The dust has all-but settled after the marathon Eurozone negotiations that very nearly saw Greece exit the single currency, but instead ended with the country effectively becoming an economic ward of Germany. People are still arguing over whether it was a German coup or capitulation, but attention is now turning to what’s next.
Greece has to pass a raft of VAT, pension and labour market reforms even more sweeping than the ones rejected in the recent referendum by tomorrow. And that’s only to even start negotiations on a third, €82-86bn (£55.6bn) bailout.
It looks like a significant minority of far left MPs from the ruling Syriza party will revolt, while the leader of its far right coalition partners has also said it can’t agree to the deal. Prime minister Alexis Tsipras is likely to be able to pass the laws with the support of the opposition, but his government could well fall apart and trigger yet another round of destabilising elections.
Then there is the fact that Greece needs an estimated €7bn in ‘bridge financing’ to get it through July, given the actual bailout negotiations will take an estimated four weeks (although as we’ve discovered, with Eurozone negotiations, time frames are definitely flexible). That includes to pay €3.5bn owed to the European Central Bank on Monday. It’s also now €2bn in arrears to the IMF, after missing a second payment deadline today. But Eurozone finance ministers are already, predictably struggling to agree on how to tide Greece over.
Moreover, Tsipras seemingly swallowed the bitter pill of yet more austerity in part to secure debt relief within the latest bailout. But he may not actually get any, despite the IMF agreeing Greece desperately needs a reduction in what will be a debt pile pushing on for €400bn. Germany has flexed its muscles and bent the smaller nation to its will thus far, and ‘haircut’ is not a phrase its voters much like.
Clearly, Greece needs a proper New Deal/Marshall Plan/[insert other historical parallel here] to bring an economy that has suffered a recession relatively deeper than the Great Depression back to its feet and growing again (and its citizens and companies actually paying taxes). The merry-go-round of bailouts and reforms has quite obviously failed so far, and there isn’t a clear case to say this latest one will be any different.
Meanwhile, with Greek voters effectively steam-rollered (although they had clearly been misled by Syriza’s immature negotiating tactics), the Euro project is suffering a political identity crisis that could yet bring the whole project to a horrible end. This drama is far from over.