This must be the day when everything gets sewn up into neat little packages. The Greek government has announced a deal has been reached to secure their second bailout, though one junior partner has not confirmed agreement. The head of the European Central Bank is saying a deal has been done as well.
Mario Draghi, head of the European Central Bank, has confirmed that the Greek government has reached a deal over the outstanding issues surrounding Greece’s second bailout.
Draghi told reporters in Frankfurt that Greek prime minister Lucas Papademos had phoned him in the last few minutes and declared that an agreement has been reached and endorsed by the major Greek political parties.
Draghi added that the Greece austerity deal will be discussed by eurozone finance ministers in Brussels tonight.
State-run TV is also now reporting that there has been an agreement.
Much like the foreclosure fraud settlement, the terms have not yet been disclosed, and probably won’t be until the finance ministers meet tonight. But we know that the “troika” – the EU, the IMF and the ECB – wanted a series of really crushing austerity measures, including the firing of 15,000 more public workers, cuts to private-sector wages, and cuts to supplemental pensions. Earlier the supplemental pension cuts were seen as a stumbling block to an overall deal, but that has been resolved, reportedly by using other cuts to defense and elsewhere to plug that hole in the budget.
National unions promised a 48-hour strike to protest austerity. But the fix does look to be in. There’s an election planned in Greece in a few months, and considering that every party had to agree to this deal, I wouldn’t be surprised if “none of the above” emerged victorious.
Greece will receive 130 billion euros as part of the deal which will avert a disorderly default. This also allows a bond swap to go forward that will result in a haircut for Greek creditors. You can call that an orderly default because leading rating agencies will consider it that way and it could trigger credit default swaps, even though the point all along was to avoid them. And while Greece hasn’t left the euro, the brutal austerity shows that they are trying to engage in an “internal devaluation” on the backs of their people. And the leadership somehow claims leaving the euro would be worse. Tell it to the street.