Will the New Deal between Greece and lenders work? field_506ffbaa4a8d4

Athens – The new Agreement for Greece, obtained after long term and tensed negotiations among Eurozone leaders and finance ministers has given Greece a last- may be – chance to hold on to Euro as its national currency or will lead to a new austerity dead end paid by the usual unlucky ones?

Despite the fact that austerity in Greece has become a necessary evil, it was proved too much for the country’s polarized politics and angry society to bare. Stricter measures and deeper cuts in an already depressed economy will threaten the already fragile political stability, while elections remain.

European officials and economists share strong doubts whether Athens can respect the economic plan. All Greek governments up today, stick to over taxation, have failed to implement structural reforms and limit public spendings, respecting the society’s obsessions.

After five years of Memorandum, Greece remains a small, largely agrarian economy, unable to respect financial controls and allergic to reforms and  private sector. Mr. Konstantinos Yfantis, Professor of International Relations, answered our questions regarding the New Agreement between Greece and its lenders.


What are the strong and the weak parts of the New Deal between Greece and its lenders?

Given the fact that Greek economy went back to 2011 standards and the banks are facing huge problems, the program-following the classic recipe of spending cuts and tax increases- aims at harnessing the deficit and recapitalizing the banks. The most possible scenario is that once again, a Greek government will deny limiting the public cuts in order to avoid tax increases. The greatest loss will be in the field of pensions and insurance.

It is indeed positive the fact that there will be a more strict schedule with regards to the discussion on the sustainability of the debt, in the November or December. This specific schedule is due to the fact that the economy’s management the last six months has made the debt really not sustainable.

Do you thing that the creditors are more “experienced” comparing to the past and will observe closer the implementation of the program?

The Greek economy’s rescue bears a bigger political cost for the creditors, their national parliaments and their societies. Therefore, the monitoring will be stricter and such will be each disbursement. There is a strong mistrust that Greece will respect its fiscal goals and will implement the necessary structural changes.

The necessary reforms will finally be implemented?

A rapid implementation of the structural reforms, which is absolutely a matter of political will, is the only way to alleviate the injustices contained in this program. The big stake always remains the state’s limitation not quantitatively, but the cost reduction of the state. The only way to move forward is the opening of the economy and the liberalization of professions. This will regain the trust versus the Greek economy, will attract investments and will lead in a development, even a slight one. In the meantime the measures will be tough, especially for the week parts of the society. This is the thing that no Greek government up today, even the current one which claims to be in favor of the week ones, has realized: the bill will be paid by those who are supposed to be protected by the government.

Might the agreement be seen as a chance to correct EU flaws and lead to a European economic recovery?

Certainly Europe will recover, but not at the pace that the more flexible economies like the American do after the recession, main due to its structural weaknesses. One of the reasons which led to this deal with Greece was the fear that a potential GREXIT would have put in jeopardy the slight development of the European economy.

The great stake in Greece is political and tightly related to political stability. The Greek governments must realize that development in the globalized capitalism can be assured only by a liberal economy and the wealth is produced by the private sector having a playing field.