On June 22,
at three o’clock in the morning, officials in Brussels declared a victory for
the Eurozone’s last intensive care patient after eight years of public spending
cuts, and cleared Greece to borrow from markets after August 20.
Austerity
has brought some important results. Greece balanced its budget, so it is living
within its means. Its exports are rising, so it is bringing in much-needed
foreign revenue. The assurance of creditworthiness from the International
Monetary Fund and the European Stability Mechanism – the sovereign distress
fund that now owns most of Greece’s debt - is an important signal to markets.
It should mean that Greece can start to rebuild its credit history and
refinance its debt.
Other
aspects of the deal are less reassuring. Supervision of public spending will
persist for the next 40 years, so Greece hasn’t really graduated - it’s on
probation. During those two generations, Greece must set aside an average of
2.2 percent of its economy to repay its creditors. This means that it will
remain belaboured by austerity policies that presently include uncompetitively
high taxes.
