For my first morning in Thessaloniki, I
woke up to the news that a new bailout agreement with Greece has been reached.
Just over a week after Greece’s parliament approved massive new austerity
measures, the Eurogroup has agreed to release €10.3 billion to Greece. According to the Athens-Macedonian News Agency, this
money will meet Greece’s financing needs until the end of October. Debt relief of
the sort that the IMF has been pushing for some time now is not part of the
agreement. All actors will formally reassess the situation in 2018. Beyond that, details are (even more) vague. The
agreement specified a target of keeping no more than 15% of Greek national
income devoted to debt financing until 2030. But the specific measures required to
achieve this end—extending debt maturities, most likely—will not be fleshed out
until 2018. Looming over the talks was the specter of upcoming German elections,
which will happen no later than the autumn of 2017. Any major changes to the
bailout program would have to have been ratified by the German parliament.
Given recent statements and the
international organization’s internal analyses, agreeing to participate in a
bailout of Greece without an explicit Eurozone commitment to debt relief constitutes
a major (albeit predictable) concession by the IMF. Germany, on the other hand,
got what it wanted: avoidance of debt relief and a postponement of any serious
discussion about it until after the 2017 elections. In other words, very little
has changed, as far as the basic structural factors that characterize Greece’s
place in the politics of Eurozone austerity.
The episode demonstrates again the twisted
logic by which market discipline functions. According to reporting in The Guardian, yields on Greek 2-year
bonds improved to a six month low and yields on 10-year bonds dropped to around
7%. Yet only a few days ago, the Greek government passed austerity measures
that include a set of (further) tax increases and spending cuts. The Greek
economy is predicted to contract once again in 2017, but investors are still encouraged.
Stability without default, not economic growth, remains the order of the day. Short-term
thinking remains the norm and, assuming that the German and French elections do
not bring radicals to power, I do not see any reason why Greece won’t be back
at the precipice at least once in the next couple of years.
Strikes to come. In France, strikes are
already on.
