What do you think? Leave a respectful comment.

Deal struck, pain and political hurdles ahead for Greece

Greece struck a debt deal after a long night of negotiations with European creditors. According to the preliminary deal, the nearly bankrupt country will receive a $95 billion bailout over three years, and be subject to tough austerity measures. Special correspondent Malcolm Brabant reports from Greece and Judy Woodruff gets reaction from Eswar Prasad of Cornell University.

Read the Full Transcript

  • JUDY WOODRUFF:

    The nation of Greece and its creditors reached a preliminary deal to avert immediate financial collapse, but it demands that the struggling country make major concessions and means continued sacrifice and hardship for its people.

    NewsHour special correspondent Malcolm Brabant has this report.

  • MALCOLM BRABANT:

    Prime Minister Alexis Tsipras emerged after a long night of bitter negotiations.

  • PRIME MINISTER ALEXIS TSIPRAS, Greece(through interpreter):

    Until the end, we battled to get an agreement to get the country back on its feet. We were faced with a very difficult decision within hard dilemmas. We took the responsibility to decide in order to avert the most extreme plans by conservative circles in the European Union.

  • MALCOLM BRABANT:

    German Chancellor Angela Merkel was one of those conservatives who ran a hard bargain with the Greeks. They seemed ready to quit until European Council President Donald Tusk, who is also president of Poland, persuaded them to keep at it.

  • DONALD TUSK, President, European Council:

    The decision gives Greece the chance to get back on track with the support of European partners. It also avoids the social, economic and political consequences that a negative outcome would have brought.

  • MALCOLM BRABANT:

    Meanwhile, in Athens, pensioners saw no reason to celebrate, as they queued up to withdraw money outside closed banks.

  • KATERINA MANETI, Greece (through interpreter):

    They're acting thoughtlessly. Our current politicians are experimenting on us.

  • MAN (through interpreter):

    Tsipras was put in a corner and he had to make this deal. We will have to swallow this and see how it goes.

  • MALCOLM BRABANT:

    The near-bankrupt country will receive a $95 billion bailout over three years, but the deal mandates tough conditions on Greece, ones its voters rejected just one week ago.

    The deal calls for streamlined pensions, raised taxes and reform to the labor market. Two hours boat ride from Athens, dawn broke on the island of Angistri, with its 1,000 residents unsure of their future. This has traditionally been a summer playground for Athenians, but cash-poor Greeks have stayed away over the past five years.

    At the small clifftop hotel run by Nondas Agianozoglou and his family, there's none of the tension that exists in Athens. But this tourist industry veteran shares his countrymen's fury at the perceived harshness of the measures imposed on Greece.

  • NONDAS AGIANOZOGLOU, Owner, Rosy’s Little Village:

    You can't force a people that doesn't make money to cut down his salaries, his pensions, pay higher taxes, and pay out his debt.

  • MALCOLM BRABANT:

    But a pensioner from Holland enjoying the Greek seaside said his hosts had long been living beyond their means.

  • JAN MEYERS, Dutch Pensioner:

    A policeman of 46 years. After 25 years of work, go on pension with 100 percent of his salary, it's crazy. There's no country that can pay that.

  • MALCOLM BRABANT:

    The tourist industry, which is one of Greece's most important foreign currency earners, will have to bear some of the burden of financing the new bailout package. Hotels and restaurants will have to pay more in sales tax. And there are fears that this could drive away vacationers in what is a highly competitive Mediterranean market.

    MICHALI PANDOU, Chairman, Angistri Chamber of Commerce: The other touristic places in the Mediterranean are already cheaper than us. And if we try to increase it, we're going to have to minimize the tourists that possibly want to come to Greece for holidays.

  • MALCOLM BRABANT:

    But holidays are perhaps the last thing on the minds of many on the streets of Athens. Left-wing groups are urging workers to go on strike in protest against the bailout deal and they are organizing demonstrations over the coming days.

    Their aim is to convince Greek lawmakers to reject the E.U. proposal and to trigger Greece's exit from the Eurozone. The country's continued presence within the euro depends on Prime Minister Tsipras convincing Parliament to enact emergency legislation by Wednesday. He faces a certain revolt from within his governing coalition, but he should secure enough votes to make sure that Greece remains financially afloat.

    For the PBS NewsHour, this is Malcolm Brabant in Greece.

  • JUDY WOODRUFF:

    Let's zero in on what Greece and the rest of Europe have agreed to and the power dynamics around this.

    Eswar Prasad watches all of this as a professor at Cornell University and a senior fellow at the Brookings Institution. He's also worked for the IMF.

    Welcome back to the program, Eswar Prasad.

  • ESWAR PRASAD, Cornell University:

    My pleasure.

  • JUDY WOODRUFF:

    We just heard some of the conditions the Greek people are going to have to live up to in order to make this agreement work. What do they really mean for the Greek people?

  • ESWAR PRASAD:

    This is total capitulation at one extent to what the Germans and the others have demanded.

    Greece has agreed to do basically everything that the Germans and the others in the Eurozone feel is necessary to turn around the Greek economy, make it more competitive again. And some of these things will have to have been done in any case, because the Greek labor markets are sort of frozen up, the product markets aren't very competitive, which means that entry into certain professions is not very easy.

    The tax burden is still very low. The tax administration is not good. The public administration costs too much. So they have basically agreed to reform all of these, in the hope that their economy can become more competitive. And in the interim, the deal is that they will get some money that will get them through the next three years.

  • JUDY WOODRUFF:

    So, as you're suggesting, adjustments in pensions, higher taxes, what they're calling labor market reforms. What does that mean?

  • ESWAR PRASAD:

    That essentially means that it will be easier to fire workers. Right now, it's difficult to shut down firms, to fire workers.

    And the collective bargaining agreements are not making the labor market vibrant enough, which means that firms are very reluctant to hire workers because it's very difficult to fire them. And the wage structure is also very complicated and makes it difficult to cut wages, although Greek wages have fallen quite significantly.

    So, Greece has actually done a fair bit in the last few years, but the problem is not enough to make the economy competitive and they still have a crushing debt burden.

  • JUDY WOODRUFF:

    They believe that this is going to make a difference, that this is actually going to bring down the Greek debt? They're not getting actual debt relief, as I understand it, with this deal. Is that correct?

  • ESWAR PRASAD:

    That's the crucial issue. The deal on the table about three weeks ago was in fact a slightly better one.

    And then Prime Minister Tsipras said he would have a referendum. The referendum took place on July 5. And that shattered the trust that the other Eurozone countries had in Greece, so now they have said you have to implement some of these measures and some of these measures in fact have to be in place by this Wednesday.

    And then the Greeks will get some debt relief, again not a write-down of their debt, but a longer period over which they could pay it back.

  • JUDY WOODRUFF:

    Why did Prime Minister Tsipras and the rest of the Greek leadership agree to this?

  • ESWAR PRASAD:

    At this point, they really had no choice.

    Germany and the other hard-line countries in Europe had made it very, very clear that there was no other deal on the table, and in fact even this deal came together only at the very last minute. So the alternative would have been to exit the euro. And the Germans made it clear that they were willing to consider this possibility.

    So Tsipras was left with no options. And now he's had to accept this deal, which is not a great one for Greece, because it may help in some ways in terms of getting the economy back on track, but I'm not sure it ensures the economic viability of Greece within the Eurozone still.

  • JUDY WOODRUFF:

    What happens, Eswar Prasad, if Greece is not able to fulfill these reforms, not able to carry through on everything that they say they will do?

  • ESWAR PRASAD:

    It is going to be a very difficult political slog to do by Wednesday what they need to do.

    If they can do that, that passes them past one hurdle. But I think it's still going to be very difficult because it is going to be enormous and wrenching pain in the Greek economy, which is going to lead to social and political instability.

    If all of that happens, I think a very clear line has been drawn in the sand that if the reforms are not implemented, then Greece is going to have to exit the Eurozone, and it may well come to that.

  • JUDY WOODRUFF:

    Meanwhile, if you look back at the bigger picture here, what does all this say about the political relationship between Greece and the rest of Europe, the internal political dynamics on the continent?

  • ESWAR PRASAD:

    It's almost become a morality play at one level, with the French view, for instance, that it's important to keep the Eurozone together no matter what the cost, and the views of the Germans, the Dutch and the Finns and so on that if the Eurozone is to be preserved, all the rules have to be preserved and maintained and that giving Greece a free pass will not do.

    Greece has surrendered some degree of sovereignty here. Essentially, it's allowed or given permission to the so-called Troika, the European Commission, the European Central Bank and the IMF, to come back and supervise what the Greeks are doing. So in that sense, Greece has basically said, we are willing to take you in and you can discipline us and that we will commit to do what we are doing.

    But Greece essentially has given away a lot of its political and economic levers in order to remain in the Eurozone.

  • JUDY WOODRUFF:

    But this has opened up, you're saying, a significant divide inside the European Union itself. ESWAR PRASAD: This has exposed very clear rifts within the Eurozone.

    And I think no matter what happens to Greece, that's going to be very difficult to put together right now, because it's clear that there is going to have to be a reconsideration of the political governance structure. I think many of the countries that feel that Greece got a difficult deal here are not going to, I think, suspect Germany taking the lead on these issues anymore. So, it is going to be a fraught time for the Eurozone ahead.

  • JUDY WOODRUFF:

    We have been watching it for days. Now we know the result. But it will continue.

    Eswar Prasad, we thank you.

  • ESWAR PRASAD:

    Thank you.

Listen to this Segment

The Latest