Try to Contain Your Excitement: Greece Has Been Saved. Again
The umpteenth agreement to save Greece and the Eurozone was reached at around 3am this morning British time, so unfortunately I was tucked up in bed and missed all the excitement. But it was probably for the best: with an 'historic' deal seemingly being signed every few weeks for the last couple of years, my neighbours must be sick of me running out into the street each time a new bailout is announced, waving the European Union flag and singing Ode to Joy (yes, we Europeans have our own
national transnational anthem) at the top of my voice.
Forgive the sarcasm, but it's becoming increasingly hard to take these eleventh-hour, continent-saving announcements seriously. If you're interested in the details of the latest can-kicking exercise, the Wall Street Journal has a summary here, but essentially, in return for 130 billion euros in bailout loans, Greece has agreed to reduce its debt-to-GDP ratio from 160% to 120.5% by 2020, with private investors taking a haircut of up to 70% on their Greek bond holdings.
To reduce the debt, Greeks will be subjected to another round of punishing austerity measures: tens of thousands of public sector jobs will go, and there will be further cuts to pensions and wages. As a condition of the agreement, monitors from the European Union, European Central Bank and IMF will be permanently stationed in Athens to enforce compliance.
Anyone who's been following the eurozone crisis will know that elements of the deal are likely to unravel, and we'll be back here in a few weeks, or a few months. Some private investors have still to sign up to today’s agreement, and the Greek government must commit to three billion euro’s worth of cuts in the next few days in order to get the bailout money; not surprisingly, some eurocrats believe yet another bailout will be required in short order.
Europe’s leaders have at least – for the time being anyway – decided that they want to keep Greece in the death grip of the eurozone. Last week several officials and politicians, including Germany's finance minister, were making noises about Greece being forced out of the single currency. It may be that those noises were a bluff designed to concentrate the minds of the country's politicians, although it could also be the case that the eurocrats haven't ruled out an eventual Greek exit, and are simply buying time to shore up their banking systems in readiness.
Either way, Greece remains stuck with the worst of both worlds: condemned to decades of austerity, massive unemployment, social unrest and low economic growth, but unable to cut itself loose, return to the drachma and devalue its way back to competitiveness.
The big question is how long the Greek people will put up with this state of affairs. The governing coaltion parties have been losing support, and extremist parties on both the right and left are set to make gains in elections scheduled for April on the promise of opposing further cuts (the communist KKE party is organizing street protests for tomorrow). If some of those parties end up in government, they may demand a renegotiation of the bailout on less harsh terms, threatening to take Greece out of the euro if they don't get their way.
The Greek people remain understandably schizophrenic about their predicament, with opinion polls showing that a majority both want to remain in the euro, but oppose the spending cuts that are a prerequisite of continued membership. It's no surprise that some European officials have suggested postponing the elections and installing a technocratic government along the lines of that imposed on Italy last year – a move which would be the final humiliation for the cradle of democracy.
Greece's Finance Minister Evangelos Venizelos claimed this morning that his country had avoided the 'nightmare scenario', but for millions of ordinary Greeks the nightmare is just beginning.