Greece Will Defy Europe Yet Again

It looks like the latest Greek bailout deal is about to be put to bed. Greece has passed the required legislation, the deal has been okayed by the relevant donor parliaments, and the debt buyback required by the IMF is almost complete. All systems are GO for lift-off.

However, this latest deal is not just a xerox copy of the prior (failed) deals. At the insistence of the donors, it contains what appear to be some real teeth. In trying to reconcile the need to prevent Grexit while forcing Greece to comply with its demands, the Troika wants to do to Greece what the US used to do to Central America back in the good old days. Just as the US Navy would take over customs collection until its bonds were redeemed, the Troika will take control of Greek revenue and expenditures, or so it believes.

The new deal includes the following conditions:

1. Disbursements are conditioned on Greek fulfillment of its specific promises. For example, the upcoming disbursement of 9.3 billion euros requires that the Troika certify that the Greek government met a January deadline for implementing tax reform. (It is unclear if that means merely passing the legislation or actually changing the tax system, a crucial distinction in a country where legislation means nothing.)