Greece and EU Continue Debt Restructuring Agreement
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After reaching an agreement to give both sides more time to negotiate, Greece will submit a new economic plan to EU legislators this week in the hopes of reaching an agreement.
Late on Friday, the EU announced reaching a tentative agreement that gave Greece a four-month extension so that the 19 Eurozone nations could find common ground on how to move forward. “We agreed on four months under conditions,” said Finance Minister Hans Joerg Schelling.
After reaching an agreement to give both sides more time to negotiate, Greece will submit a new economic plan to EU legislators this week in the hopes of reaching an agreement.
Late on Friday, the EU announced reaching a tentative agreement that gave Greece a four-month extension so that the 19 Eurozone nations could find common ground on how to move forward. “We agreed on four months under conditions,” said Finance Minister Hans Joerg Schelling.
A Game of Chicken
Some economists compared the Greek debt discussions to a perpetual “game of chicken” in which both sides waited for the other to blink. Many argued that Germany was in a relatively weak position, because a Greek exit from the Eurozone would encourage separatist groups in Spain and Portugal to gain political ground in their own efforts to break away from the currency regime.
In Spain, the euro-skeptic Podemos party has seen a surge of popularity after Greece’s Syriza won elections in early 2015.
To counter the broadly held view, Germany made a number of moves last week to suggest that it was prepared for a so-called “Grexit.” German news outlets published editorials arguing that Greece has “one last chance,” as DW pundit Bernd Riegert wrote last Friday.
Malta Finance Minister also told reporters that Germany is much stronger in the negotiations, and was ready to let Greece leave on its own. “Germany, the Netherlands and others will be hard and they will insist that Greece repays the solidarity shown by the member states by respecting the conditions,” Minister Edward Scicluna said in an interview.
Several other outlets published reports that the ECB and the EU were preparing for a Grexit, and the IMF said such an event would be manageable thanks to “firewalls” already in place for such an event.
A Last-minute Deal
Despite the hard talk of an immovable Germany, some perceive the terms of the agreement as a victory for Greece and a sign that the central European country blinked first.
The most significant aspect of the deal is a change to the previous surplus requirement, which had stated that Greece must run a budget surplus of 4% starting next year after a minimum 3% surplus in the current year. This becomes more flexible and ties to growth rates, which was a significant aspect to previous offers made by the Syriza party in the negotiations.
Additionally, Greece will be required to provide details of how it will move forward to the EU this week. Tonight, the Greek government will need to submit an action plan that outlines exactly how it will move its economy forward and deal with its debt load, which has risen to 240 billion euros and roughly 175% of GDP.
On Tuesday morning, Greek ministers will have a conference call with EU ministers, during which they expect to negotiate the details of the Greek plan and come closer to an agreement. Many analysts are already suggesting that Greece is likely to have the majority of its terms met.
