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Greece escapes brush with bankruptcy but austerity still bites

© Angelos Tzortzinis / AFP | France's Finance Minister Bruno Le Maire (R) speaks with Greece's Prime Minister Alexis Tsipras (L) during a meeting at the Maximou Mansion in Athens, on June 12, 2017.

Text by Nicole TRIAN

Latest update : 2017-06-17

Overshadowed by questions of ‘will they or won’t they’ make a deal, Greece obtained its third bailout from European creditors Thursday and a potential plan for debt relief. In the short-term however, ordinary Greeks remain shackled to austerity.

Greece’s lifeline arrived on Thursday in the form of 8.5 billion euros ($9.5 billion) in new loans which had creditors hailing the deal a success and ending months of uncertainty over whether the debt-laden nation would meet large repayments due in July.

"I think that's really the best agreement we've had for quite a while," said Pierre Moscovici, the top economy official for the European Union.

Leftist Greek Prime Minister Alexis Tsipras said the deal was a "decisive step" towards the country emerging from the crippling crisis which has forced more than a third of the population into poverty, and turned thousands of Greeks into economic migrants.

His finance minister, Euclid Tsakalotos added: “There is now light at the end of the tunnel."

Nick Malkoutzis, politics and economics editor for Greek website Macropolis told FRANCE 24 that the agreement gives Greece “breathing space but it’s not a game changer”.

"While Greece has received a sizeable package the majority of funds will go straight back to lenders to pay off 7 billion euros of debt with only 1.6 billion going back into the Greek economy.

“Greece left with the measures it demanded, but not debt relief and that’s a blow for the Greek government,” Malkoutzis said.

Beginning of the end to the Greek drama? 

Tsipras, who was elected in 2015 on promises to repeal bailout-related budget cuts and to press the Eurogroup for debt relief measures, has taken a drubbing in the polls. And while he may have had the backing of pro-government newspaper Avgi, who called Thursday's deal "The beginning of the end to the Greek drama," dozens of protesters took a different view, creating their own drama on the streets of Athens.

Outside the finance ministry on Friday hospital workers had built a fake wall outside the entrance topped with a banner reading: "They have made us drown in debt." 

In the short term, the latest bailout is unlikely to ameliorate the worst effects of austerity.

Unemployment is still running above 23 percent, and youth unemployment stands at around 45 percent. In a country where the mountain of debt sits at 180 percent of GDP and where elderly pensioners are often obliged to support their jobless children, the question of whether, or when, the country might be given relief is still unclear.

The Athens Stock Exchange may have reached a two-year high off the back of the latest bailout but it’s a world away from the everyday life of Greeks.

But progress appears closer than it has since Greece was first bailed out in 2010. And credit lies largely with the newly elected French President Emmanuel Macron and his finance minister, Bruno Le Maire, who presented a plan for enabling debt relief. It was a vindication of sorts for former Greek finance minister Yanis Varoufakis who clashed with his Eurogroup creditors before resigning in 2015.

“While the troika of Greece’s lenders and the Berlin government were strangling our [...] attempts to liberate Greece from its debt-bondage, Macron was the only minister of state in Europe that went out of his way to lend a helping hand,” he recalls, referring to the gruelling tussle that opposed Greece to its German-led creditors.

The French plan is the first proposal of its kind to make it onto the negotiating table, signaling a potential break in the vicious cycle of Greece's unserviceable debt.

"Essentially the most important aspect of the deal is a fairly clear commitment that in the months to come debt relief will be examined as an option," said Malkoutzis.

On Thursday, eurozone representatives said they were ready to consider easing the burden of austerity by potentially extending overall debt repayments by up to 15 years. An outright cut in Greece's debt is not allowed under euro rules, but the length of time the country has in paying back its debts can be extended, and the interest rates can be cut.

In the short-term, however, the bailout will make no tangible impact, particularly for those hardest hit by austerity, but Malkoutzis says: "It’s a stepping stone for Greece exiting the bailout program next year and having debt relief kick-in."

Date created : 2017-06-17

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