On the 5th of July, the Greek people voted 5 to 3 in favour of rejecting an EU bailout agreement linked to further economic reforms. They were promised that their Eurozone partners would relent and that within 24 hours, the banks would reopen and within 48 hours, the Eurozone would offer them a deal on better terms. It was an utterly unrealistic (and some might say cynical) promise. The banks stayed shut with customers restricted to a maximum withdrawal of €60 per day and the Eurozone partners were in no hurry to reconvene talks.
In the end, the Greek government has asked for a third bailout, in the region of €80 billion, offering even more draconian reforms than their partners were demanding. Naturally, this has gone down like a lead balloon with segments of the ruling Syriza party and some Greek citizens who feel a sense of betrayal from the election pledges that the party made when seeking a mandate in late January of this year. Trust between the Eurozone group and Greece is at a sufficiently low ebb that an outline agreement to the structural reforms had to pass the Greek parliament before the Eurozone would agree to enter into discussion with their Greek counterparts.
Emergency funding has been agreed for Greece which will allow it to clear a debt to the IMF and honour other up-coming obligations whilst the details of the third bailout are agreed. With this in hand, today (29th July), Greek banks have finally re-opened with further financial back stopping from the ECB. However, it is not business as usual and withdrawals are restricted to a weekly ceiling of €420 with other restrictions still in place. VAT, a sales tax, will rise from 13 to 23% as from today in a bid to bolster state revenues.
It is evident that the Greek leadership is far from a keen supporter of the new deal, but has accepted that it is a vastly better alternative than the economic Armageddon which would follow a Grexit. There are still a goodly number of chances for a wheel to come off, but the Greeks must surely know that they are drinking in the Last Chance saloon. Her Eurozone partners will be wanting to see clear evidence of effective structural reforms being implemented in Greece and it is just as clear that their patience is all but exhausted after months of brinkmanship, bravado and insults.