World Press View: The Greek Deal is a Roll of the Dice

Greece's hopes for a deal with international lenders for a third bailout will or won't work, depending on who you speak with.

Greece’s hopes for a deal with international lenders for a third bailout will or won’t work, depending on who you speak with, world press reports say.

Some excerpts:

Personality Clash Over Greek Bailout Deal

The New York Times – Andrew Higgins

To many Greeks, the debt the country has amassed is the evil fruit of austerity policies, imposed from the outside, that asphyxiated its economy and trampled on its sovereignty.

To the International Monetary Fund, the debt of more than 310 billion euros, or almost $339 billion, is more of a mathematical problem.

After years in which it was a stern advocate of tough austerity policies, it now says that there is no way that Greece can reasonably pay its debts and needs to have a substantial amount of it forgiven.

Then there is Germany, Greece’s largest single creditor, which treats Greece’s debts as a sacrosanct commitment that must be paid as a matter of law and of principle.

As Greece and its creditors begin working on the details of the latest bailout package — the third for Athens in the past five years — the issue of debt has become something of a Rorschach test.

Nearly everyone agrees that its debt is unsustainably high, but figuring out how to grapple with it has unleashed a volatile mix of politics, economics, history and even morality.

The economic argument in favor of debt relief is that Greece’s depression-scarred economy cannot be expected to carry the weight of debts that now amount to around 175 percent of gross domestic product. This is already far above what the I.M.F. set as a “sustainable” target of 110 percent, and could increase to 200 percent and more in coming years if the economy withers further.

Debt relief, many economists say, is no longer a matter for debate but an unavoidable necessity. “There is no way around it. It is mathematically clear,” said Peter Bofinger, a German economist who belongs to a group of experts that advises the government in Berlin …

Having abandoned his election promises to end austerity, Mr. Tsipras now desperately needs some progress on debt to shore up his divided Syriza party and also to convince both friends and enemies that, for all his government’s defeats and reversals, it has a plan that can secure results.

The only European leader to say openly what many fear is the president of tiny Latvia, Andris Berzins, who told a local television station, “Greece’s debt is so great that everyone understands — it will not pay.”

Why the Greek Debt Deal Will Work

The Guardian – Anatole Kaletsky

Now that Greek banks have reopened and the government has made scheduled payments to the European Central Bank and the International Monetary Fund, does Greece’s near-death experience mark the end of the eurozone crisis? The conventional answer is a clear no.

According to most economists and political commentators, the latest Greek bailout was little more than an analgesic.

It will dull the pain for a short period, but the euro’s deep-seated problems will metastasize, with a dismal prognosis for the single currency and perhaps even the European Union as a whole.

But the conventional wisdom is likely to be proved wrong. The deal between Greece and the European authorities is actually a good one for both sides.

Rather than marking the beginning of a new phase of the euro crisis, the agreement may be remembered as the culmination of a long series of political compromises that, by correcting some of the euro’s worst design flaws, created the conditions for a European economic recovery.

To express guarded optimism about the Greek deal is not to condone the provocative arrogance of former Greek finance minister Yanis Varoufakis or the pointless vindictiveness of the German finance minister, Wolfgang Schäuble.

Neither is it to deny the economic criticism of the bailout provisions presented by progressives such as Joseph Stiglitz and conservatives such Hans-Werner Sinn.

The arguments against creating a European single currency and then allowing Greece to cheat its way into membership were valid back in the 1990s – and, in theory, they still are. But this does not mean that breaking up the euro would be desirable, or even tolerable.

Joining the euro was certainly ruinous for Greece, but there is always “a great deal of ruin in a nation,” as Adam Smith remarked 250 years ago, when losing the American colonies seemed to threaten Britain with financial devastation.

The great virtue of capitalism is that it adapts to ruinous conditions and even finds ways of turning them to advantage.

The United States in the mid-19th Century was badly suited for a single currency and a single economic structure, as evidenced by the Civil War, which was provoked as much by single-currency tensions as by moral abhorrence to slavery. Italy would probably be better off today if Garibaldi had never launched unification.

But once unification has happened, the pain of dismantling the political and economic settlement usually overwhelms the apparent gains from a break-up.

This seems to be the case in Europe, as clear majorities of voters are saying in all eurozone countries, including Germany and Greece.

Thus, the question was never whether the single currency would break up, but what political reversals, economic sacrifices, and legal subterfuges would occur to hold it together. The good news is that Europe now has some persuasive answers.

Is Greece Now On The Road To Recovery?

The BBC – Andrew Walker

Bailout number three is, more or less, in the pipeline. Another parliamentary vote – after a bad tempered debate – has ticked some more of the boxes required by the eurozone.

So what next for Greece?

First let’s be clear – that third financial rescue package has still to be negotiated. So much political blood has been shed just to get the talks started, surely, you might think, Greece and the eurozone wouldn’t let a deal slip from their grasp after all that.

Perhaps. Though the next few weeks of negotiations will be hard. So let’s assume the third programme will be agreed. Will Greece comply?

The precise contents are still to be negotiated but it will include many policy commitments that the Greek government and much of the population will hate.

There will be targets for the government’s finances, specifically for a primary surplus – that means the government must take in more in tax revenue than it spends, putting to one side the interest it is paying on the national debt.

Greece has managed primary surpluses for the last two years. But after a renewed decline in the economy starting at the end of last year – and severely aggravated by the bank closures this month – it will be very hard to repeat that this year.

To achieve that aim will mean more austerity. Can the Greek government implement it?

There has been massive austerity already. The adjustment to the government finances has been extraordinary: there is a measure called the structural budget balance: that went from a deficit of 18.6% of GDP in 2009 to a surplus of 2.2% in 2013. (These figures take out the impact of the economic cycle on taxes and public spending and so show – imperfectly – the effort a government has put in to change its financial position.)

The programme will be subject to continuous monitoring and it’s sure to lead to further episodes of tension between Greece and the creditors, and in all probability more occasions when payments are delayed because of slippage in the implementation of the policies.

We had a flavour of the political difficulties the government will face with implementation over the last 24 hours. A statement from a public sector union said: “We will continue our battle so that the new barbaric bailout does not pass and is overturned.”

Eurozone governments also expect Greece to make a commitment to a wide range of reforms covering, among other things, industrial action, collective bargaining, and opening closed professions. There’s more potential there for political difficulties in implementation.