News Analysis: Greek third bailout's hard labor warning signal for Greece, eurozone

News | 15.07.2015 | 00:49

Xinhua - After six months of heated negotiations, Greece emerged from a marathon eurozone summit in Brussels on Monday with an agreement that clears the way for a new painful three-year bailout program.   It will be the third bailout the debt laden country secures from international creditors in the past five years.   If everything runs according to the plan in coming weeks, Greece will avoid the risk of an imminent bankruptcy and Grexit, which according to officials and analysts from both sides would trigger havoc in Greece and shake the European common currency zone.   A tough deal that gives Greece more time and another opportunity to fix the structural shortcomings of its economy and restore stability and growth is better than no deal, is the widespread motto in Athens and across Europe.   However, the new program's unprecedented difficult labor this time and the harsh terms of further austerity, which the ruling Leftists opposed until recently, is a warning signal for Greece and the euro zone, according to financial experts and media commentators in the Greek capital.   After the end of the battle in Brussels, Greek Prime Minister Alexis Tsipras faces another wager to sell the deal to his party, his junior coalition partner, Greek lawmakers and citizens, to avoid a domestic rift and political instability and implement the conditions of the agreement with no more waste of time in order to unlock vital foreign financing.   The danger of possible prolonged political turbulence in Athens that could send the program again off track emerges as a key concern after the sealing of the debt deal.   The second is the legacy of the poisonous verbal war that lasted for weeks between Greece and its allies on one part and the most conservative circles of lenders led by Germany on the other part during the negotiations, analysts warned.   "There are two dangerous things lurking around the corner for Greece: the anti-Greek sentiment that has taken root in the minds of powerful euro zone players and the anti-European sentiment growing among Greek citizens," Alexis Papachelas, Executive Editor of Kathimerini (Daily) wrote in an opinion article on Tuesday.   On the one hand German Finance Minister Wolfgang Schaeuble and his allies await to prove that Greece cannot reform and make it, while on the other hand Tsipras faces a Herculean task to implement extremely painful policies, he argued.   For Papachelas the solution lies with the Greek premier. If he sees himself as a reformist, he could shift towards the political centre and move forward with new partners to change Greece.   For others, irrespective of Athens' intentions and stance from now on, any government's efforts are undermined right from the start by the harshness of the conditions set and by the big blow that has harmed relations in the euro zone lately.   Faced with a clear ultimatum by creditors to accept the harsh terms or deal with disorderly default and Grexit, the Greek premier made a very difficult compromise. A battle was won, but the war within the euro zone is not over, they warned.   Eventually the hardliners among champions of harsh austerity may face greater pressure and challenges from member countries which sided with Greece, like France and Italy.   "The Greek tragedy is a characteristic example of the way monetary unions always collapse when they do not develop into political unions, such as the U.S.," according to economist Vassilis Vilardos.   Regardless of the current painful compromise, the replay of the Greek thriller and an eventual rift with partners in the future is inevitable, if there will be no debt relief of any kind provided to Greece, the Greek expert argued in a recent article, insisting that the Greek debt load is unsustainable.   An editorial posted on the financial news portal "Euro2day.gr" on Tuesday backed the argument pointing to an article written in the summer of 1997 by the late Nobel Prize winning economist Milton Friedman under the title "The euro: Monetary Unity to political disunity?"   "The drive for the euro has been motivated by politics not economics ... I believe that the adoption of the euro would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues," Friedman had written.   Greek ruling Radical Left SYRIZA MP and Professor of Economics Costas Lapavitsas has no doubts regarding which path Greece should choose after the announcement of the terms of the deal.   In a statement released to media he insisted on Tuesday that the best solution for Greece in the long run will be a Grexit instead of an "unviable deal struck under blackmail."   "The dilemma Greece faces since 2010 is: stay in the euro with memoranda and a huge debt burden or return to the national currency with a growth program ... We tried the first road and we have witnessed the results. The new deal leads the country to the same dead end on worse terms," he argued.   For Lapavitsas the European monetary union today has failed due to the prevalence of the austerity formula and the repercussions on the European Union will be dramatic unless European partners change course.