Greek agreement does not dispel mistrust and acrimony

The deal makes some concessions on the Tsipras demand for redrafting the rescue package conditions over the next four months. But it imposes a full endorsement of current pledges. Furthermore, it foresees Troika scrutiny on any new measures. As Greece vows to achieve the unlikely goal of “successfully completing” the present bailout, EU hardliners will fully exploit such a promise. They will block any loosening of the shackles unless tough pre-conditions are met.

“As long as the programme is not successfully completed, there will be no further disbursement,” Schäuble triumphantly claimed.

Yet, Greece has secured its partners’ agreement in its bid to reshape reform plans. With no one expecting it to fulfill current commitments, the issue will again resurface  in the coming months. At present, no one dares to trigger a Grexit scenario, and so Tsipras will enjoy ample room to score some points domestically. He will suffer no pain in explaining the deal to his fellow countrymen. They fully support his forceful attempt to scrap stiff austerity, which is widely believed to have gone beyond any reasonable yardstick. Even if he has not achieved full victory, his resolute stance will have garnered widespread support back home. For the first time, a hard-pressed debtor has openly defied creditors, enhancing national pride. Those who drove Greece to an undignified position are to blame for such an utter blunder.

Tsipras has won the upper hand in political terms, for all the concessions made. Thus, his rebellion will propel other extremist parties around Europe eager to blame the EU for all wrongdoings and failures. Yet, he would be well advised to stick to the reforms and restrain spending to stave off a downward shock hitting the Greek economy. He inherited a promising recovery likely to derail under current uncertainties. His Achilles’ heel lies in his domestic economy being badly damaged by his own cliffhanger tactics. Unless he delivers growth and confidence, things could turn nasty.

Greece’s ability to pay back creditors seems doomed. So, why should its government worry about credit obligations that will only materialize in a couple of decades? Redressing the economy should stand as its sole paramount goal, Tsipras’s record being judged on this standard alone. By pushing negotaitions with partners to a make-or-break point, he will receive little sympathy  from them when he most needs their help. He should engage in a confidence building endeavour to recover good neighbourly relations which have been badly damaged by Varoufakis shocking behaviour.

The Greek government strategy which focused on reshuffling the rescue package has paid off for the time being. Yet its main hurdle lies in bolstering the banking system, enabling it to finance enterprises and households on proper terms. The ECB credit facilities will remain closed as long as  firm evidence on a likely completion of the current package is not delivered. In the meantime, Greek banks face a tough environment, worsened by the agreement’s clause withdrawing €11 billion earmarked for financial rescue. Frankfurt will continue exerting pressure on Athens until pledges are duly honoured. A bad omen when the credit crunch exerts such a devastating blow to the economy, hampering its chances of recovery.