Well, that didn’t take long.
It turns out that math is not subject to a referendum.
Greece and its European creditors announced an agreement here on Monday that aims to resolve the country’s debt crisis and keep it in the eurozone, but that will require further budgetary belt-tightening that Prime Minister Alexis Tsipras could have trouble selling back in Athens.
The agreement does not guarantee that Greece will receive its third bailout in five years. But it does allow the start of detailed negotiations on a new assistance package for Greece.
The total commitment of money has not been disclosed. But a document by the eurozone leaders noted that experts had estimated that Greece might need from 82 billion to 86 billion euros more — $91 billion to $96 billion — to shore up its economy, rebuild its banks and meet its debt obligations over the next three years. The document said Greece and its creditors should seek to “reduce that financing envelope,” if possible.
As part of Greece’s commitments, Ms. Merkel said, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt. That fund would be “to the tune of” €50 billion, she said.
Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments. The Greek government had resisted a continued role for the I.M.F., seeing the fund’s involvement as unwanted meddling.
The agreement will call for Greece to raise taxes in some cases, pare pension benefits and take various other measures meant to reduce what critics see as too much bureaucracy and too many market protections that keep the Greek economy from operating efficiently.
In other words, Greece has to do what they’ve always had to do: fix their broken tax system, fix their broken pension system, stop spending money they don’t have, sell off bloated Greek government assets and clean up the corruption.
It’s not clear that this will happen: the Greek parliament still needs to approve it. But it is clear that Greece’s left-wing government has accomplished very little other than making the pain worse for their citizens, all to the cheers and plaudits of comfy Western liberals who see this as some kind of experiment in economics and an opportunity to show those damned austerians what’s what.
The alternative for Greece in exiting the Euro. Virtually the entire American Left, who are apparently fine with the idea of a government weaseling out of its debt, thinks this is a better option. The BBC has a great summary of what a Grexit would mean:
The previous Greek Prime Minister, Antonis Samaras, warned that living standards could fall by 80% within a few weeks of exit.
Unable to borrow from anyone (not even other European governments), the Greek government would simply run out of euros.
It would have to pay social benefits and civil servants’ wages in IOUs (if it pays them at all) until a new non-euro currency can be introduced.
The government would not be able to repay its debts, which now amount to a total of about €320bn (£237bn), most of it owed to European governments and agencies and the International Monetary Fund.
The government would have to impose a freeze on withdrawals and on people taking money out of the country. This could lead to queues of ordinary Greeks trying to empty their bank accounts before they get converted into a new currency worth substantially less than the previous one.
In the longer run, Greece’s economy should benefit from having a much more competitive exchange rate.
But the devaluation would not solve underlying problems in the economy, including poor tax collection and a struggle to control government spending.
There is also a real possibility of a surge in inflation.
Tax receipts would probably fall as the economy contracted, so the government might finance spending by printing money.
The likely currency depreciation would also be inflationary. It would make imported goods – which in Greece includes a lot of its food and medicine – more expensive.
That’s just the effect on Greece. It might also encourage other countries like Spain to leave. And worldwide, the effects would be very unpredictable.
That’s what the people glibly talking about a Grexit are contemplating. Seems a steep price to pay so that you can side with the deadbeats against the Germans.