The Greek bailout and Iran Nuclear deals-taking stock. IMF says debt relief necessary.
A Greek deal has been approved by the negotiators, as has an Iran Nuclear deal. Both have domestic political support headwinds to overcome before they are confirmed. So it’s time to take stock.
As predicted in this blog, a Grexit was avoided at the last minute. The Iran deal, which none of us has seen in detail, is expected to follow the outlines of the agreed upon detailed framework agreement reached back in April. It appears that the terms are a bit harsher than that turned down by the Greek people last week.
The Greek deal also appears to reflect annoyance with the former, in-your-face negotiating style of asking for help–Finance Minister Yanis Varoufakis. The latter has urged some off-the-wall proposals in the past day that have angered some in his own Syriza Party. He was also a member of the party’s Central Committee. A broad range of ministers from the EU were quite angry at Tsipras for even calling for the vote last week. Apart from all of the smaller members of the Union’s venting, the dominance of Germany and France in the EU, meant that they had the final say. It appears, as seemed likely for some time, that the terms will be more similar to those given to Spain and Ireland not too long ago. Reducing the outstanding debt by the creditors, the so-called “haircut” didn’t happen, at least at the moment. This will be significant if Greece is to have any kind of a chance at righting the sinking ship. My reading of the new deal being submitted to the Greek Parliament is that there is a sort of wink and a promise to revisit that result after the EU member pique at Greece is behind us for a while. Today the International Monetary Fund blasted the EU saying that Greece needed some debt relief, so I’d imagine the wink has a good chance of becoming real sooner than later.
Tsipras is likely to face some opposition to the agreed upon deal from the hard-line Left in his own party. If so, I suspect he will make the vote on it a “vote of confidence” rather than a conventional parliamentary vote which would have possibly forced new elections. The deal will, in my opinion, be affirmed by Parliament with the likely support from his main opposition party. This may result in a National Unity Government, which might well be necessary to effect the changes in any event.
The Iran deal, as I noted earlier, though fraught with angst over Iran’s willingness to adhere to it’s terms, is still likely to be a Win-Win situation for both sides. It may not have eliminated all nuclear activities, but it reduced them considerably, particularly in terms of weapons grade material. Importantly it will put sophisticated nuclear materials inspectors on the ground. As Obama said today it would “permanently give the International Atomic Energy Agency (IAEA) access “where necessary when necessary.” It may not be perfect but it’s better than thing now are, and it’s well worth the trade-off of a phased out sanctions removal that can easily be reinstated or increased if the terms of the agreement are not met. This judgment is subject to a careful reading of what the final terms were. If it lifted the embargo on conventional weapons, then I would have to withdraw my support for the agreement. Those weapons make their way to Hamas to be used against Israel. The embargo, by the way, has been only partly successful. It merely slowed down the flow of weapons to Hamas, and made only slightly more difficult the ongoing resupplying of arms to Hezbollah. In the so called P5+1, the nations that negotiated this agreement with Iran, Russia supported the Iranian position on the conventional arms embargo. This isn’t surprising as Russia is an exporter or those weapons.
I would expect that we won our position on the conventional arms embargo and gave a bit on the timing of sanctions removal in exchange.