Greece has been bent over a barrel and forced to accept harsh new austerity measures, in return for getting billions in aid flowing again.
After 17-hour talks between Greek Prime Minister Alex Tsipras and Eurozone leaders, a third bailout program worth an estimated €86 billion has been agreed between the two sides, but it doesn't appear like a great deal for Greece.
Given the level of distrust of Greece by the rest of Europe to stick to its agreed austerity measures, The Mediterranean country has been forced to agree to implement a raft of new measures, many being a roll-up of previous austerity measures that haven't yet been implemented. You can read the full press release here, but the following are the main points:
- By Wednesday, Greece must implement a raft of market-oriented laws as a sign of good faith. The laws will face scrutiny from the International Monetary Fund (IMF) for compliance. This includes streamlining its VAT (think GST) system, broadening its tax base to increase revenue and begin reforming its pension system.
Only then will the other 18 European nations start negotiations over what Greece will receive in return as part of its third rescue funding. - Valuable Greek assets will need to be transferred to an independent fund and the monetization of these assets will be used to pay down its debt. Anyone want a used Acropolis, going cheap?
The value of assets is expected to reach €50 billion, with half of that used to recapitalise Greek banks. - Modernise the Greek administration system to reduce costs.
- Overhaul the civil justice system, aimed at accelerating the judicial process and reducing costs.
- Make changes to Sunday trading, sales periods, pharmacy ownership and reforms for milk and bakeries.
- Continue with the privatisation of the electricity transmission network operator.
- Strengthen the financial system – mainly by eliminating political interference especially in appointment processes and taking action on non-performing loans.
Essentially, these measures are designed to make Greece more efficient and capable of standing on its own two legs without the need for billions of aid from the rest of Europe every year. Greece's tax collection system has virtually broken down, helped by years of delays in prosecuting offenders who have refused to pay tax, or found to have paid less than required.
In other words, Greece needs to become more like Germany, which is going to be tough, if not impossible. The measures above are also the minimum requirements, suggesting Europe is taking a much harder line this time around.
This is not the end of the road either, despite stock markets soaring overnight. Prime Minister Tsipras still needs to get the Greek government to agree to the deal.
Former finance minister Yanis Varoufakis described the bailout deal as "the politics of humiliation" when speaking to the ABC's Radio National, adding, "The troika have made sure that they will make him eat every single word that he uttered in criticism of the troika over the last five years. Not just these six months we've been in government, but in the years prior to that."
Mr Tsipras may call an early election, with Mr Varoufakis saying he'd be surprised if Tsipras wanted to stay on as prime minister. Essentially the recent Greek referendum rejected the previous Eurozone bailout, but now Greece has the option of accepting an ever-harsher deal for the country, or going it alone.
Foolish takeaway
We aren't done with Greece yet. It's not over till the fat lady sings. Consider this the intermission.
