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Greek Bailout Deal
The Mother of All Capitulations

After talks that lasted more than 17 hours, European leaders unanimously agreed on the terms for a third a bailout plan for Greece worth €86 billion. Greek Prime Minister Alexis Tsipras finally capitulated to the full demands of the his eurozone creditors announced this weekend, which went well beyond the pension cuts and tax increases discussed as recently as two weeks ago. The most striking provision was that Greece be forced to sell some €50 billion in state assets to set up a trust fund outside of Athens’ reach to be used for bank recapitalization and debt repayment. Tsipras also accepted intrusive economic oversight from bailout monitors and a far-reaching public administration reform program to be overseen by the European Commission. Though markets breathed a sigh of relief and the euro rallied, there is still ample room for crisis to return. The deal must be officially approved by the Greek parliament this week in order for negotiations on bailout implementation to continue.

Greece has had to accept, or at least swear an oath of mickle might that it accepts, the euro status quo, but it isn’t clear if that can or will work. The deal is a terrible humiliation for Tsipras and a strong lesson for all small country leaders who want to buck the European consensus: you will be nibbled to death by sheep. The likeliest next steps: the Greeks won’t fully comply with the new conditions, either because they refuse to or simply lack the capacity to enforce them; the pain won’t end. The real future of the euro now depends on what happens in Italy and Spain. If those economies continue to mend, the outlook brightens.

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  • wigwag

    The Euro continues to be a disaster. The politics of austerity will insure that European growth returns only in anemic form in Europe’s north while Europe’s south will continue to be mired in economic calamity.

    The Euro is finished. So is Europe.

    Good riddance.

  • ljgude

    I have to say that The Euros may have done better then I expected this time – extracted some real austerity from Greece, not just promises. For a moment there I heard a few growls – not just bleating. Of course the deal has to get through several European parliaments as well as the Greek parliament which it will only because the opposition party will give Tsipras the votes he needs. But it will split his own party which means he has to go into coalition with the party he defeated to take office or call new elections. I am not convinced that Greece can actually pay off the debt or even has the will to do so. So I am quite aware this may be just be throwing good money after bad. Since the unified currency is beyond the control of the Greeks the EU has to force restrictive fiscal policy on a government that cannot service its debt. No doubt the other PIIGS’s minds will be wonderfully focused by all this drama. I still think that Greek culture requires a fungible currency under their control but with some restraint imposed as the price of ongoing political participation in the EU. Argentina couldn’t function using a currency they couldn’t control – the US dollar, but they have beggared themselves once more, after ending that noble experiment in in fiscal rectitude.

  • Nevis07

    So now the EU has effectively stripped Greece of even the most basic areas of sovereignty. One wonders if this is the first step toward a real super-state. Even if it is, I think this whole experience has greatly increased the chances of Britain voting to leave the EU.

    • Andrew Allison

      It’s debatable whether the EU has attempted (there’s many a slip twixt cup and lip) to strip Greece of anything more than the ability to spend other people’s money. I suspect, however, that being required to provide 15% the latest bailout despite not being a member of the Eurogroup will have much more impact in Britain. It seems that the EU is as anxious to get rid of Britain as Germany and others are to get rid of Greece.

  • Pete

    “The deal must be officially approved by the Greek parliament this week in order for negotiations on bailout implementation to continue.”

    Not only must the deal be approved by the Greek parliament but it must also be implemented. And since there is only a small chance of that, Greece will be back in the spotlight in a year or so.

    • Ellen

      Precisely. And ditto for the Iranian nuclear deal. Nothing will be implemented on the Iranian side, so the battlefield will be the final arbiter. The Eurocrats and American liberals will be shown for the hollow shells that they are.

      • f1b0nacc1

        But then again, they won’t suffer any consequences for it (the EUnicks and the American left), so nothing will change….

  • זאב ברנזון

    i am enjoying the rage against the machine in the global left
    capitalism and fiscal discipline is like gravity
    you can only ignore them at tremendous cost and even that only for a limited duration

  • Proud Skeptic

    Does anyone think this is anything more than a stopgap? Tune in later this year for the next exciting episode of our soap opera.

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