The worst-case scenario for Greece -- the country's financial collapse or a forced exit from the European Union -- has been averted, at least for the moment. The situation was temporarily saved by an agreement between Greece and the EU to extend the financial rescue program by four months beyond the end of February. However, the most important issues facing the country, such as debt and structural reform, have merely been deferred to further discussions, while many Greeks are reacting angrily to the austerity measures forced on the country as conditions for the program.
The four-month extension falls short of the six months requested by the struggling nation. No agreement has been reached on specific steps Greece has been required to implement for structural reform, such as cuts in budgetary expenditure and sell-offs of public assets. Official procedures for the extension of the bailout program will start only after Greece draws up reform plans and has them accepted by the EU and other organizations.
Greece was seen as likely to run out of money as early as the end of March if the country failed to reach a deal to extend its rescue plan. Instead of being content with the latest deal, however, the new Greek government under Prime Minister Alexis Tsipras has to do its job. The first thing that it should do is work out a list of feasible reforms and a road map for achieving self-sustained economic growth based on financial support. Once in power, the Tsipras administration is responsible for explaining to the Greek people the need to wean the nation off dependence on protection and to manage policy measures pragmatically.
The euro currency system is being pushed hard by Greece, a small country, accounting for slightly less than 3% of the area's economic size. The political leaders of major European nations such as Germany and France should look squarely at the reality of European economic integration.
The Tsipras government was formed as a coalition between the radical left-wing party, Syriza, and an anti-EU right-wing party, after Syriza won in January with campaign promises such as pension hikes and pay raises for public-sector workers. There is no doubt that such populist parties may also gain greater presences in other countries where the public have also grown weary of austerity measures.
Reasonably enough, efforts should be made to stave off the possibility of immediate turmoil in finance markets worldwide and Greek bank failures. The worry is that a global financial crisis might originate in the eurozone again. Essentially, however, the Greek crisis has dimensions that go beyond the borders of economy. From a geopolitical point of view, it is extremely important to maintain Greece as an economically stable member of the eurozone, since it is geographically close to Russia, currently at loggerheads with the EU.
The strong line that the Tsipras government consistently takes in negotiations with EU leaders seems to stem from its awareness of the strategically important position their nation occupies for eurozone economics. Given this, the EU has no choice but to be pragmatic and continue extending the support needed to keep the country as part of the EU.
The hope is that EU powers -- particularly Germany, considerably dogmatic in its wish to force Greece into austerity measures -- will be more flexible in responding to requests from the new government in Athens. Let us hope that the latest deal turns out to be the first step on Greece's journey to recovery.