After weeks of tense, acrimonious negotiations, the Eurogroup of European finance ministers and the government of Greece hashed out an agreement to extend the troubled southern European’s bailout program by six months.
In broad terms, the agreement allows Greece to access an additional $273 billion from its bailout, but only after certain conditions set by the Eurogroup are met. Greece will have to submit a series of reforms to the IMF and EU by Monday and if they aren’t sufficient, another Eurogroup meeting could be called as soon as Tuesday. German Finance Minister Wolfgang Schäuble noted, “As long as the program isn’t successfully completed, there will be no bailout.”
Provided Greece agrees to enough reforms, the new deal should be enough to stave off an imminent crisis. With that in mind, Wolfgang Schäuble and the pro-austerity Germans got the better end of the deal. Negotiating with the leverage of a looming Greek bank run, the current agreement keeps Greece in the Eurozone, on track to payback its bailout without serious debt discounts.
On the other hand, a clear loser is Greek Prime Minister Alexis Tsipras. This week’s deal falls well short of the rhetoric he espoused on the campaign trail. While the agreement does leave Athens with some flexibility on the size of this year’s budget surplus, it is a far cry from the plan he laid out in September, which called for a massive, EU-funded job creation program and haircuts for Greek bondholders. This deal will be a difficult sell to an already-beleaguered Greek public.
European negotiators have also boxed Greece into a corner by setting the deadline for a new agreement for April. A large block of Greece’s debt will mature in May and June, so Athens will be forced to either agree to European demands or face default.
Although this week’s deal was a promising first step, the next few months will be critical in determining Greece’s future in Europe.