Rigid Greece deal only buys a little time

Euro leaders are holding Greece to honor a debt that seems far beyond its means to pay, while forcing an austerity plan on its citizenry that can only harm both its people and the economy.

While the 11th hour deal reached July 13 between the European Council and Greece prevented the fiscally struggling country’s immediate exit from the eurozone and its single currency, it accomplished little else.

The latest bailout — the third — once again is built on unreasonable expectations. It reduces the crisis to as immer but assures another boil to come.

Once again, Greece promises to undertake more austerity measures to turn its huge deficit spending into a surplus and give it the leeway to begin paying down its debt. According to the BBC, Greece’s total debt amounts to 323 billion euros ($356 billion), including 240 billion euro so wed to European Union countries due to the bailouts. It owes Germany the most, 68 billion euros.

To put that in perspective, Greece’s total deb t is approaching 200 percent of its gross domestic product (GDP).

In the latest deal, Greece agreed to raise its value-added tax, again raise the age at which citizens qualify for a retirement pension under the national system, and continue steps to privatize more services. On that latter point, The Economist points to International Monetary Fund (IMF) data showing Greece has so far achieved savings of 3 billion euros through privatization efforts that began in 2011, after the last bailout. The savings goal under the new austerity plan is 50 billion euro!

Equally dubious are reports that creditors are counting on Greece running a surplus of 1 percent of GDP this year and 2 percent next.

Greece’s near exit from the eurozone caused a run on banks, with the investors facing limits on how much they could withdraw daily. While the panic abated with news of a deal to continue the use of the euro currency, more citizens and businesses are reportedly using cash only, still fearful of bank viability and hoping to avoid taxes.

The bottom line of all the pain and fear caused by the austerity tactics is that Greece has stagnated in a permanent economic depression— and an emotional one as well. Unemployment is 26 percent.

The situation remains volatile. A rebellion against the severity of higher taxes and service cuts brought 40-year-old Prime Minister Alexis Tsipras and his left-wing Syriza Party to power. In an effort to get citizen backing for his showdown with the European Council, and its economically dominant member, Germany, Mr. Tsipras set a July 5 referendum at which 62 percent of voters rejected the terms of a tough bailout plan, exactly what the prime minister expected.

But rather than being chastened, the eurozone members, including Germany, hardened their positions, and it was Mr. Tsipras who blinked, accepting a deal that by some accounts is harsher than that rejected by voters. This divide between expectations and results has roiled the country.

As Parliament approved the austerity measures in accordance with the latest relief package, protests outside turned violent.

If the desire is to provide some opportunity for economic recovery in Greece, and remove the persistent specter of a “Grexit,” the eurozone should be open to some debt relief. Such a step would raise questions of fairness and concerns that other struggling euro members would demand similar relief. But the alternative is arguably worse, leaving Greece perennially struggling and perhaps eventually abandoning the euro and returning to its own currency, the drachma. That would shake an already weak European economy and start a rush to the exit by other countries. The IMF has reached the conclusion that debt relief is the lesser of two evils.

Germany in particular has remained insistent that the eurozone cannot forgive any debt. It is a rigid position not in keeping with the spirit of unity the single-currency euro was intended to foster.