Finance ministers from the 19 countries that comprise the Eurogroup have reached a deal that extends Greece’s bailout loans for four months while officials try to negotiate a longer term deal.
The negotiations have been long and tense, with senior government officials trading insults. The talks at times broke down without participants agreeing on so much as a statement about continued discussions. Now the leaders of the Eurogroup countries have to face the unpleasant reality that this may have been the easy part.
Europe has been keeping Greece on its feet for the past five years through a program of loans financed by the European Commission, the European Central Bank and the International Monetary Fund. The Greek people have long resented the arrangement — with some justification — because it came with strict austerity requirements that slashed public services, increased unemployment and appears to have done little to get the Greek economy moving again. The new Greek government, headed by Prime Minister Alexis Tsipras, rode to power on a promise to undo much of the austerity programs forced upon Greece as terms for its bailout.
If the Greeks hated the bailout deal, their European neighbors weren’t particularly fond of it either. Greece helped get itself into trouble through profligate spending (several governments ago, just to be clear) and poor governance. Europe as a whole rode to the rescue with two major bailout programs, in 2010 and 2012, even as the continent, then as now, was itself suffering from slow economic growth.
The deal was struck Friday won’t go into effect until the various national legislatures around Europe have approved it, and in some countries — notably Germany and the Netherlands — that’s going to be a tough sell. Many Europeans are frustrated at seeing their euros flow south to a country whose economy never seems to improve. There is even a strong undercurrent of suggestion that Greece is somehow hoodwinking the rest of Europe.
The German daily newspaper Bild, for instance, ran a headline Thursday depicting a deal then under discussion as a Trojan horse, complete with Greek Finance Minister Yanis Varoufakis pictured bursting through the wooden animal.
Germany, Greece’s largest creditor, had pushed the new government in Athens to abide by strict conditions for any continued aid, and as part of the latest deal the new Greek government must submit by Monday a detailed list of budgetary and other reforms it will take to comply with creditors’ demands, according to preliminary reports. Those proposed reforms would then be reviewed by the European Commission, the European Central Bank and the International Monetary Fund.
That letter will have a lot to do with how favorably the various European legislatures look upon the deal, and whether they are ultimately willing to see it through.
German Chancellor Angela Merkel, who appeared more open to a deal in the first place than her finance minister, Wolfgang Schaeuble, said that German legislators could vote on a deal as soon as next week, and she will likely be able to bring her government along.
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