Bailout gives cred­i­tors un­prece­dented say in Greece

The China Post - - COMMENTARY - BY BRYAN MCMANUS

Greece’s in­ter­na­tional cred­i­tors will have an un­prece­dented say over the coun­try’s gov­ern­ment to make sure Athens sticks to the terms of its huge third bailout. But will it be enough to en­sure its suc­cess?

The mon­i­tor­ing of the 85-bil­lioneuro (US$95-bil­lion) res­cue by the cred­i­tors — the EU, Euro­pean Cen­tral Bank and In­ter­na­tional Mon­e­tary Fund — will touch ev­ery­day life in Greece, from a visit to the doc­tor’s to the pur­chase of a daily loaf of bread.

But an­a­lysts say all this over­sight, de­signed to make sure Athens sticks to the deal, could even turn out to be coun­ter­pro­duc­tive, stok­ing the pop­u­lar re­sent­ment against the cred­i­tors that put left-wing Prime Min­is­ter Alexis Tsipras in of­fice in Jan­uary.

Fi­nance min­is­ters from the 19-coun­try eu­ro­zone were due to meet in Brus­sels on Fri­day to give their ver­dict on the bailout deal, af­ter Tsipras man­aged to get the pack­age through par­lia­ment de­spite sig­nif­i­cant op­po­si­tion within his own rad­i­cal-left party Syriza.

An­a­lysts say the cred­i­tors too face their own po­lit­i­cal prob­lems, es­pe­cially in Ger­many where many vot­ers re­sent hand­ing over more money to what they see as a lost cause in Greece.

“This cur­rent deal does not guar­an­tee that Greece will con­tinue to stay in the euro area,” said an­a­lyst Daniela Sch­warzer with the Ger­man Mar­shall Fund of the United States.

“It is an im­por­tant step which con­firms all par­ties’ po­lit­i­cal com­mit­ment at this point in time. But there can be po­lit­i­cal, eco­nomic and fi­nan­cial ob­sta­cles,” Sch­warzer told AFP.

With Greece’s two pre­vi­ous bail- outs in 2010 and 2012, the cred­i­tors de­manded a whole se­ries of painful tax hikes, spend­ing cuts and eco­nomic re­forms in re­turn for a com­bined 240 bil­lion eu­ros. That did not work. As the pro­grams fal­tered and Greece slumped into a deep six-year re­ces­sion, the cred­i­tors blamed suc­ces­sive gov­ern­ments for fail­ing to meet their com­mit­ments.

Athens in turn blamed the cred­i­tors for ask­ing for too much, too fast, say­ing aus­ter­ity did more harm than good as public anger at their in­tru­sive over­sight grew sharply.

The new bailout is even more far­reach­ing, with a long list of dos and donts as the cred­i­tors aim to leave no wrig­gle room for Athens.

They go far be­yond eco­nomic man­age­ment to in­clude ex­ten­sive re­forms of the coun­try’s health and so­cial wel­fare sys­tems, and mod­ern­iz­ing and de-politi­ciz­ing the public ad­min­is­tra­tion.

Seem­ingly small de­tails of daily life will be af­fected by the new rules, in­clud­ing the fact that the cred­i­tors want to force bak­eries to set bread prices by the kilo rather than the loaf, and ex­tend the ex­piry dates of pas­teur­ized milk in the su­per­mar­kets.

The gov­ern­ment will also have to bring the ed­u­ca­tion sys­tem into line with “best EU prac­tices,” the stan­dard set for many of Athens’ new obli­ga­tions, which in­clude clean­ing up the banks, a new pri­va­ti­za­tion drive and open­ing closed pro­fes­sions.

Many of these com­mit­ments must be put into law be­fore cash can be handed over. The cred­i­tors will con­duct reg­u­lar re­views, the first due in Oc­to­ber, to en­sure the re­forms are be­ing fully im­ple­mented.

An­a­lysts says this close over­sight raises other ques­tions about the fea- sibil­ity of the bailout — es­pe­cially in terms of whether its roll­out is seen as demo­cratic.

“The prob­lem of demo­cratic le­git­i­macy should not be un­der­es­ti­mated, nei­ther for Greece nor for the lenders,” Sch­warzer said.

“This is true in Greece as a re­cip­i­ent coun­try which is sub­ject to ever tighter con­trols and where crit­ics have long ob­served a loss of sovereignty,” she said.

“For the lenders, like­wise prob­lems of le­git­i­macy arise, as it is get­ting harder and harder to ex­plain to taxpayers that they should con­tinue to pro­vide liq­uid­ity aid to a coun­try which has been iden­ti­fied as in­sol­vent,” Sch­warzer said.

Fred­eric Alle­mand, re­search co­or­di­na­tor at the Euro­pean stud­ies CVCE think-tank in Lux­em­bourg, said any gov­ern­ment faces prob­lems in win­ning sup­port for un­pop­u­lar poli­cies, es­pe­cially if those are de­manded by out­siders.

“It is al­ways very dif­fi­cult for a coun­try, and even more so in a bailout case, to ac­cept con­di­tions laid down by oth­ers,” Alle­mand told AFP.

“Among the Greek peo­ple, there is great un­cer­tainty about the fu­ture and about the ne­ces­sity or not of adopt­ing these mea­sures given that early elec­tions are very likely,” he said.

The bot­tom line, how­ever, may be that Greece has no choice.

“There wasn’t re­ally very much choice for the Greeks,” said Vicky Pryce, chief eco­nomic ad­vi­sor with the Cen­tre for Eco­nom­ics and Busi­ness Re­search in Lon­don.

“The bailout is quite harsh, in terms of its con­di­tions, but it is go­ing to keep Greece in the euro, at least for longer than oth­er­wise would be the case,” Pryce said.

“It is a nec­es­sary evil.”

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