So it looks like it’s finally happened. The Greek people voted No, their government caved in anyway and agreed to further austerity, and a third bailout for the once-proud democracy has been agreed. At least, that’s the way it’s looking on Tuesday morning, after new Greek finance minister Euclid Tsakalotos confirmed that a broad agreement has been reached, and with the rubber-stamping by Greece’s parliament expected any day now.
What it means in the short term is that Greece should get a new €86bn injection over three years, and will be able to repay the €3.2bn that’s due by 20 August. But will it signal success in the longer term?
One of the key points of contention between Greece and the EU has been the country’s failure to make sufficient headway with its privatisation plans — €50bn was supposed to have been raised from the sell-off of state-owned assets by 2015, but nothing close to that has been achieved. That target has now been reset, to be achieved over the life of the new bailout loan, with the key difference that the sale will now be managed by an independent fund with a degree of EU oversight.
Don’t be fooled
But if you believe this is the turnaround point for the Hellenic Republic and that a rosy future is now assured, think again — at best, it’s only just the start of a very painful road back to economic health.
For one thing, the EU has been revising its economic forecast for Greece, and until the recent crisis it was actually forecasting growth! Now, horrors, the EU admits that Greece might even be back in recession. Of course Greece is in recession, and it’s going to be a hard one — that much is obvious to anyone who can see beyond the stream of deluded gobbledegook that pours out of Brussels.
Greece is now allowed to run a deficit this year (as if it had any alternative), but must target a surplus of 3.5% by 2018 and then sustain it. I’ll repeat that — a sustainable surplus of 3.5%, by 2018. Is there anyone in their right mind reading this who thinks there’s any chance of that happening?
Then there’s the level of Greece’s debt, which is expected to represent around 200% of GDP over the next couple of years. That can simply never be repaid, even though Germany (the country that has benefited from by far the largest amount of debt forgiveness in Europe over the past 100 years) insists on getting every last eurocent back.
Demands like that would condemn generations of Greeks to lives of penury, and it is unreasonable to expect the country to just suck it up while they see their richer Northern neighbours exploiting the eurozone for their own benefits.
More fudge
No, it has been fudged yet again, and unless there are material changes to Greece’s debt (which means writing off a large chunk of it, in whatever face-saving way the EU wants to word it), in another few years we’ll be right back here again with exactly the same crisis unchanged. And that will put yet more pressure on the eurozone — we’ve even started to see divisions between Germany and France over the latest crisis, and they can surely only widen if Germany continues to live its fantasy.
I still reckon it’s only a matter of time before the eurozone is rightfully consigned to history, but the real injustice is that Greece is having to suffer the pain of its death throes.