The Greek Parliament’s approval on Friday of its government’s proposals on securing a third bailout was a positive step in the long drawn-out saga over whether Greece will remain in the eurozone.
With yesterday’s positive reaction to this latest package by the eurozone’s finance ministers, optimists would argue a new dawn beckons for the Greek economy that could signal a beginning of the end of a crisis that has hurt the Greek people and Europe as a whole.
Today’s EU summit is crucial. It can either assent to this deal, which will secure – at least for now – Greece’s place in the eurozone and avert a political and economic crisis in Europe, or leaders will dig in their heels and reject it.
European Council president Donald Tusk has described the situation as “maybe the most critical moment in EU history”. A little melodramatic perhaps, but his remark does show the concern throughout Europe.
Greece is feeling the pressure too. After much tough talk and an ill-advised referendum last Sunday – ill-advised primarily because of its timing but also because its objective was so unclear – the left-wing Syriza government led by Prime Minister Alexis Tsipras has blinked.
He has, mystifyingly for some, included many elements in its proposed package that were decisively rejected – as the government had urged voters to do – in last Sunday’s referendum.
Perhaps Mr Tsipras wanted to strengthen his hand in his negotiations with Greece’s creditors and show the electorate that he fought to the very end, or perhaps his finally understood that the alternative to not reaching a deal – namely a Greek exit from the eurozone – was really a much worse option for his country.
And with the European Central Bank refusing to increase its level of emergency assistance to Athens, the pressure was mounting for Mr Tsipras to reach a deal to prevent the economy from collapsing.
On the face of it, the Greek proposals are indeed “thorough” as Eurogroup president Jeroen Dijsselbloem described them.
They include a tax rise on shipping companies, the raising of VAT to three rates of 23 per cent (the standard rate), 13 per cent (for food, energy, hotels and water) and six per cent (for medicine and books), the phasing out of a solidarity grant for pensioners by 2019 and €300 million defence spending cuts by 2016.
This represents a major shift by Mr Tsipras and it is telling that his former maverick finance minister, Yanis Varoufakis, was absent from the vote in the Greek parliament.
Greece will, of course, be seeking concessions – primarily on restructuring its debt in a manner that will put less pressure on its people.
However, two things remain to be seen: one relates to Germany’s stance. As the country most exposed to Greek debt, it has been steadfast in its refusal to write off the money owed by Greece but has expressed some openness (and is being pushed by France) to a softening of the terms.
However, the overarching question is whether the other eurozone members trust Greece to follow through on its promises. It has never done so to date and – in the absence of a common European fiscal policy – may return to its old ways once again.
This was an issue discussed by European finance ministers yesterday and will no doubt take centre stage at the summit of leaders today. What the EU wants more than anything is to declare it has dealt with this problem and to project unity. However, there may well still be some acts to be played out in this drama before anyone would confidently predict what will happen next.