Sign in Syntagma Square, Athens, on February 12. Photo credit: http://www.flickr.com/photos/odysseasgr/6868962575/
The eurozone has agreed a €130 billion rescue deal for Greece after all-night talks. The plan is aimed at reducing Greek debt from 160 percent of Gross Domestic Product (GDP) to 120.5 percent in 2020, and will involve greater oversight of the country’s finances by the eurozone. It’s been a bumpy ride: there were fears negotiations would collapse after the “troika” (the European Commission, the International Monetary Fund, and the European Central Bank) discovered a funding shortfall that threatened to derail the deal. Private creditors were persuaded to accept a “haircut” (that is, greater losses) on their Greek debt, allowing the second bail-out to go ahead.
Greek PM Lucas Papademos seemed publically pleased with the deal: “It’s no exaggeration to say that today is a historic day for the Greek economy,” he said, reported The Telegraph. However, the rescue package is dependent on a stringent austerity programme that has already provoked violence in Athens, after the Greek Parliament passed a bill enabling €3.3 billion in swingeing cuts to pensions, wages and jobs to placate eurozone ministers. And The Guardian suggested that Greek debt negotiations had been “overshadowed” by a gloomy troika report: “It painted a dire picture of the Greek economy, warning it was likely to miss its targets and predicting that Greece’s banks will require a larger recapitalisation programme.”
So will the second bailout prove a permanent solution, or is this just a sticking plaster on the broken limb of Greece’s economy?
This is not the end. Writing for the BBC, Robert Peston warned against celebrating too soon, pointing out that the result of the talks is “an agreement in principle, not a final, definitive rescue of Greece”: “Let’s just see how it goes down with the relevant private-sector lenders, politicians in the only creditor country that really matters – Germany – and Greek citizens, who are being asked to sign up for years of declining living standards with no promise about when and whether the better times may return.” Peston pointed out that proposed private sector haircut on Greek debt is “unprecedented”, amounting to a 53 percent write-down on the value of what the government has borrowed.
“We must look ourselves in the mirror and show our best side. We must not let bankruptcy, outbreaks of violence, corruption and decay, reduce us to the dustbin of history,” wrote Alexis Papachelas at Athens newspaper EKathimerini.
Insufficient. “My sense is that what the leaders of the euro zone are again hailing as a landmark agreement will, like all of the other landmark agreements of the past two years, seem completely insufficient six months from now,” wrote Michael Schuman at Time. Schuman argued that the difficulty with reducing Greek debt is that the economy is shrinking – and the new austerity measures demanded by the eurozone will likely cause the economy to shrink even further: “So Greece ends up like a dog chasing its tail.” Schuman raised the prospect of a third bailout in the future.
“Further major and joint efforts by all parts of the Greek society are needed to return the economy to a sustainable growth path,” said Jean-Claude Juncker, prime minister of Luxembourg and chairman of the eurozone finance ministers group, after the deal was announced, reported the BBC.
Blame Greece. “There are growing signs that Greece, like some drug-addicted relative who lies endlessly, spends recklessly, and endangers people foolishly, has worn out its welcome in the euro-zone family,” wrote Christopher Dickey at The Daily Beast, ahead of the latest agreement. According to Dickey, some eurozone countries see the plan as “Greek extortion” and believe Greek politicians are gambling that European leaders will take any measures to prevent the country from defaulting and leaving the monetary union.
Don’t blame Greece. The idea that the Greek debt crisis is due to the country’s profligacy is a fairytale the German government peddles to its citizens in order to divert attention “from Germany’s responsibility for the eurozone’s current economic woes”, said Fabian Lindner on The Guardian’s Comment is free. “Because Germans believe their belt-tightening in the 2000s was such a success, its failure in other countries has to be due to those governments’ moral flaws,” wrote Lindner – but this is based on a misconception of how Germany’s economy really functions. In fact, said Lindner, Germany’s austerity reforms only worked because other countries didn’t operate under the same system: “German banks could expand their business by lending [southern economies] the money to purchase the goods that Germans could no longer afford themselves…. Germany’s beggar-thy-neighbour policies only worked because others pursued the exact opposite policies.”
EU split. The Greek debt talks have exposed a fundamental split in the EU, wrote Christoper Brooker in The Telegraph. On one side, France and the European institutions are determined to prevent Greek default with another bail-out; on the other side, Germany, Holland and Finland are sick of the situation: “It is they who have wanted to pile ever more impossible demands on Greece to hurry on a default,” said Brooker. This Franco-German divide marks the beginning of the end of the eurozone: “The European dream has entered a nightmare stage from which there is no rational escape and the consequences will be horrendous, for Europe and the world,” wrote Brooker.
