by Eleni Chrepa
June 16, 2017
After months of wrangling, Greece’s creditors granted the struggling nation an 8.5 billion euro ($9.5 billion) aid payment and committed to debt relief if needed, putting an end to the latest round of political bickering. They also bound at least two more generations of Greeks to stringent austerity measures required to meet a new series of economic targets. Investors applauded the move as they digested what the latest deal means for stability in Athens.
1. What’s different this time?
The accord, reached by euro-area finance ministers in Luxembourg on Thursday, will cap Greece’s gross financing needs at 15 percent of gross domestic product for the medium term and at 20 percent thereafter, while extending maturities and deferring the interest payments on some bailout loans by as much as 15 years. Greece agreed to additional austerity measures -- equal to about 2 percent of GDP -- that go beyond the end of its latest bailout in 2018, including a lower threshold for tax-free income and a further cut in pensions. The steps will be offset by other measures if the country beats its ambitious budget targets.
2. What does this mean for Greek politics?
The decision will give Greek Prime Minister Alexis Tsipras some time to breathe “at least for the next six months, ’’ according to Nikos Marantzidis, a professor of political science at the University of Macedonia in Thessaloniki. Greece’s prolonged financial drama has made its citizens less sensitive to such decisions and a significant shift in opinion polls isn’t expected immediately. The payout will calm Greece’s financial markets, and the fact that it was larger than expected could mean fresh money can be directed to the economy starting in September, Marantzidis said.