NY TIMES
Forced by his nation’s creditors into broad new concessions to avert financial collapse, Prime Minister Alexis Tsipras of Greece returned home on Monday with just days to sell the deal to fractured lawmakers and a dazed electorate.
The agreement he struck with other European leaders early Monday after a contentious all-night bargaining session would give Greece the chance to receive its third international bailout in five years, a package of as much as 86 billion euros, or $96 billion, as well as easier repayment terms on some of its existing debt of more than €300 billion and a short-term economic stimulus plan.
Should he succeed in carrying out the policies set out in the agreement, he would oversee just the kind of market-based changes that creditors have been demanding and successive Greek governments have been failing to deliver for years.
As the talks ended in Brussels, Mr. Tsipras, who had once vowed to overturn the austerity policies he says have undercut the Greek economy and left its people suffering, was no longer talking of “blackmail” by creditors or “hostage taking.” Instead, he said the new package of proposals would “maintain Greece’s financial stability and provide recovery potential.”
The country which we help has shown a willingness and readiness to carry out reforms,” Ms. Merkel said, referring to Greece.
Mr. Tsipras came to that willingness very late in the game, but some critics as well as supporters said that his turnabout was pragmatic in the face of shuttered banks and a collapsing economy.
“At a certain point he realized that he had been given very bad advice,” said Aristos Doxiadis, an economist and venture capitalist who writes about politics and has been critical of Mr. Tsipras in the past. “It wasn’t whether it was a good or a bad deal, but whether there was any feasible alternative.”
“Some will surely feel betrayed by what has happened,” he said. “But most Greeks will say this man tried very hard and if he was convinced there is no better way, then there is no better way.”
Among the elements that must be dealt with this week are increases in the value added tax, including the end of a special tax status for the Greek islands; a makeover of the pension system; and the imposition of automatic spending cuts if the government misses budget targets.
If the deal is a political earthquake for Greece, it also puts the country on course for a major economic shake-up. It aims to force Greece once again to tackle many issues it has kicked aside for years, from simple ones like getting reliable economic statistics to more complex ones like opening up product and service markets, further streamlining the pension system, improving tax collection and moving ahead on privatization.
Yet even if the Greek Parliament passes a spate of reforms this week, Athens has a spotty track record at carrying out tough changes. As a result, Mr. Tsipras has now agreed to have the International Monetary Fund survey every move he and his government make.
Many of the changes demanded by creditors are political hot potatoes, including increasing the consumption tax to 23 percent for a range of goods and services, raising the retirement age to 67 and reducing more pension benefits in an aging population. Many of the changes could have the effect of further slowing the economy in the short run and reducing standards of living for some Greeks.
“It will be extremely difficult for the Greek people to accept such an adjustment off the back of five years of economic depression,” Megan Greene, a managing director at the financial firm Manulife who has been monitoring the Greek situation, said in a report.
The creditors’ insistence on tough terms reflects years of pent-up frustration with Greece’s slow progress in modernizing the economy. Many claim that austerity is harder than it would have otherwise been had Athens moved swiftly to promote change.
Mr. Tsipras and most Greeks say that austerity is what killed the economy, especially after previous governments slashed state spending 20 percent since 2010 under previous bailouts, mainly by cutting pensions, wages, health care and social services, impoverishing many Greeks.
One of the more contentious new demands from creditors — one that is likely to prompt an outcry among Greeks — is that Greece transfer €50 billion worth of state assets to a fund that would have international monitors. The fund would oversee sales to pay down Greece’s debt and help recapitalize its teetering banks.
Passage of the new measures appears assured, since Greece's opposition parties have pledged to support Tsipras' deal. His most pressing problem was more likely the speaker of Parliament, Zoi Konstantopoulou, also a member of Mr. Tsipras’s Syriza party, who objected to Mr. Tsipras’s attempts to pass narrower proposals last Friday.
Some analysts said that Ms. Konstantopoulou, a stickler for rules, could prevent him from using the fast-track procedures that would be necessary to get the job done in time to satisfy European leaders. Portions of the plan must be passed by Wednesday, and more a week from Wednesday.
NY TIMES
The latest effort to preserve Greek membership in the eurozone has only deepened the fissures within the European Union between north and south, between advanced economies and developing ones, between large countries and smaller ones, between lenders and debtors, and, just as important, between those 19 countries within the eurozone and the nine European Union nations outside it.
In the name of preserving the “European project” and European “solidarity,” the ultimatum put to Greece required punishment for all of Greece’s past sins, and for all of the gamesmanship and harsh talk of the governing Syriza party. Paul Krugman, the Nobel prize-winning economist and prominent critic of austerity in Greece, said the creditors’ demands on Greece were “a grotesque betrayal of everything the European project was supposed to stand for.”
But it averted an outcome that could have left Europe even more badly fractured. And it highlighted the willingness of some leaders to make a compelling case for unity over narrow national interest, especially President François Hollande of France, who played an important role in mediating between Germany and Greece.
Unpopular and yet contemplating another run for the presidency in 2017, Mr. Hollande displayed leadership and distanced himself from Ms. Merkel and German demands, which many in Europe, especially in France, saw as selfishness and vindictiveness.
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| Francois Hollande, French President |
It remains to be seen if the European Union can now, after so many years, lift its head from its euro crisis and begin to concentrate on other critical issues: providing economic growth and jobs for its young people, a rational and unified policy on migration, a response to Russian ambitions in Ukraine and elsewhere, and a British vote on whether to leave the European Union.
A so-called Brexit — an exit by Britain, which is expected to overtake France as Europe’s second-largest economy and is one of Europe’s main military and diplomatic actors, with a permanent seat on the United Nations Security Council — would be far more damaging to the European Union than the departure of small, difficult Greece.
Britain, which never joined the euro currency bloc, plans to hold a referendum by the end of 2017 on whether to remain a member of the European Union, and Prime Minister David Cameron is negotiating now to change Britain’s terms of membership. The mess over Greece has hardly helped the reputation of the European Union inside Britain, but it may also help Mr. Cameron secure a better deal.
As for Ms. Merkel, her reputation hangs in the balance, at home and in her role as Europe’s de facto leader. Having rejected a Greek exit from the eurozone three years ago in the name of European solidarity, she has again avoided that outcome. This time, she risked considerable cost to her political standing at home. But what would really damage her legacy is another expensive bailout for Greece that fails.
The crisis that played out over the weekend was just the latest in a series that traces back to the origins and nature of the currency union.
When Germany under Chancellor Helmut Kohl gave in more than two decades ago to the entreaties of President François Mitterrand of France and agreed to give up the deutsche mark for the new common currency, the euro, he did so not for economic reasons, but for political ones.
Mr. Kohl and Mr. Mitterrand ignored the voices that warned against a common currency without common financial institutions or fiscal policies in a set of widely varying economies.
Greece was allowed into the eurozone for largely the same reasons, wishful politics, that put ancient Greece, the core of European culture, at the heart of a European ideal built on civilization and peace. The fact that today’s Greece bears little relationship to the country of Socrates or Pericles was simply ignored. And so was clear evidence, well-known at the time in Brussels, that the Greeks were regularly faking their budgetary figures to qualify for the euro.
The magical thinking involved was that the euro, somehow shorn of politics, would bring all these different economies into closer balance. The last decade has proved that to be illusory. And Monday’s deal — if it is ratified by an angry Greek Parliament, and by an unhappy German Parliament, and not derailed by smaller countries like Finland [which is expected to vote against the agreement] with coalition governments that depend on the support of euroskeptic parties — will avert the debacle of a country leaving the common currency for the first time. But by itself, it will do little to strengthen the future of the euro.
For many in Europe, the euro’s economic benefits have been offset by the constraints it imposes. For the weaker economies in particular, it has become a sort of prison, limiting the ability of elected governments to use budgetary policy to smooth out the ups and downs of the economic cycle and eliminating their use of currency fluctuations to help manage national economies.
The victory in January of Prime Minister Alexis Tsipras and his Syriza party led to the reversal of some critical economic overhauls demanded by creditors, threw the Greek economy backward and raised even higher the requirement for further loans. Mr. Tsipras bet big but lost. But so have the Greeks.
It is one thing to undergo changes when a government and a people have bought into them as necessary and hopeful — this is how the Baltic nations took the pill of economic austerity and overhaul, and this is largely how Ireland, Portugal and Spain saw matters, too, when faced with implosion.
But it is a far different thing to have further social changes and austerity shoved down one’s throat in an exercise of political power and domination, as many Greeks are no doubt interpreting this deal. Carrying out these changes will feel like enforced labor to many Greeks, and especially to the Syriza government, if it survives at all.
As Samuel Johnson said about second marriages, this prospective third bailout of Greece is a triumph of hope over experience. Even more so with Mr. Tsipras and Syriza, their protestations of mandates and sovereignty thrown back into their faces by European colleagues offended by Syriza’s moralizing, and even more, by its gamesmanship.