Nothing is set in stone yet. But if a draft of demands from Eurozone finance ministers to Greece's leaders holds up, the country could be about to enter a period of financial and economic crisis that will trump the past year of turmoil.
The proposal amounts to a massive transfer of sovereignty from the Greek people and government to wealthier, northern European neighbors. While the attitude of many foreigners towards Greece is "tough luck," the colonial overtones of the effort, and the limits placed on Greece's leaders, as if they were recalcitrant children to be sent to bed without their supper, will rankle the Greek electorate.
How much and to what effect is the question. Perhaps emotional attachment to the euro will lead a majority of Greeks to frown and bear it. While there is certain pain for staying in the euro, there will be plenty of pain - perhaps a good deal more - if the country leaps into the unknown and abandons the common currency.
To be sure, negotiations are ongoing and furious. European opinions are split. The Germans are favoring a hard line - they've proposed a "temporary" suspension of Greece's participation in the common currency if a deal isn't struck by Wednesday - while countries like France are more worried about preserving the 19 member Eurozone. French President Francois Hollande said Greece's departure from the currency would "mean a Europe that is in retreat, a Europe that no longer moves forward."
Still, Greeks earlier this month overwhelmingly voted against a package of European demands in exchange for refinancing debt owed to the IMF, the European Central Bank (ECB), and European governments that was less stark than the deal currently on the table. And their parliament has now been handed a Hobson's choice that, even if they take it, will be hard to deliver on.
That's in part because even if parliamentary consensus can be found and Prime Minister Alexis Tsipras' left-wing coalition can hold together, they've been given until Wednesday to pass a daunting list of new legislation, all of which are technically complex and most of which will be politically controversial.
If Greece accedes, between 82 and 86 billion euros will be provided, mostly to reschedule and repay existing debts to European institutions. The country has about $12 billion more in debt coming due between now and mid-August. What are the current demands from the Eurogroup (the eurozone finance ministers) to Greece's parliament, with a supposed deadline of about 3pm eastern US time Wednesday?
1. Big changes to the tax code.
2. Pension cuts and "comprehensive pension reform."
3. A "major overhaul" of Greece's civil justice system to "accelerate the judicial process and reduce costs."
4. Laws to "safeguard" the independence of Greece's economic statistics authority (cooking the books has been common in Greece for decades).
5. A law mandating "automatic spending cuts" if Greece fails to hit primary budget surplus ("primary" means not including debt repayment and interest) targets set by Europe.
6. A string of regulatory changes allowing more business on Sundays, different laws for pharmacies and bakeries, and more competition in the ferry business, among other things.
7. A "rigorous" review of regulations around employment, collective bargaining, and ones that make it hard to fire employees.
Think on how much trouble the US Congress has passing controversial legislation. Not hard enough yet? It gets more interesting still. By July 20, the Eurogroup wants Greece to submit a proposal to start a program, "under the auspices of the European Commission," to "de-politicize" Greek administration - meaning that they want politics out of hiring civil servants and for non-Greek powers to play a major role.
The finance ministers hammered the point home thus: "The government needs to consult and agree with the institutions on all draft legislation in relevant areas... before submitting it for public consultation or to Parliament."
That's an arrangement reminiscent of Soviet meddling with nominally independent satellites before the fall of the Iron Curtain, or US control of Germany immediately after WWII. Has any European country given up so much sovereignty since? None come to mind. This is not to say that Greece will be made to give up control at the point of a gun. Far from it. The ball is in the country's court. But an extraordinary abandonment of national control, nonetheless, if the Greek parliament agrees.
Some of the draft proposals are in brackets, meaning that they're still being argued over among the finance ministers. One possible proposal that jumps out is a call for $55 billion of "valuable Greek assets to be transferred to an independent fund like the Institution for Growth in Luxembourg to be privatized over time and decrease debt. Such fund would be managed by the Greek authorities under the supervision of the relevant European institutions."
Selling state assets has long been a demand of Greece's European creditors. But to give a sense of scale, that's over 20 percent of Greek GDP of about $240 billion. For comparison, a relative value of US assets would be about $3 trillion. While there is a fair argument to be made this would be ultimately in Greece's best interests, it's hard to imagine such a transfer of state assets to foreigners being popular in any country, let alone one chafing at being treated as a second-class member of the Eurozone.
Another proposal in brackets is for possibly reducing interest rates or lengthening repayment terms in exchange for Greek compliance. One sentence not in brackets is: "The Eurogroup stresses that (nominal) haircuts on the debt cannot be undertaken." A "haircut" is a write-off of some of the existing principal, which Mr. Tsipras has been demanding.
"Cracks in Syriza (have appeared) already over (their) proposal sent to Brussels (and) what is coming back is even more stringent than the rejected referendum.," an analysis from Citi, which knows a thing or two about bailouts, argues. "The economic minister has suggested capital controls will remain in place for the next two months (though they may be lightened). During the tourist season, this is proving to be a death touch to the economy."
With banks shuttered for weeks now, and set to remain so for a good while longer, Greece's economy looks set to decline for the seventh straight year. While technocratic solutions drawn from the central bank playbook may appeal to the rest of Europe's leaders, Greek voters are probably going to have a different view of their matter and make their voices heard again before too long.