Even though Greece and the eurozone reached a provisional agreement on 20 February and extended the current bailout program by 4 months, past the 28 February deadline, the drama is far from over. As a condition for the extension of the current program, Greece submitted a first list of reforms that was deemed a sufficient first step allowing for the extension of the program. Now, the reforms will need to be finetuned, which will surely be some heated diplomacy. Only once the reforms are negotiated and the Greek government undertakes to adopt them, will the eurozone disburse the last outstanding tranche of the bailout. This is worth some €7 billion and Greece badly needs it as soon as possible. The reforms need to be agreed by the end of April, but Greece will need several billion euros in March to repay some of its debts, partly to the IMF. Therefore the finance minister Janis Varufakis pushes for talks as soon as possible. Last week, he sent a letter to the Eurogroup president outlining the first seven reforms from the first list in more detail, clearly hoping to have discussions started ahead of the Eurogroup meeting scheduled for this week. In the letter, he also stated that the follow-up arrangement, after the current bailout program expires, should have the form of a “Contract for Recovery and Growth of the Greek Economy”.
It is, however, unlikely that this week´s Eurogroup will do any considerable progress on the Greek issue. The letter, outlining some of the reforms in more detail, was only addressed to the Eurogroup president Jeroen Dijselbloem, and other finance ministers have not seen it. The discussions will surely start slower than Greece would like. Also, their content will surely be heated. Greek PM Tsipras stated in an interview for Der Spiegel, that the “thriller ... will return”.
Some of the Greek steps might further endanger the outcome of the negotiations. Starting with the continuation of usage of a strong revolutionary rhetoric at home despite considerable concessions to the eurozone, which threatens the remnants of trust between the bloc and Greece, through the verbal conflict of Greece with Spain and Portugal over an alleged conspiracy of the two against Athens, all the way to the first steps of the government towards dismantling of some fiscal reforms performed by the previous government even though Mr Varufakis promised that Athens will refrain from unilateral moves.
20th February 2019
25th January 2019