Greece Seals the Deal, Finally, But What's Next?
After months of ups and downs over whether Greece could raise money on its own to cover its deficits, concerns about a default of its national debt, and posturing by Germany, the southern European nation got its bailout.
The aid package, which will be funded by the IMF and 15 eurozone nations, will total between $130 billion and $160 billion over three years. The first year of the package will be worth $30 billion. It's too early to tell how quickly Greece can cut its budget to say for certain what the final amount will be.
Greece is due to begin paying principal on some of its debt on May 19, and the country wasn't able to raise the money to do so.
Germany's Role in the Bailout
The bailout couldn't have been arranged without the approval of Germany, the largest nation in the eurozone by GDP. The aid plan has been unpopular there, and Chancellor Angela Merkel is concerned that her party could lose votes in upcoming elections. Enough German politicians decided to support the viability of the eurozone and its currency to gain final approval for the nation's participation in the plan.
The aid package hardly ends Greece's problems. The country's debt is over 100% of GDP, and the national deficit was 13.6% of GDP last year. Greece has had trouble keeping its books. Three weeks ago Eurostat, the EU's statistics office, said that the Greek budget deficit had been underestimated.
The major concerns about Greece's future are that its citizens won't accept what is expected to be nearly $40 billion in budget cuts over three years. The nation may create a value-added tax to bring in additional revenue. The pay of government employees will be cut sharply. Greek workers have already staged a number of strikes to protest the package.
It is these protests and the question of whether they will grow and disrupt GDP improvement in Greece that are the biggest "wild card" in whether the bailout will be a success.
