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To stay in the euro, Greece forced to accept close supervision

Alexis Tsipras,  lors de sa déclaration  à la presse, après  les 17 heures  de négociations  qui se sont tenues  de dimanche à lundi,  à Bruxelles.

Alexis Tsipras, in his statement to the press, after 17 hours of negotiations held from Sunday to Monday in Brussels Photo credit: Francois Walschaerts / AP

The compromise reached in Brussels has many dots and the ax hangs over Athens.

Greece remains in the euro, the cost is exorbitant. For the insurgent Alexis Tsipras, who sees his country under trusteeship monetary, fiscal and political than six months after it Syriza gained power. And for the Monetary Union, paralyzed by the Franco-German differences, the increase in the bill and the continuing risk of amputation.After seventeen hours of closed session that almost scuppered in the morning, Greek Prime Minister, Francois Hollande, Angela Merkel and peers did not agree on a rescue plan in due form. The 19 euro separated by leaving a schedule of maturities close together, with a lot of dots. “After implementation and verification”, it would enable the EU, the ECB and the IMF “to negotiate a memorandum of understanding.” The final declaration of the summit evokes neither the risk of Grexit dreaded since the spring, or the “provisional release” of the euro during the hectic weekend Berlin. But it is clear, reading the text, that if Greece were to leave the corset forged yesterday she would find almost immediately ejected from the common currency. If Angela Merkel has been less intransigent than his lieutenant Wolfgang Schäuble, the ax hangs.

A marked path

Conversely, if successful a third bailout of Greece – on the order of 85 billion over three years – would add to the 225 billion public debt already held by the euro rescue fund (85%), the central bank in Frankfurt and Institution of Washington. To meet immediate deadlines 12 billion in bridge loans would be made available between now and 20 July, and then in mid-August. The Eurogroup should discuss the possible modalities from yesterday. Eight days after a referendum that saw the Greeks dancing the end of austerity in Syntagma Square, the cut is brackish. The compromise helps the ECB refrained yesterday to cut funding that would have tipped the country into bankruptcy paralysis. The banks remain closed, limited withdrawals. The threat persists the first misbehavior. “Either we cash these draconian measures, our economy is experiencing sudden death, summarizes the Minister of Reforms Katrougalos Georges is the austerity of Europe who won.”

Greece up Wednesday night to legislate on a list of “priority actions” that shakes all the red lines established by Athens for five months. Generalization with unsteady VAT and costly overhaul of the pension system, of course. But also limit the budgetary sovereignty: this, say the nineteen “introduce quasi automatic spending cuts in case of slippage” in relation to surplus targets

Once. these laws passed at the Vouli and mandatory green light by the Bundestag and other parliaments five (Austria, Estonia, Finland, the Netherlands and Slovakia), the actual discussion of the bailout will begin. Alexis Tsipras, figurehead of the European extreme left will then swallow other snakes: the continuation of the mandate of the IMF beyond the spring of 2016, the introduction of novel collective redundancy procedures in Greece, the “rigorous review “union power and collective bargaining.

Politically, the hands of the Prime Minister, or his successor, would be linked for three years. The government “will have to consult the institutions (creditors) and agree with them all proposed legislation” linked to the recovery plan, and that “before submitting it to public consultation or Parliament,” insist the nineteen. More referendum so. Greece loses a part of its sovereignty. The troika, officially reinstalled the same trait in Athens, gets powers akin to those of a regent.

Last Stand

This loss of face, among others at the insistence of Germany, adds a political risk in a scenario that already includes many. They could reach coalition government until failure, with the hazard of early elections incompatible with the tight schedule dictated in Brussels. From there to search for the suspect Berlin Grexit by other means at the same time as the elimination of the leader of Syriza, there is a step taken in Greece, and even in France.

The consensus seemed at hand, it is on another front that the Prime Minister has chosen to lead his last stand: the creation of an “independent” privatization fund 50 billion, which would also have been a performance bond to virtually discretion of the euro countries. “At six in the morning, we found ourselves near the Grexit says a relative of Donald Tusk. The Germans and Greeks told us that there was no basis for compromise. ”

Angela Merkel wanted to install the fund in Luxembourg and dip into the privatization product accelerated to repay debt. Alexis Tsipras refused any sequestration of assets out of the Peninsula and wanted to devote the proceeds to investments in Greece. They eventually split the three: 12.5 billion will be used to reduce the debt ratio, 12.5 billion investment and the rest indirectly in the recapitalization of Greek banks. The power will remain geographically in Athens, “but under the supervision of the European institutions”. Ambiguity, among others.

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