“Greece has turned a new page. It leaves behind the austerity of destruction and fear and proceeds with optimism, hope and dignity in a changing Europe,” declared Alex Tsipras in his victory speech back in January. Fast forward seven months later, Greece came dangerously close to getting kicked out of the euro zone until the government ultimately gave in to harsher austerity measures. No wonder Tsipras ain’t Mr. Popular right now!
In fact, Tsipras probably had too many sleepless nights spent figuring out how to appease the country’s creditors, his own anti-austerity Syriza political party, and the entire Greek population. After several heated bailout negotiations, a nationwide referendum voting against austerity, and plans for a party congress, Tsipras decided to just throw in the towel and resign from his post.
What happens next?
In his televised announcement this week, Tsipras said that he is letting the Greek people have their say on whether they want his government to stay in power or not. This means that early elections will be conducted, possibly by September 20.
For now, a caretaker government led by current Supreme Court President Vassiliki Thanou-Christophilou will be in charge of running the show, as mandated by the Greek constitution. This transitional government is expected to start implementing the economic reforms and spending cuts required in the latest bailout package.
Well, at least Greece got the bailout funds already, right?
Yep, so far so good for Greece, which has been able to meet its loan repayment to the ECB this week, thanks to the third bailout granted by its creditors. For now, Greece has an extra 86 billion EUR in its pocket to be used for paying existing debt obligations and recapitalizing banks.
Aside from that, Greece has 50 billion EUR in a trust fund from privatizing assets that can be used in reinvestment and reducing its debt-to-GDP ratio. An additional 35 billion EUR in funding has been pledged by the EU to help the country climb out of a recession and create new jobs later on. That’s a pretty sweet deal, if you ask me!
So it’s all good then?
Euro forex traders seem to be overjoyed by the fact that Greece has been able to unlock the third bailout and that it can keep hanging out with the cool kids of the euro zone for now. However, some forex analysts are concerned that any political trouble could destroy the trust that the country struggled to restore with its creditors.
“It is crucial that Greece maintains its commitments to the euro zone,” emphasized Eurogroup President Jeroen Dijsselbloem. European officials seem to be in agreement that swift elections in Greece can ensure that the bailout terms will be enacted without a snag.
But if there’s one thing we’ve learned throughout this Greek debt saga, it’s that it never seems to run out of plot twists. A victory by the hard-left Syriza faction that is strongly opposed to spending cuts runs the risk of history repeating itself, with unrealistic promises of wiping out austerity likely to put the support from the EU and IMF in jeopardy and bring the possibility of a Grexit back on the table. In that case, the euro might be forced to return its recent forex gains. Not again!
Do you think the third bailout means a happily-ever-after for Greece? Or will the early elections start another conflict?