Given that neither the Greeks nor any of their Eurozone partners want to see Greece abandon the Euro, it should be unsurprising that a deal has been struck which should enable Greece to receive the final tranche of bailout funding, €7.2 billion. The funds would enable Greece to remain solvent for a further four months whilst it tries to negotiate a longer, more sustainable deal with its EU partners, the IMF and the ECB. This paragraph is couched in conditional terms because this agreement needs to be ratified by national parliaments before it can come into effect. Most people think this will just be a formality.
It is clear that whilst the creditors are encouraged by Greek overtures about a reformed bailout agreement (compared to the opening Greek position which called for a 50% debt haircut and the cessation and reversal of austerity measures), they are not yet convinced that Greece has given enough ground.
Pledges of specific action
The Greeks have sought to abandon the Troika process which oversaw disbursement of funds to Greece against progress of agreed reforms and cuts. In any event, the current payment would have been the final one under the bailout, so this concession by the EU and IMF is not huge. In order to secure this phase of help and replace Troika control, Greece is making pledges of specific action, notably tightening up on tax avoidance and evasion (being a left-wing administration, richer Greeks and larger corporations will be firmly in their cross-hairs) and action against smuggling. The main pledges were summarised by the BBC website:
Combat tax evasion
Tackle corruption
Commit not to roll back already introduced privatisations, but review privatisations not yet implemented
Introduce collective bargaining, stopping short of raising the minimum wage immediately
Tackle Greece's "humanitarian crisis" with housing guarantees and free medical care for the uninsured unemployed, with no overall public spending increase
Reform public sector wages to avoid further wage cuts, without increasing overall wage bill
Achieve pensions savings by consolidating funds and eliminating incentives for early retirement - not cutting payments
Reduce the number of ministries from 16 to 10, cutting special advisers and fringe benefits for officials
It should be noted that these pledges are being made five years into the bailout process which demanded specific revisions to the Greek economy to put it onto a sustainable footing in the first place: you may ask why tax evasion, corruption and smuggling are still issues so far down the road.
The concessions made by the Greek administration may be a hard sell to the electorate or even members of the coalition government.
Four more months
Whilst funding has been given the greenlight, it is clear that key figures still have significant reservations about the process, but it has bought Greece, and arguably the Eurozone, four months of grace.
Head of the IMF, Christine Lagarde, had this cautionary comment in a letter to the Eurogroup:
“In some areas like combating tax evasion and corruption I am encouraged by what appears to be a stronger resolve on the part of the new authorities in Athens. In quite a few areas, however, including perhaps the most important ones, the letter is not conveying clear assurances that the government intends to undertake the reforms envisaged.”
Jeroen Dijsselbloem, chairman of the Eurogroup told Dutch radio that: "The new government is much more aggressive on taxes and corruption, and these are excellent things. But the Greek government is perhaps too optimistic about the speed with which they can boost tax revenues."
For his part, ECB president Mario Draghi pointed out that the current Greek proposals “differ from existing programme commitments in a number of areas" and said that it would have to be confirmed that the dropped measures had been “replaced with measures of equal or better quality".
The EC and ECB stated that the Greek proposals were a “valid starting point” and a Eurogroup statement noted “We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close co-ordination with the institutions”
The obvious elephant in the room for Greek voters is that there has been no movement on the part of the creditors to agree any further debt write-down and there is an insistence that Greece adheres to key points agreed under the bailouts: this is not what they voted for when bringing Syriza to power, but reflects the fact that voters in one country have no say over the actions of international (sovereign and inter-governmental) creditors.