After 22 hours of fierce negotiating, the Eurozone summit has come up with a deal that will keep Greece in the Eurozone in exchange for both budget cuts and tax hikes.
For those who oppose austerity and “euro”centric economics, the deal is a huge blow. Europe has agreed to advance Greece 10 billion Euros to help the flailing country pay down it’s 3.5 billion euro debt to the IMF. Greece will also receive around 77 billion dollars in aid over three years in part to help strengthen it’s banking system. European officials will also review Greece’s total debt, but will not (!) reduce the amount to be paid back. In return, Greek officials have agreed to a line of policy changes that include cuts to pensions and an increase in the sales tax, with the goal of increasing the budget surplus. They must also make steps to privatize much of the economy, which will (hopefully) increase competition in local markets, and contribute 50 billion euros worth of privatized assets into a fund that will be used to help Greece pay off its debt.
In short, it’s an activist’s worst nightmare.
More via the Wall Street Journal:
"The deal is hard," [Greek Prime Minister Alexis] Tsipras said after the summit, warning that the measures required by creditors will send the country's economy further into recession.
European stocks rallied Monday on the news. The Stoxx Europe 600 rose 1.7% early in the afternoon, building on Friday's hefty gains.
"Trust needs to be restored," German Chancellor Angela Merkel said at a news conference.
"The agreement was laborious. It took time but it was done," said Jean-Claude Juncker, the president of the European Commission.
"There won't be a Grexit," Mr. Juncker added, referring to a Greek exit from the eurozone.
Tsipras isn’t happy—this deal could be a political death knell for him. His party was elected specifically for their anti-austerity stance, he served up a politically-convenient referendum encouraging his people to buck the Eurozone’s demands, and what has happened? That referendum passed overwhelmingly, and now we’re looking at an almost-complete capitulation to the people Tsipras has claimed are out to destroy Greece’s economy.
The deal serves as a disappointing reminder of Greece’s weakness for those who opposed austerity measures and believed that a “no” vote on Tsipra’s anti-euro shotgun referendum would strengthen Greece’s bargaining position with the rest of the Eurozone:
Of course, those rallies and protests all happened during the fever of the referendum; today, reactions to the new deal have been mixed. Those who opposed a deal (especially a deal that sanctioned further involvement of the IMF) are obviously disappointed, but Greeks who are committed to membership in the Eurozone were sure to voice their praise:
#BREAKING Greek civil servants' union calls 24-hour strike for Wednesday
— Agence France-Presse (@AFP) July 13, 2015
— Katerina Polyzou (@ptwkate) July 13, 2015
— Stavroula Koukou (@stavroulakouk) July 13, 2015
This isn’t over, of course. Greece still has to follow through by drafting and passing legislation aimed at cutting costs and raising revenue. We’ll keep you updated on how compliant Tsipras’ party is in getting these things done.