Greece’s debt is expected to rise to 200% of GDP within the next two years. As a result, the nation was threatened with removal from the eurozone if did not comply with certain austerity measures. Following their cautious acceptance of these measures, Greece entered into a series of arduous deliberations with eurozone officials to determine the fate of the nation’s economy.
After six tedious months of negotiations, Greece and the European commission are nearing a solution regarding Greece’s debts. According to officials within the commission, the parties have come to an agreement “in principle”. The announcement was made on Tuesday morning after 23 hours of deliberation. The specifics of the pact have not yet been released.
The deal would provide Greece with approximately 86 billion euros ($93.72 billion) in loans over the course of the next three years. The parties are currently working to iron out a few minor discrepancies. For example, the parties have yet to decide who will be in charge of selling Greece's state-owned assets. The amount of time allotted for Greece to implement new austerity measures is also up for debate.
The EU finance ministers will meet this Friday to discuss the agreement. It should be noted that garnering approval from said finance ministers has always been a difficult task. If passed, the bill will go to various national parliaments within the eurozone for approval next week.
If the measures are agreed upon, then officials in Athens can expect to receive their first pay out--25 billion euros. This would allow Greece to repay a three billion euro debt to the European Central Bank prior to an August 20 deadline. The nation would also allocate another 12 billion euros to the repayment of their lenders. A further 10 billion euros would be used to recapitalize banks that have suffered due to poor financial practices during the recession. Despite their optimism, Greek officials are wary of the fact that the amount of this first bailout payment has not been set in stone.
The International Monetary Fund is also being urged to provide Greece with aid. The organization has chosen to withhold aid until they have received definitive proof that measures have been enacted to restructure Greece's economic policies. In essence, Greece would need to find a way to mitigate their nation’s debt, reform the country’s economic practices and implement budget cuts. The IMF also insists that creditor nations write off part of Greece's debt.
Unfortunately, this bailout is no cure-all. The nation will undoubtedly be forced to deal with a number of socio-political and economic complications as a result of these new austerity measures. The Syriza party is currently trying reconcile the abandonment of their campaign promises to end austerity with the necessity of submitting to the demands of the creditors in order to avoid total economic collapse. The more radical members of the Syriza party wish to abandon the euro and default on the debt.
Speaking on local radio, Health Minister Panagiotis Kouroublis said “After this deal the prime minister should call for elections, so that the Greek people can vote on whether they approve the program or want something else.”