It appears as if the troika has forced Greece into a humiliating capitulation. ABC News has a succinct outline of the final package offered to the Greek government which will need to be approved by Wednesday (not much time for a fully democratic debate in the Parliament):
Immediate steps
By July 15, the radical left government of prime minister Alexis Tsipras must get parliamentary approval for four key pieces of legislation in order to “rebuild trust” with the eurozone, the document said.
Reforming Greece’s notoriously complex value added tax (VAT) system and increasing revenue by broadening the tax base.
Improving the “long-term sustainability” of the pension system.
Protecting the legal independence of Greece’s national statistics agency so that government fiscal data is reliable.
Creating an independent fiscal authority and a mechanism to automatically reduce spending if budget targets are missed.
Reforms
“Ambitious” reforms to Greece’s generous pension system, which has already suffered under previous bailouts.
Market reforms affecting Sunday shopping, sales periods, milk and bakeries and pharmacy ownership.
Privatise the electricity transmission network operator ADMIE.
Review and modernise collective bargaining, industrial action and collective dismissals.
Strengthen the financial sector.
Privatisation
Greece will park assets for privatisation worth up to 50 billion euros ($74 billion) in a special fund based in Athens. Some 25 billion euros of that will go towards recapitalising Greek banks left near-empty due to a limiting of emergency European Central Bank funds. It will also help reduce its debt mountain and go towards investment.
The asset fund will be set up in Greece under Greek government management but under the supervision of European institutions. Greece opposed initial plans to base the fund in Luxembourg.
Government
Greece must de-politicise the administration under EU monitoring – a measure critics say is designed to remove officials from Mr Tsipras’s leftist Syriza party from their positions.
Return of the Troika
Greek officials must “fully normalise working methods with the institutions, including necessary work on the ground in Athens”. This is code for a return of the Troika, the creditor institutions of the European Commission, European Central Bank and International Monetary Fund responsible for monitoring Greece’s two previous bailouts, whose officials were kicked out of Greece by Mr Tsipras after his election amid widespread loathing.
Consult with the Troika on “all draft legislation in relevant areas”.
Amend laws
Reverse laws brought in by the Syriza government since the election that run counter to Greece’s earlier bailout arrangements in 2010 and 2012, except for a key humanitarian law.
Bailout size
The third bailout fund for Greece could amount to between 82 billion and 86 billion euros. Eurozone leaders agreed to take note of “urgent financing needs” to meet debt payments of 7 billion euros by July 20 including a huge ECB loan and another 5 billion by mid-August.
Banks
Ten to 25 billion euros should be set aside for bank recapitalisation or liquidation.
Debt
In response to Greek pleas for a reduction in a mountain of debt worth nearly 180 per cent of its GDP, eurozone finance ministers are “ready to consider … possible additional measures” including longer grace and payment periods. This would be considered after a first review of a new Greek bailout program, possibly in October.
But any “haircuts” which would write off debt are ruled out.
International Monetary Fund
The International Monetary Fund, which was involved in the previous two Greek bailouts, must be involved in any new program “as a precondition”.
EU loans
The European Commission is ready to lend Greece 35 billion euros until 2020 to boost jobs and growth.
In short, Greece gives up almost all its sovereignty. Indeed, the deal implicitly requires Greece to give up the most sacred aspect of sovereignty–territory–through the privatization clause. Greece may be forced to sell some of its islands or some of its archaeological sites if there are private buyers.
But the most astounding aspect of the deal is that it will not solve the problem. It will further immiserate Greece making it even less likely for it to repay its loans. But its creditors will most likely make back a healthy profit on the loans they provided to the country.
Wolfgang Münchau wrote an essay for today’s Financial Times which is truly insightful. In it, he argues:
“A few things that many of us took for granted, and that some of us believed in, ended in a single weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union.
“In doing so they reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order. The best thing that can be said of the weekend is the brutal honesty of those perpetrating this regime change.”
He goes on to suggest that the euro has only benefited Germany, the Netherlands, and Austria:
“The implications for the rest of the eurozone are at least as troubling. We will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable. Previously, the strongest argument against any forecasts of break-up has been the strong political commitment of all its members. If you ask Italians why they are in the eurozone, few have ever pointed to the economic benefits. They wanted to be part of the most ambitious project of European integration undertaken so far.”
I suspect that we have just witnessed the beginning of the end of the European experiment.
World Politics News 
Leave a comment