Greece negotiated a four-month extension of its bailout on Friday, which has helped the country to avoid defaulting on its loans. Once an outline is ready to show how Greece will keep its finances in check, the European Commission, European Central Bank, and International Monetary Fund will review the reforms before officially ratifying the extension.
Greece joined the EU in 1981 and replaced its currency, the drachma, with the euro two decades later. The country was at risk of defaulting on its loans after years of unrestrained spending and borrowing. That led to the rest of the eurozone’s having to bail out Greece twice, once in 2010 and again in 2012, with $275 billion.
The assistance, however, came with strict austerity conditions, leading to multiple tax hikes and a nearly 27 percent unemployment rate. That led to anger among the population and to strikes and mass protests in the streets. Last month voters elected Alexis Tsipras from the anti-austerity Syriza party after he promised to renegotiate the country’s loan deal.
Greece’s eurozone creditors balked at Tsipras’ changing the terms of its bailout, and the country will still have to deliver on fiscal reforms by this summer to receive further financial assistance.
During Al Jazeera America’s Sunday night segment The Week Ahead, Richelle Carey spoke to Dan Kelemen, a political science professor at Rutgers University, and to Megan Greene, the chief economist with Manulife Asset Management, who joined the discussion from Boston.
“For the most part, Tsipras and the Greek government had to climb down from a lot of their big promises and their demands, although he’s spinning it as having won a battle,” said Kelemen. “In reality, he had to give up on most of what he wanted.”
Greene mostly agreed, saying that “the Greek government did have to climb down on a lot, but they did as well as they possibly could have.” She said that Greek banks may be able to use European Central Bank funding now to prop up the banking sector.
In terms of unemployment, Kelemen said the government will have to deliver sustained growth for quite some time before there can be a significant dent in the jobless rate. He said Athens will also have to tackle the underlying structural problems with corruption.
Greene said the compromises that Greece had to make actually benefited the European countries that are lending to it. She said, “We haven’t seen any financial or economic contagion, because it’s been kept within Greece.”
“It’s a huge election year this year in Europe,” she added. “There are elections in Spain, Portugal, the U.K. and Finland. There are regional elections in France and Germany. And in almost all of those countries, you have a major anti-establishment party that has gained a lot of support in the past year.”
She said we could see a major anti-establishment movement spreading throughout Europe on the back of Syriza’s victory in Greece.
But Kelemen said it depends on how the situation is spun. He said creditors will push the idea that they have forced Syriza to back down, in an attempt to send a message to other similar parties across Europe.