EL-ERIAN: The game has only just begun. "The agreement will be subject to approval by the parliaments of several euro-area members. These political discussions will be lively... There is much at stake because a rejection by just one national parliament could derail the deal at the European level. ... Friday’s accord was necessary but far from sufficient. Its emphasis -- on maintaining the flow of official European funds to Greece pending comprehensive agreement on the complicated and controversial remix of austerity, structural reforms and debt relief -- is important but narrow. The larger challenges ahead to resolve the Greek crisis will be more difficult to overcome, by many orders of magnitude." Bloomberg View.
Greek and European officials resolved some of their differences late Friday, and it looks as though Greece will remain in the euro zone. "The agreement, in doubt for much of this week, avoids a potentially catastrophic exit by Greece from the euro zone. This latest deal continues, with a few changes, the terms of the November 2012 financial rescue that had given Greece money in exchange for tough reforms to the country's economy, including sharp tax hikes and budget cuts. Those harsh measures helped push Greek unemployment over 25 percent, and they ultimately brought the new left-wing party Syriza to power last month with its promises to end the onerous terms of the old agreement." Matt O'Brien in The Washington Post.
Now the Greeks must submit a proposal to their creditors for economic reform. "If the EU and IMF do not approve of the Greek measures as 'sufficiently comprehensive to be a valid starting point' for completing the current bailout, eurozone officials have agreed that another Brussels meeting of finance ministers will be needed on Tuesday. Without approval, Greece’s EU bailout will expire on Saturday. Athens is expected to send a more detailed submission on Monday, but there were already concerns the plan from Yanis Varoufakis, the Greek finance minister, could run into resistance." Peter Spiegel and Kerin Hope in The Financial Times.
The government must find a way to mollify popular opinion, too. "Alexis Tsipras, the prime minister, was elected on a pledge to tear up Greece’s bail-outs and leave austerity behind. Mr Varoufakis has spent the last few weeks seeking a 'bridging arrangement' as an explicit alternative to a bail-out extension. ... Greece has secured no change to the terms of its epic debt, which stands at over 175% of GDP. Its behaviour will continue to be supervised by the institutions formerly known as the troika. It is obliged to refrain from passing any measures that could undermine its fiscal targets; that appears to torpedo vast swathes of its election manifesto, which included all manner of spending pledges." The Economist.
The country's new leaders were in a tough spot. "Faced with escalating bank runs and rapidly deteriorating public finances, Athens finally bowed to the inevitable and did what it had vowed not to do: request an extension to the country’s current bailout program—and commit in good faith to completing it. In doing so, the new Greek government has averted certain economic collapse and bought itself time to break yet another promise as it tries to secure a new bailout. Little was agreed upon at Friday night’s meeting of eurozone finance ministers that couldn’t have been agreed on the day the government took office. Athens invested the better part of a month in the pursuit of the legally as well as politically impossible fantasy of unconditional loans from the European Central Bank and eurozone taxpayers." Simon Nixon in The Wall Street Journal.
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