Greece has agreed to submit a preliminary list of economic reforms to its creditors for this morning which may form the basis of negotiations on a new financial settlement for the country. The Greek Finance Minister Yanis Varoufakis has agreed to a four-month extension to the current bail-out agreement in return for the opportunity to negotiate different repayment conditions than those originally pledged.
The amount which Greece owes is around €323bn which it received in an attempt to rescue its economy from challenging circumstances in two bail-outs. The amount which Greece borrowed it owed to more than one creditor with 60% belonging to the Eurozone, 10% to the International Monetary Fund (IMF), 6% to the European Central Bank (ECB) and the remainder being from Greek banks, foreign banks, Bank of Greece and other bonds and loans according to Open Europe.
The reforms that Greece submitted still need to be accepted by its creditors so there may continue to be negotiation and certain conditions from the original terms might be extended at some point today. Only on the acceptance of the reforms by the creditors may the four-month extension be confirmed. The Greek Minister of State, Nikos Pappas, says that the reforms may involve a streamlining of the civil service and a bid to reduce tax evasion within the country. The Syriza party made substantial gains in the elections by promising to reverse austerity measures which were part of the original agreements between Greece and its creditors.
The reforms have the opportunity to be an example of compromise with the Greek government aiming to extend its current repayment conditions although also securing a renegotiation during the four-month period. Equally, the creditors get the opportunity to approve the proposed reforms whilst also keeping Greece within the Eurozone and the European Union. The manoeuvring of the Greek government towards a solution incorporating compromising reforms may highlight the importance that Greece’s Eurozone membership commands within the country. Recently Greece’s creditors have been underlining the importance of substantial and structural reforms that may go some way to preventing the need for future financial relief being supplied to the country. It appears that a willingness to implement satisfactory reforms may lead to an opportunity to further negotiate changes to the loan conditions.
Since the Syriza party’s establishment of a coalition government it has appeared at times that this might lead to challenges in the EU and Greece’s relationship, although this agreement appears to highlight the role which diplomacy and negotiation may play in global politics. In an international climate with the situation between the Ukraine and Russia continuing it is important that the EU takes the opportunity to hold a united front and highlight the ability of diplomacy and negotiation in solving challenging international situations. Equally, Greece has seen 12,872 migrants attempting to cross the Aegean Sea from Turkey according to Migrants at Sea. Greece’s relatively close geographical proximity to countries such as Syria, Iraq and Libya means that it is seeing substantial numbers of migrants seeking refuge within the EU. It may appear a benefit to recent economic developments may lead to increased EU support in helping those migrants seeking refuge from ISIS or challenging circumstances in other countries such as Libya.
The Syriza government’s opportunity to submit its own list of economic reforms in an attempt to renegotiate those accepted by its predecessor is a breakthrough for Greece. For the Eurozone the opportunity to accept the reforms before continued negotiation secures the creditors position and encourages structural reforms that may lead to a more secure economy in Greece over the long term. Whilst in Greece there seem to be some who challenge that the government may have pushed for more changes Syriza appears to have secured and the possibility to ease the economic austerity programme it has followed in recent years. It may appear that the German Chancellor Angela Merkel, who is seen as the de facto leader of Greece’s creditors, is facing important negotiation with Greek Prime Minister Alexis Tsipras over the economic future of both the Eurozone and Greece.
How may the agreements improve relationships and co-ordination between members of the European Union?