The winners last night at the EU summit were the Greek army. Today they can relax. Their future wages are now going to be paid by more EU loans, at lower rates of interest.
The losers last night were the French and German taxpayers. They have to lend more to Greece, for less return.
The markets say they like the deal. I do not see why. It does not solve very much. It delays sorting out the underlying problems for longer.
As always with political fixes, there is plenty of spin. All have come out telling papers to write that the “Euro has pulled back from the brink”, that ” the crisis has been solved”. Surprisingly many do.
There is a lack of detail. Questions to answer include:
What happens to private sector lenders to Greece who refuse to take a haircut?
Is this a default according to the Rating Agencies? – It looks like one to some of the commentators.
Will CDS insurance trigger? Who pays that?
Is the UK going to accept a cut in the interest rate on its loan to Ireland? We were told the rate was a good one as part of the selling job on it at the time.
When will we hear of the Franco-German plan to integrate the Euroland economies more? Does anyone else get to have a say on it?
What will the UK demand as the price for its agreement to all this? Can we get some powers and money back?
Why should we believe Greece is a special case?
When will they beef up their intervention funds, so they could withstand a large country needing help?
All this looks like bad news for the better run Euroland states. They will pay more to ailing countries. They will use their own better credit ratings to borrow to lend more to the troubled countries. This could gradually erode their credit status.
Predictably the EU is going for more integration, not less, for doubling the bet on the Euro rather than quitting. They have a lot more to do to create a functioning transfer union. It is going to need much more money to fix, and a further major shift of decision taking from member states governments to the centre. Germany should remember how much it cost and how long it took to fix East Germany, and that was part of the same country. Greece, Portugal and the rest will prove altogether more difficult.
It’s a bit early to open the champagne.