Greece – €86 Billion Euro Later

By Michelle Seiler-Tucker, Special for  USDR

After 17 hours of negotiation, Greece accepted a bailout plan to the tune of 86 billion euro. The settlement set forth by Greece’s three creditors, “the troika,” is harsh, but it needs to be. European Commission, IMF, and ECB officials are wary of Greece’s commitment to repaying debt, and structured a deal which left very little room for Greece to wiggle out. If Greece avoids its required payments, or deviate from the settlement, near-automatic spending cuts will be activated. Greek parliament votes on the settlement this week – the three creditor institutions will then formalize and institute the plans. Here are the key points to settlement package:

Greece must simplify its tax code and expand its VAT. To mitigate the negative effects of widely increasing taxes, 35 billion euro from the EU will become available for economic stimulus.

Creditors require large scale reforms to labor law and unions, to get both in line with European best practices. Greece must also cut its infamously large pensions and raise the age of retirement.

Creditors also seek to reform almost every aspect of Greek government and business: dismantle corrupt monopolies across the private sector; streamline the court system to save money, end corruption, and speed-up suits; and make Greece’s economic and demographic data agency, ELSTAT, completely  independent.

The troika also demanded sweeping bank reform. Greece will now follow EU protocol for handling failing  banks

Greece must also monetize 50 billion euro worth of assets to recapitalize banks and decrease national debt (25bn for  each).

What can go wrong now? Well, still everything. The Syriza party, currently in power, contradicted nearly its entire running platform by accepting the bailout and austerity measures. Greece could see more political turmoil and likely a new party in office. Additionally, Greece does not have 50 billion euro’s worth of assets on hand. Creditors suggest privatizing utilities, but that might not cover everything; German officials suggested selling land, islands, and even ancient monuments to cover costs. Here again we will likely see unrest if Greece resorts to liquidating pieces of its history. Moreover, these austerity measures are not yet guaranteed. The first round of provisions must be passed through Parliament by July 15th, and many more swaths of laws in coming days and weeks. For now, however, Greece avoided a catastrophic meltdown and ejection from the euro  zone.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.