My Big Fat Greek Bailout
Athens Signs Up for More Austerity

Greece appears to be tightening its belt to secure its next round of bailout funding, The Wall Street Journal reports:

Greece and its international creditors sealed a deal Tuesday over fresh austerity measures, keeping its €86-billion ($93.74 billion) bailout on track and clearing the way for debt-relief talks that offer the best chance in years for the battered Greek economy to begin healing. […]

Now, Prime Minister Alexis Tsipras is betting that by conceding to more belt-tightening—including pension cuts and broadening the tax base—he can win a bigger prize: A restructuring of Greece’s crushing €315-billion debt that will lure back international investors and revive the country’s economy. […]

Tuesday’s agreement will release around €7 billion payment without which Greece would be insolvent by July. But more important, it sets the conditions for talks—possibly by the end of May—with creditors on a deal to lengthen the maturity and lower payments on Greece’s debt.

The Greek government has some reason to depict this as a win. Fiscal reforms have been agreed, the next round of bailout funds are coming, and Greece’s European lenders are now opening the door a crack to the prospect of debt relief, stating alongside the IMF that a sustainable strategy for Greek debt could be negotiated in the coming weeks. With that in mind, the ruling coalition, whose majority in a slim 3 seats, will move quickly to push through the agreed-upon reforms; the government is already playing up expectations that a debt relief deal could be agreed by a Eurogroup meeting on May 22.

As ever, though, there are serious reasons to doubt that this will all play out as everyone hopes. For one, the IMF and EU remain at loggerheads over Greece’s budget surplus targets, which are likely to be a sticking point in any debt deal. And privately, Eurozone officials are already throwing cold water on the idea that Greece can expect a tidy deal so soon. According to one official quoted by Reuters, any debt relief would remain conditional on Greece’s ability to follow through on the reforms they pass. In his words, any agreement this month would be “less of a decision and more of a vision of how to get where you want to get in terms of debt sustainability….There is no grand design or somebody who knows already today what the outcome will be by May 22.”

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