Greek debt pact is far from a done deal
By John W. Schoen, Senior Producer
In their jubilant celebration over the latest agreement to solve Greece's debt debacle, European officials forgot to check with two important groups: the Greek voters and the bondholders who lent Athens the money it now says it can’t pay back.
The agreement once again buys the eurozone some time. Greek officials agreed to deeper spending cuts of 325 billion euros ($430 billion) and stricter budget oversight by the European Union. They also agreed to ask investors to accept less than 50 cents on the dollar on Greek bonds they hold.
If all goes well, Athens will once again dodge bankruptcy with the infusion of the latest, $172 billion (€130 billion) installment in the ongoing bailout of the rapidly contracting Greek economy.
But the ink was barely dry before the top official of the International Monetary Fund, which has to sign off on the payment, gently reminded the parties that two important conditions still need to be met.
“As soon as the prior actions agreed with the Greek authorities are implemented and adequate financial contribution from the private sector (bondholders) is secured, I intend to make a recommendation to our Executive Board regarding IMF financing to support a program,” Christine Lagarde, Managing Director said in a statement.
The first condition -- making those $430 billion in budget cuts stick -- is a tall order.
For the past four years, the Greek economy has been in a tailspin, shrinking by 20 percent as repeated rounds of government spending cuts imposed by European officials have stifled economic growth, further shrinking the country's tax base and fueling a vicious downward spiral. The Greek unemployment rate has more than doubled during that time; today, roughly half of Greeks aged 15- to 24-years-old are out of work. Each round of spending cuts has only intensified the economic pain on Greek citizens.
Greek voters will get a chance to weigh in on the deal in April, when parliamentary elections are scheduled. Candidates running on an “austerity” platform can expect an uphill battle in a country mired in a deep depression. Earlier this month, riots flared in Athens and other Greek cities as thousands joined protest rallies, burning dozens of buildings and looting businesses. On Sunday, thousands of demonstrators in Athens staged a repeat anti-austerity protest.