It seems all but done — Greece’s government and the ‘troika’ of the International Monetary Fund, the European Central Bank and the European Commission have reached an agreement on the latest disbursement of funds that Greece needs to finance government operations, in exchange for a series of budget cuts and labor market reforms.
In an additional twist, there are quasi-official reports from both Germany and Greece that the bailout program will be extended from the end of 2014 to the end of 2016, which will give Greece until at least 2016 to whittle down its budget deficit to the 3% required under EU rules, though it seems unlikely that Greece’s budget will be anywhere near to closing in on that target by even 2016.
The details are essentially as described over the past four months — €13.5 billion in budget cuts over the next two years, €9 billion of which will take effect in 2013. The bottom line for Greek finances is that a Greek exit from the eurozone, which seemed virtually inevitable through much of 2012, has now been delayed, and delayed for a significant amount of time (Citi, for example, lowered its odds of a ‘Grexit’ to 60%, and predict it could still happen, but only in the first half of 2014).
That’s a significant victory for Greece’s prime minister, in office for barely four months, Antonis Samaris (pictured above, right, with Euro Group president and Luxembourg prime minister Jean–Claude Juncker), and it will now give him some breathing space to turn to Greece’s economic depression.
For me, there are three notable political aspects to the deal worth noting: Continue reading Greek government, troika reach agreement on Greek bailout