Is news coverage of Greece wearing you down? Too many deals and deadlines?
It’s no wonder. The “Greek debt crisis” has been in progress for nearly six years, making it easy to assume that we’re seeing just another crazy episode in a long-running drama.
But European leaders are saying this time it really is different. Here’s why:
After a marathon summit that ran into Monday morning, eurozone leaders stood united, agreeing to bail out a deeply indebted Greece for a third time. But this time, the money will come only if very tough conditions are met.
“This was high drama: 17 hours of uninterrupted negotiations of 19 leaders,” Germany’s U.S. ambassador, Peter Wittig, told NPR. “This was a critical moment.”
“In the end, the leaders agreed and came to a compromise,” he said. “And this is the important conclusion: They are paving the way for new aid for Greece — with conditions, with strings attached.”
Wittig said that in the past, Europeans provided bailout money, but without requiring Greece to change the practices that had led to fiscal trouble. For example, the Greek government does a very poor job of collecting taxes.
Europe To Greece: Change Now
Now, Europeans are demanding that their Greek neighbors change — by Wednesday — to get more help. Germany and other European nations will provide up to $96 billion in emergency funding over the next three years to allow Greece to keep making payments to creditors and get its fiscal house in order.
But that will happen only if lawmakers in Athens agree on Wednesday to overhaul the country’s expensive pension system and reform the value-added tax system to boost revenues.
Parliament also must agree to selling off Greek utilities and some land, and weakening the power of labor unions, among other concessions.
Only after such changes are approved will the bailout parties, which include the International Monetary Fund and euro member states, work out the final agreement for keeping Greece out of default and inside the eurozone.
That plan would include debt relief in the form of longer periods to repay loans.
Wittig said the first two bailouts “didn’t succeed the way we wanted them to succeed because there was a lack of implementation on the Greek side,” he said. Going forward, Europeans first must have “confidence that the recipient of this aid is implementing what is needed.”
It’s Up To Greek Lawmakers
Greek Prime Minister Alexis Tsipras is trying to unite lawmakers behind this last-ditch effort. The world’s major stock markets rose on hopes Monday that he will succeed.
IHS Global Insight Senior Economist Diego Iscaro predicts that Tsipras will indeed get the legislature’s cooperation because Greece’s economic suffering has become so severe. Without Parliament’s acquiescence to the bailout terms, the Greek banking system may soon start to collapse, deepening the economic depression.
With agreement, Greece’s short term prospects will improve.
But the long term will still be a question mark because there remains “the very real prospect of Greece being unable to meet the targets demanded by its lenders” over time, Iscaro said.
What would happen then is anyone’s guess. But for now, the country has a shot at reopening its banks and restarting its economy. And that’s different.
“Those were really tough negotiations, but in the end this was a very important achievement,” Wittig said.