Greece, at least for the next four months, will remain a part of the eurozone, according to an agreement hashed out by the finance ministers of 19 nations Friday night in Brussels.
Eurogroup Chairman Jeroen Dijsselbloem called the deal “a very positive outcome.” But Greek Finance Minister Yanis Varoufakis, perhaps the loudest advocate for sweeping changes to a bailout agreement that Greeks believe has forced the country into unsustainable austerity, was less effusive. “This is not a moment for jubilation,” he said. “This agreement is a small step in the right direction.”
Nevertheless, the conclusion of a deal that, at a minimum, puts off until summer the collapse of the eurozone was greeted with seeming euphoria on Wall Street, where the Dow Jones Industrial Average rose more than 150 points after the deal was announced, to close at a historic high of 18,140.44.
The fact that U.S. traders reacted so energetically to the announcement of the deal, which came about 90 minutes before the markets in New York closed, suggested they were not expecting an agreement.
There was still a shoe to drop on the accord. Under the deal, Greece by Monday must submit concrete plans to eliminate the country’s endemic corruption and force Greek businesses and individuals to pay their taxes.
“Our big anxiety now is whether we can enforce these reforms,” Finance Minister Varoufakis said. “That is the big national bet.”
Indeed, it was clear that the extension was far from a best-case scenario for Greek officials. The Greek government, elected in January, had entered into these discussions vowing to renegotiate the terms of a $275 billion bailout that required deep cuts in government spending. Many Greeks blame those required cuts for their nation’s deep economic woes.
But in the end, the Greeks caved on that pledge. “The Greek authorities reiterate their unequivocal commitment to honor their financial obligations to all their creditors fully and timely,” said a statement outlining the deal.
The accord also gave Greece’s creditors the authority to decide if the list of reforms to be drawn up by Monday “is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review.”
Only when the creditors conclude that Greece is making the needed changes will the country receive the next payment – $10 billion – in the bailout program.
The agreement was likely to face a cool reception in Greece, where voters had chosen the new government largely on its campaign promise to end austerity. Greek political commentator Pavlos Tzimas characterized the accord in an interview with SKAI media as “very heavy concessions … politically poisonous concessions for the government.”
And it appears to have been a difficult move for the Greek rulers. In what is only one of many bizarre turns in the negotiations leading up to the deal, Greek negotiators Friday insisted that a letter they had submitted Thursday taking a hard line on the terms for an extension had been an “administrative mistake.” They replaced it with one that largely met European demands.
Greek unemployment has soared under the current austerity program, which eurozone leaders had imposed on the country in return for the bailout. The economic woes are often summed up in a youth unemployment rate of 50 percent at the end of 2014, up from 37 percent at the end of 2010 (though down from a peak of 60 percent in 2013).
But the agreement provides for little wiggle room for the Greek government to return to its previous spending habits.
“The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions,” the agreement reads.
German Finance Minister Wolfgang Schaeuble said after the announcement of the deal that while nobody wants Greek economic turmoil to continue, solutions to such problems are not simple. Greeks have cast Germany in the role of tormentor, but Schaeuble insisted he had worked hard for Greek interests.
“Governing is a date with reality,” he was quoted in German news accounts. “Varoufakis certainly will have a difficult enough time explaining the deal to the voters. We don’t want to make it any more difficult.”