Early this week European policymakers announced a third bailout package for Greece. The stricken state will receive up to €86bn in return for a wide range of reforms, including pension cuts, an increase in VAT, and deregulating various markets. A privatisation fund under international supervision is supposed to raise €50bn in three years in order to recapitalise the banks, pay down debt and reinvest in the economy.
The deal was being presented to the Greek parliament as MoneyWeek went to press, and in the next few days several other assemblies also have to approve it. But the International Monetary Fund (IMF), one of Greece’s creditors, raised another potential obstacle to the progress of the deal on Tuesday. It said Greece needed substantial debt relief and it could withhold its €16.4bn of the aid package unless European institutions finally consider this seriously.
What the commentators said
This is a “painful, humiliating” deal for Greece, said economist.com. Prime Minister Alexis Tsipras has had to sign up to “precisely the sort of demands his Syriza party railed against” during its successful election campaign in January. Furthermore, the proposals the Greek people rejected in a referendum last week are merely the beginning of the new deal. All the reforms, which amount to pervasive liberalisation of the Greek economy, will take place under the auspices of European institutions.
You can see why people are worried Germany is abusing its power, said Hans Rauscher in Austria’s Der Standard. It has pushed through a programme that goes far beyond an austerity package; it essentially attempts to refashion the Greek state apparatus to make it actually work. One point, for instance, calls for the “depoliticisation” of the national statistics office. “Translation: ‘We’re tired of your faked statistics.’”
But even if all the conditions are implemented, the odds are that Greece will need yet more help before too long. The IMF was merely “stating the bleedin’ obvious” by saying Greece needs debt relief, as Nils Pratley put it in The Guardian. The debt pile could reach an utterly unsustainable 200% of GDP in the near future owing to the recent turmoil in the Greek economy. Further austerity will also undermine economic momentum. So Greece hasn’t a hope of growing its way out of debt unless some of it is forgiven. But Europe isn’t discussing that.
What a mess, said Der Standard’s Andreas Schnauder. Greece is in misery while the rest of the eurozone stands to lose more money. New tensions, notably the divide between Germany and France, are tearing at the fabric of monetary union. Europe is paying a high price for an “unconvincing prestige project called the euro. Too high.”