Eurozone's eaders emerged bleary-eyed to hail 'a comprehensive blueprint' that would put Greece on the straight and narrow
"Is this the way they say the future's meant to feel?" asked Pulp. "Or just 20,000 people standing in a field?" As dawn broke in Brussels, it was not E-fuelled but €-fuelled delusions which slowly gave way to an €-fuelled comedown. The eurozone's financial leaders emerged bleary-eyed to hail "a comprehensive blueprint" that would put Greece on the straight and narrow. Having stayed up late enough, with enough frenzied friends, they no doubt believed they were doing something amazing. But a nagging awareness of the outside world soon made itself felt.
In the harsh morning light, the deal looked like a pact to keep going by necking more of the drugs already swallowed in vast doses. There will be a fresh bailout loan of €130bn, new "voluntary" reductions in payouts to private holders of Greek debt, with parallel losses on bonds held by public institutions, which are weirdly structured to conceal the hit foreign taxpayers are taking. Oh, and in return for all this, the Hellenic Republic must endure further cuts, now and into the future. Greece, lest we forget, is already in the depths of a true Great Depression, with a fifth consecutive year of contraction now predicted, even by the EU. The eurozone is relying on the remedies of Hoover and Brüning to pull it out of the mire.
It won't work, which is the first reason why the small-hours sense of a resolution on Tuesday was a hallucination. Even before the announcement, a secret report prepared for the ministers warned that Athens could require yet another bailout before long. The official claim that Greek public debt will now fall to a high but supposedly stable 120% of GDP is pure assertion. How could it be otherwise? The GDP half of that equation is a known unknown, but seeing as any would-be investor will look at the heightening social chaos and think twice, there is reason to be fearful. All the risks are, in the jargon, on the downside.
Athens's outstanding obligations may appear the more predictable half of the debt-GDP ratio – but it ain't necessarily so. Greece's imagined descent down the debt mountain relies, first of all, on the timely arrival of all that promised finance from Europe's north, where there could be resistance. It relies, too, on privatisation bringing in revenues on an entirely new scale. Where a paltry €1.6bn has been raised to date, €19bn is now meant to be raised from 35 transactions. But a government so palpably desperate cannot stage anything other than a fire sale. If you are an oligarch who fancies snapping up a Greek island, your moment may just have arrived.
More significant even than the selling-off of vast tracts of Greek land could be the perception on the part of Greeks that their government has sold them out. The 150,000 public sector jobs which the financial planning imagines being neatly dispatched would represent roughly a million in the context of the larger UK economy. Just imagine what would happen if a British chancellor proposed lengthening the dole queues by a million while also asking workers still in jobs to swallow additional wage cuts, on top of the 15% that they were already in for. The most immediate claimed gains of the deal have some substance – Greece can now make its March repayment and avoid a messy early euro exit; meanwhile Spain was yesterday borrowing at its cheapest rates in a good while. Further into the future, the plans will run aground on politics if nothing else.
Europe is demanding that Greeks rewrite their constitution to place debt repayment above any other priorities the people may have. Germany's finance minister has made remarks suggesting pending elections could be postponed. But the election is set to proceed this spring, and with an anti-austerity left rising in the polls. This opposition does not have all the economic answers, but it could yet demonstrate that democracy refuses to die in the place that it was born. George Osborne said yesterday that "the Greek people, the Greek political system, has to deliver really difficult decisions now, but I don't think Greece has any other option". Well, we shall see about that.