As we said, seemingly alone amongst politics-watchers, the storm in a teacup – albeit a very big, expensive teacup – is duly passing.
Greece has taken a crucial step towards a bailout after its parliament passed a crucial second set of reforms.
The passage of the measures means that negotiations on an €86bn European Union bailout can begin.
The reforms include changes to Greek banking and an overhaul of the judiciary system.
Thousands demonstrated outside of parliament as the bill was debated, with protests briefly turning violent as petrol bombs were thrown at police by a few anarchists.
There had been fears of a rebellion by MPs but Greek Prime Minister Alexis Tsipras was easily able to must the support required. In total, the measures received 230 votes in favour and 63 against with five abstentions. Among those who voted against were 31 members of his own Syriza party. However, this represents a smaller rebellion than in last week’s initial vote. Demonstrating the breadth of understanding that the reform package had to pass,former Greek Finance Minister Yanis Varoufakis was one of those rebels in the first vote who returned to vote with the government this time.
Speaking before the vote, Mr Tsipras stressed that he was not happy with the measures that creditors had imposed. Well, he could hardly have appeared chirpy, could he? That would have been political suicide.
“We chose a difficult compromise to avert the most extreme plans by the most extreme circles in Europe,” he told MPs.
Representatives of the European institutions that would provide the bailout funds will begin negotiations in Athens on Friday.
Last week, Greece passed an initial set of austerity measures imposed by its creditors. These were a mix of economic reforms and budget cuts demanded by the eurozone countries and institutions before bailout talks could continue.
This second set of measures passed early on Thursday morning were of a more structural nature, including:
- a code of civil protection aimed at speeding up court cases
- the adoption of an EU directive to bolster banks and protect savers’ deposits of less than €100,000
- the introduction of rules that would see bank shareholders and creditors – not taxpayers – cover costs of a failed bank
More contentious measures – phasing out early retirement and tax rises for farmers – have been pushed back to August. As we said, these issues were always going to be the can that got kicked along the road. The political fallout will need to be managed by the Greek Government and that cannot occur in a few days.
Negotiations will now begin on approving the terms of a third bailout, with the aim of completing a deal by the middle of next month. It’s a tight timetable but doable. What is not clear is that Mr Tsipras still has to decide whether a successful conclusion of negotiations should be followed by early elections. Our bet is not.
The deal explained
On Wednesday, the European Central Bank (ECB) increased its cash lifeline to Greek banks.
The emergency injection of an extra €900m (£630m), the ECB’s second in a week, came just hours before the vote.
The International Monetary Fund (IMF) confirmed on Monday that Greece had cleared its overdue debt repayments of €2.05bn and was no longer in arrears. The repayments, which included €4.2bn to the ECB, were made possible by a short-term EU loan of €7.16bn.
Greece’s next major deadline is 20 August, when it must pay €3.2bn owed to the ECB, followed by a payment of €1.5bn to the IMF in September.
Essentially, the deal is akin to a Bank lending money to a drunken defaulting home owner to repay the mortgage they unwisely lent them in the first place. There is a lot of talk about how irresponsible the handling of the Greek economy has been by successive Greek Governments – not to mention that tax avoidance is something of a national sport – and that is all true.
What has been especially annoying in much recent commentary has been the characterisation of the Greek people themselves as lazy. In fact, the opposite is true. They put in some of the longest hours of any workforce in the EU. Needless to say, the Greek people know this, and their anger at having to carry the burden of the stupidities of generations of those that rule them is justified. That they could be working more productively is hardly the point. At some stage, the role of both private management, union leadership and political governance needs to be taken into account. It’s not all the fault of the “bleedin’ workers”.
What also needs to be factored in is that for decades now Europe has been lending Greece money for Greece to spend on vanity infrastructure projects supplied to them by Europe – arms is a classic example, manufactured mainly in Germany – Greece has a ridiculously large navy, for example – so the EU is at the very least as culpable in helping the Greeks to get into this mess in the first place.
Historically, Obama’s intervention to urge the Europeans to settle with Greece will be seen, for those attuned to geo-political balances – as the tipping point. What is encouraging is that some of the other economic basket cases in Europe have not instantly put their hands up for extra funds. It appears that brisk diplomacy – along the lines of “Shut up, guys, we need to sort this out, we’ll look at your situation down the track” – has worked in a timely fashion. But the Eurozone is not out of the woods yet.
One good start for Europe would be to substantially reduce the overhead structure of running the EU itself. The peoples of the constituent countries might be more amenable to pulling their heads in if they see the bloated and out of control Euro bureaucracy being made to do the same. No matter how pro-EU anyone is – and we are pro-EU, for political reasons more than economic ones – the Eurocrats need a serious haircut, and fast.
(BBC and other sources)