Greece strikes deal with creditors, avoids chaotic euro exit

BRUSSELS — After grueling, often angry negotiations that tested the limits of European unity, Greece struck a preliminary rescue deal with its creditors Monday that should avert an imminent financial catastrophe but also guarantees years more hardship and sacrifice for its people.

ADVERTISING


BRUSSELS — After grueling, often angry negotiations that tested the limits of European unity, Greece struck a preliminary rescue deal with its creditors Monday that should avert an imminent financial catastrophe but also guarantees years more hardship and sacrifice for its people.

Prime Minister Alexis Tsipras flew home to sell the bailout plan to skeptical lawmakers and political allies, some of whom accused him of selling Greece out. Panos Kammenos, leader of the junior partner in Tsipras’ coalition government, denounced the deal as a German-led “coup.”

“This deal introduced many new issues … we cannot agree with it,” he said after meeting with Tsipras.

Other Greeks rallied Monday night before Parliament in Athens, urging lawmakers to reject the new demands.

To close the deal with his partners in the euro currency, Tsipras had to consent to a raft of austerity measures, including sales tax hikes and pension and labor reforms — measures he had campaigned vociferously against over the last five years of Greece’s financial crisis.

Since his election in January, the youthful Tsipras has faced intense pressure to backpedal on many of his promises to Greece’s exhausted electorate. Finally, faced Sunday by the leaders of the 18 other nations that share the euro and the knowledge that Greek banks were just days from running out of money, the moment came when he couldn’t resist any more.

A series of supposed red lines vanished, including objections to tight international oversight of Greece’s economy, continued involvement by the International Monetary Fund in Greece’s bailout program and cuts to pensions.

The result of marathon negotiations emerged Monday: about 85 billion euros ($95.1 billion) in loans and financial support for Greece over three years that will preserve its membership in the euro, shore up its banks and allow a modicum of stability to return to the battered Greek economy.

Creditors have also dangled the carrot of a possible future debt restructuring in the event of a smooth bailout.

“We managed to avoid the most extreme measures,” Tsipras said.

But in many cases, ordinary Greeks now face tougher measures than those they voted down in a nationwide referendum a little over a week ago.

Syriza’s Left Platform, a group of traditionalists in Tsipras’ own party, swiftly denounced the agreement as the “worst deal possible … (one) that maintains the country’s status: a debt colony under a German-run European Union.”

Financial experts themselves were divided over the result.

“It was the best deal the Greeks could get,” said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics. “They did not do too badly given the terrible, terrible, disastrous starting point the current government put them in.”

But Ashoka Mody, visiting professor of international finance at Princeton University, said the deal just repeats policies that have already failed.

ADVERTISING


“The economics of this program have been set up for failure,” he told The Associated Press. “In three years, if this program is implemented, the Greek economy will be 10 percent smaller than it was and the debt burden will be higher.”

In many ways, Tsipras’ hard work begins now. As part of the deal, his government has to get the Greek Parliament to back a series of economic measures by Wednesday that creditors are demanding. And in the weeks to come, Greece will have to make further changes to its economy, such as opening to competition industries like energy that have long been protected.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

By participating in online discussions you acknowledge that you have agreed to the Star-Advertiser's TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. If your comments are inappropriate, you may be banned from posting. To report comments that you believe do not follow our guidelines, email hawaiiwarriorworld@staradvertiser.com.