Details of Greek deal leave Germany firm winner in debt battle

Details on the Greek deal were finally released this morning, and if it was unclear who the winner in this saga was beforehand, there is no ambiguity now.

Though they, especially the Grexit-seeking Wolfgang Schauble, won’t necessarily see it this way, the Germans have effectively got what they wanted from any third bailout agreement. The expected pension, market and labour reforms were all there, as were steps for strengthening the financial sector. Unhappily for Greece so too is the IMF, which the country will ‘request’ support from in March 2016. To further the bitter aftertaste this deal will leave, the Syriza government will have to ‘re-examine’ some of the measures they implemented, or indeed overturned, since they came into power, whilst the much sort after debt relief talks have been kicked far, far down the road.

Yet nothing captures the German victory in this debt-battle than the transference of €50 billion in high value Greek assets to a fund for privatisation, €25 billion of which has been ear-marked for ‘repayment of recapitalization of banks and other assets’ whilst the other half will go to reducing the Greek debt to GDP ratio. The only concession to Greece appears to be letting the country keep the €50 billion privatisation fund in-house; even then it will be under the supervision of the relevant ‘European institutions’. Given that this is was a red line for Greece right up to the wire, as well as the fact that reports suggest Germany was the one who wanted €50 billion compared to the €5-€10 billion floated by other countries, and Merkel can leave Brussels with a smile on her face.

Not that her smile will last for long; now begins the hard part. The Greek parliament needs to pass through a series of legislations by mid-week before Merkel will even take the deal to the Bundestag. Given, however, the current popularity in their relative governments, Tsipras might have an easier task on his hands than the German chancellor. The Eurogroup will also this afternoon discuss a finance bridge for Greece, reported to be €7 billion by July 20th and €5 billion by the middle of August, whilst the looming issue of the Greek banks and ECB ELA still needs to be resolved. The sheer amount of things to do might explain why the Eurozone indices, and the FTSE alongside them, are in the green, but not posting the robust kind of gains they have shown off in the past couple of months.