Extension Given to Greece: The Greek Tragedy Plays Out

Eurozone ministers have given approval to extend the Greek bailout. This paves the way for another installment of payments and now official creditors can discuss a new program over the next quarter.

After the approval was given, yesterday, Greek 10 year Government Bonds yields moved lower. At around 1430 GMT they were 8.675 percent. This was down from the previous recording at 9.568 percent. The Athens Stock Exchange jumped nearly nine percent higher.

Earlier in the day, the Greek Finance Minister Yanis Varoufakis sent a list of reforms to the Eurozone officials. This occurred around midnight just in time to make its deadline. These measures included ways to fight tax evasion, pension plan reforms, early retirement incentives and a new review to curb public spending. They also agreed not to roll back privatizations that had been done.

In a letter, returned to Greece, creditors, including the International Monetary Fund (IMF) gave their approval. Director of the IMF Christine Lagarde, said the plan covers all the broad topics they hoped it would cover. However there were no clear assurances made regarding comprehensive tax and pension plan reform. These are two key areas.

The European Central Banks (ECB) also welcomed the plan. In a letter to the Eurogroup, ECB President Mario Draghi urged all sides to move “swiftly.” The ECB would like to see stabilization in the payment culture and no unilateral actions by either side.

What is next? Individual European Union (EU) member states now have to green light this plan. The biggest critic, and obstacle, to this plane is Germany. They have been openly critical of Greece’s new anti-bailout government and will debate this issue on Friday.

Since its election to power, the New Greek left wing anti-austerity government has butted heads with the EU. They want to renegotiate the country’s bailout conditions which have crushed Greece’s economy. However, this latest compromise is way softer than their original stance.

Even though other countries like Ireland and Portugal have level the bailout program, Greece still need financial aid. To date they have taken over $272 billion in aid to help their economy from crashing.