BRUSSELS — The last-ditch agreement that’s supposed to keep Greece in the euro almost never happened. Even now, its designers are unconvinced it will work.
It will take “a small miracle,” said Slovak Prime Minister Robert Fico after the 17-hour summit that ended Monday.
“There’s little faith in the current Greek government,” Dutch Prime Minister Mark Rutte told his Parliament on Thursday.
The deal promises to further degrade a shattered economy through spending cuts and tax increases; it relies for implementation on a self-described party of the radical left; it counts on sales of state assets that Greece’s economy minister says “do not exist”; it leaves untouched a debt load the International Monetary Fund believes will never be repaid.
If anything, Greece and its creditors are farther apart than ever, with the country’s leaders arguing they accepted a bad deal under duress.
“It’s clearly a Band-Aid solution,” said Ian Bremmer, president of Eurasia Group, a political-risk consulting firm, in an e-mail. “I’d love to say we’ll be back here in a year or two. It’s more likely to be a few months.”
For now, anyway, things are on track. Greek lawmakers did as demanded, approving new austerity measures. Germany’s Parliament ratified the start of talks for a three-year rescue plan. The European Central Bank increased its emergency credit line to Greek lenders.
“We always acted on the assumption that Greece will remain a member of the euro area,” said ECB President Mario Draghi on Thursday. “There was never a question.”
To others, there was.
After a July 5 plebiscite in which 61 percent of Greeks backed Prime Minister Alexis Tsipras’s rejection of austerity, Jean-Claude Juncker, president of the European Union’s executive arm, spoke openly about Greece leaving the euro, also known as “Grexit.”
Europe presented last weekend’s talks as a now-or-never chance to find a durable solution to five years of crisis-fighting. The hard line, which included for a moment a German idea to suspend Greece’s euro membership, forced Tsipras to capitulate.
The demands went “beyond harsh into pure vindictiveness,” wrote Nobel laureate economist Paul Krugman.
The key question of debt relief, or lack thereof, hangs over the deal. In an analysis released Tuesday, the IMF said Greece needs its debts reduced “far beyond” what European partners have so far been willing to entertain. The Washington-based organization estimated Greek debt will peak at almost 200 percent of gross domestic product. By comparison, most advanced economies are well under 100 percent.
Asked Friday whether an accord is viable without easing the burden, IMF Managing Director Christine Lagarde told interviewers on France’s Europe1 radio station: “The answer is quite categorically not.”
Greece’s task will get only tougher as the economy shrinks. It already has contracted by one-quarter in the past five years. Unemployment is the highest in the euro area at more than 25 percent — and almost 50 percent for young people.
Greek anger was on display Wednesday night in Athens, as police fired tear gas to disperse anti-austerity protesters in the central Syntagma Square.
Across the road, lawmakers were about to vote to accept the bailout deal. Defense minister Panos Kammenos called it “the product of a blackmail, of a coup d’etat” that would make Greece an example of “Germany’s hegemony.”
Arguing Greece had no other choice for now, he voted for it anyway.
