Why this story matters:
Last Friday’s debt agreement between the finance ministers of the Eurozone was immediately greeted by governments as a “historic” step after eight years in which Greece has undergone three bailout programmes and suffered the worst economic depression of any other European country in modern times. This deal is seen as a key element in the country’s successful return to financial markets and economic health.
After tenuous negotiations, the finance ministers agreed on a ten-year extension on the repayment of 96 billion euros of bailout loans.
“It is an exceptional moment. The Greek crisis ends here tonight in Luxembourg” said EU Economic Affairs Commissioner Pierre Moscovici. “I think that it has all the building blocks...to leave the programme with confidence that we can access the markets, that we can implement our growth strategy and turn the agenda away from one of fiscal adjustment, which has been completed, to one of growth.” Greek Finance Minister Euclid Tsakalotos said after the meeting.
The deal includes an additional package of measures aimed to ensure that Greece will be able to service its debt over the years to come.
The deal was welcomed with skepticism by experts who expressed concerns on how the agreement is likely to restore Greece's severely shrunken economy, since the country is set to remain under close monitoring for the years to come with regard to the implementation of reforms.
Long story short: 40 more years of austerity and supervision. The creditors rejected a debt write-down, which means that Greece's total debt loan remains at an enormous 180% of GDP, with the agreed extension regarding the loan maturities simply postponing the problem.
Rather than ending the economic/humanitarian crisis by cancelling part of the debt and sharing the burden of adjustment on equal terms with European creditors, the agreement simply puts this burden on future generations.
Details from the story:
- Eurozone governments will give Greece a final cash loan of 15 billion euros.
- Some of that cash could be used to buy back debt the country owes to the International Monetary Fund or the European Central Bank.
- Debt measures include the return of some 4 billion euros in profits the euro-area central bank made on their Greek bond holdings and the abolition of a 220 million-euro annual penalty attached to some of the country’s loans.
- The above measures will be linked to Greece’s performance after the end of its bailout, and will be disbursed in installments over the next four years as long as the country sticks to its pre-agreed reforms and budget path.
- As part of the debt deal, Greece is foreseen to maintain a primary surplus worth 2.2% of GDP from 2023 until 2060.