Greece’s hoped for anti-austerity turn-over ended on Friday when finance ministers from the 19 countries that use the euro, known as the Eurogroup, gathered for their third emergency meeting in two weeks and reluctantly concluded an agreement to extend bailout funds to Greece for four months.
It’s been barely a month since Alexis Tsipras came to power by declaring the beginning of a Euro-wide revolt against austerity. “Europe is going to change,” he said. His efforts have failed from the very beginning as European leaders have voiced their reluctance to join in or even finance the Greek-led revolt.
Economic Measures
In addition to the four-month extension, Tsipras’s government must submit a list of economic measures it will undertake starting on Monday. The Greek government must honor fiscal targets and other conditions it had vowed to scrap but must leave in place the supervising role of the so-called troika — the International Monetary Fund, the European Central Bank and the European Commission—the trio of creditor bodies that Syriza wanted banished. It is up to this body to decide which of Tsipras’s proposals go far enough to satisfy their demands.
Additionally, the finance ministers made clear that Greece will not receive any more cash until it proves that it can spend less, setting the stage for even more tense negotiations in coming days and weeks.
Friday’s temporary resolution removes the threat of the ECB pulling the plug on government banks, a prospect that would have risked Greece crashing out of the euro. Deposit withdrawals from Greek banks have reached 20 billion euros since December and pressure on Tsipras will continue as the disbursement of the next bailout tranche of about 7 billion euros will be made only when the country’s commitments are implemented.
Tsipras said the new ruling cancels austerity and any pledges by the previous government to cut wages, pensions and public sector employees and increase sales taxes. The list of reforms will be “based on the current arrangement” and include fighting corruption, public administration and tax system changes.
According to Tsipras, “Negotiations are just beginning,” turning the previous evening’s accord into a victory for his government. “We won the battle but not the war,” he said. “The real difficulties lie ahead.”
Many of his political opponents, however, stand firm with Germany and other outside observers and disagree with Syriza’s cries of victory, viewing his acceptance of the new agreement as a capitulation and the burial of any meaningful debt reduction.
Monday’s Deadline
The next obstacle to cross will be the Monday deadline for Greece to submit a list of all the policy measures it plans to take to satisfy creditors’ demands. And even if Athen’s plan is approved on Monday, the whole issue of how to help Athens and on what terms will reemerge when the extended bailout, worth 240 billion euros, or $273 billion, expires in June and, as many expect, Greece will need a further infusion of cash to stave off default.
It’s been five years and there have been five different Greek leaders since the euro-area’s first international bailout in Greece in 2010. Since then, Greece’s economy has shrunk by about a quarter and it continues to shoulder the highest unemployment rate in the region. A deal could go some way to help repair the tattered ties between Greece and Germany, the biggest European contributor to Greece’s 240 billion-euro bailouts.