The potential deal to secure the next round of bailout funding and prevent the Greek government from defaulting on its next bond repayment on March 20 could be very close to approval from both the major political parties in Greece and the "Troika" of the European Central Bank (ECB), European Commission (EC), and the International Monetary Fund (IMF).
“Greece comes to today's critical meeting of the Eurogroup, having fulfilled all the preconditions that have been placed to approve the new program," said Greek Finance Minister Evangelos Venizelos to Dow Jones. "It is consequently apparent that we expect the long period of uncertainty, that benefited neither the Greek economy nor the eurozone overall, to end today."
Deal Could be Close
Eurozone finance ministers met today in Brussels and expressed optimism that a deal was about to be reached. While skepticism remains about the quality of the plan in question, the ministers meeting there seemed confident that weeks of debate over Greek austerity measures and the potential of bondholders writing down parts of Greek debts is drawing to a close.
"I'd like to assume that we will come to a final and definitive agreement tonight," Luxembourg's Prime Minister Jean-Claude Juncker said while entering the meeting. "Greece has fulfilled all the prior commitments that we asked of it."
Deal Could Move Forward Despite Roadblocks
The debt deal in Greece has undergone a series of setbacks and hurdles to get to where it is today, not the least of which was the violent rioting in Greece that protested the painful austerity measures called for by the Troika. Included in these was a 22 percent cut in the minimum wage. With elections coming up next month, concerns remain that the Greek people will elect officials who will hold to the deal that's been made.
"They have to satisfy the euro-zone governments while at the same time making very tough measures acceptable to their population," said Marie Diron, an economist at Oxford Economics. "That is something a technocratic government can perhaps manage, but after the election it might become much more difficult for an elected government to satisfy these two goals."
Lingering Concerns over Future
There's also the consideration of the bondholders being asked to take a 50 percent haircut on their holdings, something that could create legal issues before it's enacted next month. Finally, questions remain about the long-term viability of the Greek economy and the potential for the country to reduce its debt to 120 percent of economic output by 2020, the stated goal of the deal. Some eurozone nations are less willing to commit funds than others to a deal that could be fundamentally flawed.
“We can afford to say ‘no’ until Greece has met all the demands,” said Jan Kees de Jager, Dutch Finance Minister. “We will see to a rigid and very strict implementation of those demands, and only then will we make the next step."
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