February 26, 2015
The month-long negotiations between the Greek government and Eurozone ended up temporarily with the adoption of a 4-month extension of the current bailout program during which the Greek government is bound to undertake a specific course of action regarding these structural reforms that will convince the creditors that Greece is ready to receive the final loan package. The evaluation of the Greek proposals is due for end April, whereas by July the government should most probably sit down to the negotiation table with the creditors to discuss the steps ahead and the progress that has been made in the Greek economy.
What Greece gained from the agreement
The Greek government did achieve to extend the period of implementation of the current bailout program without being obliged to take further austerity measures, as those described in the latest negotiations between the previous government and troika, including pension/wage cuts and increase of VAT in tourist areas. The second achievement of the government is that it was granted with trust to pursue a specific reform plan that includes an ambitious tax evasion and counter-corruption program in order to increase public income and prove that alternative sources of revenue do exist, and which were never implemented by the previous governments. The third achievement is that the government pushed for the non-inclusion of a specific primary surplus rate that would be catastrophic for the necessary stability of the economy. In other words, the previously agreed primary surpluses of 3,5% and 4% for the next couple of years were postponed and put under discussion for the next rounds of negotiations with the creditors.
What Greece lost from the agreement
Although Greece’s achievements are many and vital, especially taking into account the mounting pressure since the beginning of February from all parts involved domestically, in European degree, and internationally, there are also some crucial points that the government failed to evolve and bring in the negotiation table. The first “missing point” is the stalemate observed regarding the re-negotiation of the excessive, toxic, and unsustainable public debt. For the time being, Eurozone, the IMF and the ECB dropped the discussion or, even worse, denied to depart from some common findings and assertions. The second “missing point” is the fact that the government is obliged to abandon the immediate and full implementation of the “Thessaloniki Program”, a string of vital reforms needed for the alleviation of the most vulnerable parts of the Greek society. Notwithstanding, this is the most disappointing outcome of the negotiations, as the government was hugely pressed to broaden / extend the implementation of the program from 2 months to 4 years, in exchange for the non-adoption of additional austerity measures.
The hard reality ahead
Nobody should expect that a loan agreement or an extension of such an agreement could come without any conditions. Syriza was elected to keep Greece in Eurozone with better terms, not to take Greece out of Eurozone. This was the position of the party before the elections, and this position was kept during the negotiations. The government “bought time”, and now it has to prove that it can govern efficiently.
But the major burden for the government is, again, time. Time is really pressing Syriza to bring about significant results on public finance consolidation. The European partners are clear on the conditions under which Greece could receive further financial assistance: increase public income, decrease public spending, sustain primary surpluses, and proceed to privatizations. A true quagmire and an overwhelming task.
Economy and Society are fed up
While for the time being the majority of the electorate supports the stance of the government, there are three important drawbacks in the horizon: the first is that the Greek economy is struggling five years now to comfort with austerity and restructure its foundations in a completely wrong, hasty and violent manner. The second is that Greece might probably seek for additional financial support even before April (and certainly before July-August), meaning that its debt will get even bigger and that the government will be once again strongly pressed to sign a new “Memorandum of Understanding”, the third in a row since 2010. The third drawback are simply the huge burdens of the past: the disastrous policies of Eurozone against Greece along with the support and consent of the previous governments.
In this respect, PM Tsipras stated it correctly: “Greece won a battle and the war continues”. But from now on we are not certain whether the conditions and the relevant confinements of this war would force Greece to default as a last resort of an honest redemption. A redemption for Greece, and a catastrophic defeat for Eurozone and Europe altogether.
To contact the author Dimitris Rapidis:
, Austerity Politics, Bridging Europe, debt management, EU Institutions, EU integration, EU priorities, Eurocrisis, European Commission, European Union, Eurozone, Germany, Greece, member states, Social Cohesion, SYRIZA