After a very long session that lasted nearly 25 hours, the Greek government through 222 MP’s said a clear YES to the terms of the third bailout agreement. This strong positive vote provided to Euclid Tsakalotos, the Greek Finance Minister, the necessary tools to seal the deal with his counterparts, which realized late last night at the Eurogroup’s meeting.
However, Syriza didn’t manage to sustain a minority government falling below the 120 MP’s. The latter is about to cause serious reactions and as indicated by some members of the governing party, it is highly likely that Alexis Tsipras will ask for a confidence vote to the Greek Parliament.
Apart from the Greek issue which has created serious concerns to the bloc, it seems that Europe as a whole is facing difficult times. According to Eurostat, the statistical office of the European Union (EU), the pace of the quarterly growth rates of GDP slowed to 0.3% from 0.4%, slowing down the European economy.
The Old Continent does not seem to grow since its major economies are experiencing negative economic performances. It is time for France and Italy to act and perform serious reforms in order to come back from the abyss that have fallen during the last 2 years.
Positive vote for Europe with negative consequences for Syriza
The left-wing Syriza party managed to pass all the prerequisites in order to lead to an agreement with its creditors but had 31 “leaks”. That was enough to cause turbulences to the Greek Prime Minister who seriously now thinks of conducting a confidence vote that would possibly lead to early September elections.
This move (if implemented) is going to take place after August 20 when the first tranche of 26 billion euros will have been provided to the Greek government in order to pay its obligations and recapitalize its rotten banks. Alexis Tsipras also bets on the fact that many of the MP’s who voted against this programme will fear of being deleted by the party and lose their parliamentary rights.
It is true that except for this move, there is also the possibility of having early elections in Greece. However, even if such an event may be beneficial for Syriza in terms of becoming stronger in the parliament, it will for sure be disastrous for the Greek economy at a point in time when the third bailout programme is about to launch.
Eurogroup agrees but debt issue will not be discussed before October
The third bailout programme is a reality for Greece with the Eurozone Finance Ministers to agree to provide further financial aid. Despite the strong opposition of the German Finance Minister who was promoting the solution of a bridging loan, the deal was sealed last night with the 86 billion euros package to be granted for the Greeks. More specifically, Jeroen Dijsselbloem, the president of the Eurogroup, welcomed the deal of the institutions with the Greek government and mentioned that is in line with the agreement of July 12. Further, Mr Dijsselbloem referred to the restoration of the trust between the two parties due to the initiatives of Greece to vote the necessary reforms in the Parliament.
The main issue during the Eurogroup meeting was the participation of the International Monetary Fund (IMF) in this programme. The institution, as indicated by Christine Lagarde, the head of the IMF, will not participate unless a debt relief is realized in order for the debt to be viable. Thus, taking this into consideration and after long talks, the Eurogroup decided to reevaluate the debt issue after the first evaluation of the programme in October. The pressure of the IMF has changed the minds of many countries that were opposed to the issue making things ameliorating for Greece.
The European economy is still suffering; no growth for the biggest economies
The Greek problem is not the only issue that plagues the EU. Eurostat announced yesterday a flash estimate of GDP growth for the second quarter of 2015 showing that the Euro area doesn’t seem to be able to find its way back to growth despite the long attempts of the EU leaders and officials, especially the European Central Bank.
The countries that have increased their GDP growth rates are mainly the Baltics. It seems that Estonia, Lithuania and Latvia have noteworthy noted changes compared to the previous quarter.
However, the great problem lies on the growth rate of the biggest EU economies. In detail, France was the worse candidate realizing a zero GDP growth rate, dropping 0.7% from the first quarter. Also, Italy’s growth rates decreased to 0.2%, a 0.1% change from the previous quarter. The aforementioned facts clearly show that something is wrong in the Old Continent and needs to be changed “yesterday”.
The slowdown of the Chinese economy may be one of the contributors for the latter to take place but the EU should not find excuses in order not to face its major growth problem. On the contrary, on the other side of the Pacific Ocean, the United States experienced a 0.6% increase in the second quarter which makes us realise that the Chinese economy deceleration is not the main cause of the sluggish EU growth.
All in all, the agreement of the third bailout programme for Greece could contribute to the growing of the EU economy if a debt restructuring is considered but the EU leaders must realise that it is not only the Greek problem that hurts the EU economy but the growing prospects of the biggest countries.