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05/03/2012Is eurozone out of danger after Greece rescue?
The rescue of Greece brings instant relief to the eurozone, but the crisis may be far from over.
Brussels -- After months of dispute and delay, Europe's historic rescue of Greece on Tuesday spawned instant relief across the troubled eurozone, though analysts warned the debt crisis seemed far from over.
The 237-billion-euro rescue, the biggest in Europe's history, "closes the door on a default scenario with serious social and economic consequences" for the continent's sickest nation, said European Commission chief Jose Manuel Barroso.
Analysts stressed that the deal, achieved after a night of marathon talks, not only averted bankruptcy for Greece but also its departure from the euro -- a potential catastrophe for the 12-year-old currency.
As economically fragile states such as Spain saw their borrowing costs fall on news that Europe opted to maintain debt-laden Greece within the family, even euro-wary Britain hailed a deal too long in coming.
"We have got the euro zone collectively standing behind their currency which is something that Britain has urged them to do," said finance minister George Osborne. "All along the failure to deal with the Greek situation caused uncertainty."
"Hopefully we can all move on now and get the European economy growing."
But the 130 billion euros ($172 billion) in loans and debt write-off for creditors worth 107 billion euros -- or 21,500 euros per Greek citizen -- still needs approval in sceptical German, Dutch and Finnish parliaments and comes with strings attached for Greece.
Athens is being asked to quickly rewrite its constitution and make extra spending cuts despite the threat of igniting further fiery anti-austerity protests in a country saddled with around 20 percent unemployment.
Greece too faces a loss of sovereignty in exchange for rescue as the 17 eurozone nations move to coordinate economic policy and tighten integration after a decade of looser decision-making.
As Brussels tightens its monitoring of Greek policy-making, critics have blasted the eurozone for placing the onus on austerity rather than growth.
"Even with this agreement, most of Greece's problems lie ahead of it, not behind," said Sony Kapoor of the Re-Define think-tank. "Greece will almost certainly need another bailout."
"While Greece has overcome one hurdle, the country's troubles will continue to play out for years," said Rabobank analyst Jane Foley.
However Italian Premier Mario Monti, who was appointed to steer his debt-laden nation through its euro troubles, hailed Tuesday's deal as a means of halting contagion from the debt crisis to key economies such as Italy and Spain.
Asked whether the bailout marked the end of two rocky years for the eurozone, private banking supremo Charles Dallara said the euro was not yet over the hump but that the Greek rescue marked a new step in containing the debt crisis.
"I would not want to say that this is a definitive turning point. I do feel that it is part of a turning process," said the managing director of the Institute of International Finance (IIF) which groups private creditor banks.
After the European Central Bank offered liquidity to strained EU banks late last year, with the closure of the Greek deal "you now have the seeds planted I think firmly moving toward a restoration of confidence in the eurozone."
But the head of non-EU Norway's central bank, Oeystein Olsen, disagreed.
"I think it's too early to say the danger's over," the Norges Bank chief told the press. "We should be relatively optimistic but I'm not really certain that we've seen the last of the waves of turbulence ... the debt has not disappeared."
Senior economist Carsten Brzeski at ING Belgium said the eurozone had again bought time while it worked to beef up a firewall to protect peripheral economies such as Portugal against contagion.
"The often-cited Greek can has again been kicked down the road. (The) good thing is that the can is still on the road but it requires a huge amount of stamina and patience to keep it there," he said.
Claire Rosemberg / AFP / Expatica
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