Right before the clock struck midnight, Greek government officials and EU leaders struck a deal that would allow Greece to get a 4-month lifeline and stay in the euro zone for now. It looks like the rebellious tag team of Greek Prime Minister Alex Tsipras and Finance Minister Yanis Varoufakis scored a victory in its anti-austerity revolution, as they were able to buy more time to come up with economic reforms for the debt-ridden nation.
This allowed the euro to breathe a sigh of relief and recover against its forex counterparts at the end of the trading week, but will its rallies last? You see, the last-minute agreement made last Friday requires Greece’s leaders to scramble for a list of proposals to be passed today. EU and IMF officials will then be scrutinizing these plans, which means that a few more days of debt talks might be in the cards.
“Negotiations are just beginning. We won the battle but not the war,” Prime Minister Tsipras himself said. “The real difficulties lie ahead.” Simply put, Greek government leaders have to convince their creditors that they can be able to reduce austerity measures while still boosting their budget surplus and repay their debt obligations at the same time. That’s definitely easier said than done!
Greece’s list of proposals might include labor law reforms, changes to laws on non-performing loans, and stricter measures against tax evasion, among many others. While these are all still subject to approval, what’s interesting to note is that the EU agreed to let Greece off the hook with further austerity this year.
Of course German Finance Minister Wolfgang Schäuble, who has recently been painted as the villain in this Greek debt drama, remarked that these plans are just dreamy illusions. “Being in government is a date with reality, and reality is often not as nice as a dream,” he pointed out.
While the lower likelihood of a “Grexit” is keeping the euro supported in the forex arena for now, market analysts are worried that other debt-ridden nations such as Portugal and and Ireland might follow Greece’s example and rebel against austerity as well, spreading more financial uncertainty in the region.
With that, the next four months will be crucial for Greece, the euro zone, and their shared currency. Do you think a Greek debt default and a “Grexit” was simply delayed?