offers perhaps the only option that will allow it to one day get back in the black.
It does seem that, in the short-term, crisis has been averted. Internal conflict over Greece’s position in the eurozone spiked over the weekend. French president François Hollande in particular expressed distaste at a clause that would have temporarily expelled Greece from the eurozone. “In that case it’s Europe that retreats and no longer progresses, and I don’t want that,” he remarked. Italian prime minister Matteo Renzi added: “To Germany I say: enough is enough. Humiliating a European partner after Greece has given up on just about everything is unthinkable.”
And it’s not just politicians who reacted negatively to what they perceived as overly draconian measures. Over the weekend, the hashtag #ThisIsACoup started trending second worldwide and first in both Greece and Germany, expressing public distaste for some of the demands made in return for a European bailout. Commenting on his New York Times blog, Paul Krugman, the Nobel laureate economist, said: “The trending hashtag ThisIsACoup is exactly right,” he wrote. “This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief.”
In light of this, there will be sighs of relief that a deal has been reached and the cracks between European member states won’t deepen further. Nevertheless, with Greece given two days to implement sweeping reforms just for the chance of discussing the sorely needed bailout – and Tsipras appearing to have capitulated to the demands of the country’s creditors – it seems like there is a rough road ahead both for Greece and its government.