Greece and the rest of the eurozone have finally reached an agreement that could lead to a third bailout and keep the country in the eurozone. Greek PM Alexis Tsipras conceded to a further swathe of austerity measures and economic reforms after more than 16 hours of negotiations in Brussels. He has agreed to immediately pass laws to further reform the tax and pension system, liberalise the labour market, and open up closed professions. Sunday trading laws will be relaxed, and even milk producers and bakers will be deregulated.Greece was forced to accept these measures after Germany piled intense pressure, as a price for a new deal. EU officials told us that Tsipras was subjected to “mental waterboarding” in closed-door meetings with Angela Merkel, Donald Tusk and Francois Hollande.In signing on to the deal, however reluctantly, Mr. Tsipras suddenly found himself the champion of policies he was elected to oppose and the best hope for de-escalating a crisis he had helped create. Should he succeed in carrying out the policies set out in the agreement, he would oversee just the kind of market-based changes that creditors have been demanding and successive Greek governments have been failing to deliver for years.In the European Union, most real decision-making power, particularly on matters involving politically delicate things like money and migrants, rests with 28 national governments, each one beholden to its voters and taxpayers. This tension has grown only more acute since the January 1999 introduction of the euro, which now binds 19 nations into a single currency zone watched over by the European Central Bank but leaves budget and tax policy in the hands of each country, an arrangement that some economists believe was doomed from the start. Since Greece’s debt crisis began in 2010, most international banks and foreign investors have sold their Greek bonds and other holdings, so they are no longer vulnerable to what happens in Greece. Though the greece crisis is over for the time being but another looming crisis is political crisis. The latest round of the crisis, after all, began after Greece elected Syriza, an anti-austerity party, to form the government. It is possible that domestic political upheaval in Greece could, in coming days or months, unravel the agreement with Europe. And given that Greece is now likely to undergo a period of long economic pain, that might increase the risk of political instability. More immediately, the process for reopening the banks or easing capital controls, which prevented Greeks from moving money offshore, still needs to be worked out. The European Commission, the European Central Bank and the International Monetary Fund — “the troika” — were giving Greece the money it needed to function and to, well, pay the troika back. The IMF, in particular, insisted that Greece cut its pensions by 1 percent of gross domestic product, and Greece initially responded that it was willing to cut them only half as much and make up the difference with higher taxes on businesses. When they couldn’t come to an agreement, Tsipras called for the referendum.That led to not only a political escalation of the crisis — but an economic one. There has been a slow-motion bank run the past few months — a bank jog, really — that has picked up pace as it has appeared as if there wouldn’t be a deal. That’s because people were worried that Greece would be forced out of the common currency without one, and their old euros would get turned into new Greek drachmas, which wouldn’t be worth anywhere near as much.So when there wasn’t a deal, Greece was forced to close its banks, limit ATM withdrawals to 60 euros a day and prevent people from moving their money abroad in a capitulation to this panic. Then Greece defaulted on a 1.5 billion euro payment to the IMF. Now even if Greece even do not have such a meager amount to run state affairs, it simply means it would collapse.
pk.shafaqna.com
Debt odyssey: Greece is yet not out of hot waters
