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Greece’s bailout deal: More of the same?

Lotte van Buuren, 23 February 2015

Following a tense couple of weeks during which a Grexit became a more and more realistic scenario, a deal was finally reached on Friday between the Greek government and EU leaders. The agreement extends the Greek bailout for another four months, provided that Greek PM Alexis Tsipras’ coalition government of radical left Syriza and radical right Independent Greeks manage to come up with viable reforms that can replace the current austerity measures it so heavily opposes. This list of reforms should be finished tomorrow morning and is expected to include plans on improving the civil service and on confronting tax evasion. Once these proposals are assessed by the troika – the European Central Bank, the International Monetary Fund and the European Commission – it is up to EU member states to approve them.

It is beyond dispute that Tsipras and his Finance Minister Yanis Varoufakis made considerable concessions. Most of their requests were rejected: the loan extension will be four rather than the requested six months, the troika will remain involved in national affairs and the last €7.2bn chunk of the loan will not be put in a Greek fund. Most importantly, Varoufakis appears not to have succeeded in launching a genuine debate on the essence of the bailout programme. The agreement, in contrast, literally states that the ‘framework of the existing arrangement’ and the ‘set of commitments’ remain unchallenged. Considering the financial reality that Greece is utterly dependent on European and especially German euros, it seems highly unlikely that during the coming four months, Varoufakis will be capable of launching a successful offensive against the force of the bailout. While the leverage of the two member states is incomparable, Varoufakis’ failure to modify or even start a discussion on the fundamentals of this programme appears to reduce the chances of Britain renegotiating the terms of its relationship with the EU.

Although the unilateral and rather ruthless refusal by German hardliner and Finance Minister Wolfgang Schaeuble to accept an earlier version of the Greek loan extension request put Eurogroup chief Jeroen Dijsselbloem in a difficult position, this agreement appears to have strengthened his reputation. He managed to forge a compromise between seemingly irreconcilable Greek and German interests, while strongly defending (Northern) European interests.

Still, Varoufakis repeatedly indicated that his principal demand was time, which is what the Minister managed to get out of the deal. In addition, the granted flexibility to decide on new reforms gives Tsipras and Varoufakis a means to sell the deal to the Greek public – despite the fact that the general framework is still in place. Given the circumstances and the tough stance taken by Germany, this result is not as bad for Greece as it may seem.

1 comment on “Greece’s bailout deal: More of the same?”

  1. The EU are adopting the Mr Micawber approach of hoping that something will turn up. It cannot because (1) the Euro is fundamentally flawed and (2) the rising nationalism in Europe makes the remedial action the Euro needs – a common fiscal policy including large scale shifts of money from the rich to the poorer members and a huge loss of national sovereignty – politically impossible.

    For those of us who want out of the EU the situation is increasingly promising because if Greece leaves the Euro there will be a domino effect dragging in Spain, Italy, Portugal and even France. If the EU goes the EU will go, or at least will not survive in any recognisable sense because the damage done by its existence and the rising nationalism already mentioned. Lenin’s dictum “The worse the better” applies as far as Eurosceptics are concerned.

    Greece’s plight is beautifully simple: at best it has never been more than a second world country masquerading as a first world country courtesy of the contributory member states of the EU.

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