Challenges remain for new Greek bailout plan

Eurozone finance ministers might have approved a four-month extension and an easing of the bailout terms imposed on Greece, but the plan still has to be approved by national parliaments.

Wolfgang Schäuble and Angela Merkel
Crucially, a vote is expected on Friday in the Bundestag and, although the plan is expected to be approved, there remains what Germany’s Finance Minister Wolfgang Schäuble describes as “a lot of doubt in Germany” about Greece’s assurances that it would adhere to the new agreement.The Germans are not alone in their scepticism. Both the European Central Bank (ECB) and the International Monetary Fund (IMF) have voiced concerns about Greece's ability to stick to the terms of the deal.Under the new bailout programme, the new Syriza-led government has pledged to take a disciplined approach to budgets, spending and tax collection, while remaining committed to relieving the “humanitarian crisis” produced by years of economic hardship and high unemployment.While Mario Draghi, the ECB president, says the new plan is a “valid starting point”, he wants Athens to provide more detail on the action it proposes to take. He insists that any austerity measures the Greek government abandons must be replaced “with measures of equal or better quality”.Similarly, while Christine Lagarde, IMF managing director, has welcomed the proposals to counter tax evasion and corruption, she has described the Greek plans as “generally not very specific”.She says there are no clear assurances in vital areas such as the size of pensions; revisions of Greece’s sales tax; continued plans to sell off state-owned assets; and revisions to labour laws, which many regard as too burdensome to employers. The Wall Street Journal reported, “Rich eurozone countries, including Germany and Finland, have latched onto the IMF’s hard-line views and made more aid from the eurozone conditional on the fund’s support.“In contrast to the eurozone, whose weaker members would face the immediate fallout of renewed market panic over Greece, the IMF represents 188 states around the world, many of which are already grumbling over the fund’s disproportionate support to a small European country.“The IMF’s complaints set the stage for several months of difficult negotiations between Athens and its creditors. Before any new cash from the existing bailout can flow, the government in Athens will have to flesh out the measures it presented Monday night and actually pass them through its parliament.“That could test the durability of the ruling coalition, which is dominated by left-wing activists who have campaigned for years against the bailout’s austerity measures. The coalition also includes right-wing nationalists eager to assert Greek sovereignty.”For more Re:locate news and features about the European economy click here

Related Articles