Although the second, €130bn bail-out for Greece has been agreed in principle, many challenges still lie ahead for Greece - both in the short term and in the long term.
In the short term, Greece needs to pass wide-ranging structural reforms such as a tax reform, further reduction in wages and liberalisation of certain sectors. The country has until late February to pass these reforms in parliament. Greece does not only need to get these reforms passed in parliament (which has shown its reluctance to pass government-endorsed proposals in the past) but there will also be even more intense social unrest against the tough fiscal austerity agenda. It is also far from certain that the other euro zone parliaments will approve the huge bail-out package even if Greece does. There is already growing resistance in parts of the parliaments in countries such as Germany, the Netherlands and Finland.
Even if Greece can pass the reforms within only a bit more than a week, severe doubts remain over the country's ability to actually implement the tough fiscal austerity agenda. Even the 'troika' (European Commission, European Central Bank and IMF) that monitors Greece's fiscal austerity measures doubts that Greece will reach the arbitrary target of reducing its debt burden to 120.5% of GDP by 2020 from 160% now, according to reports leaked during the bail-out negotiations.
Finally, we continue to see a self-defeating logic in the euro zone's efforts to solve the Greek debt crisis: tough fiscal austerity measures have already contributed to the economic depression in Greece, and without measures to generate economic growth (which would raise tax revenues and lower social welfare costs) Greece is unlikely to reduce its debt to sustainable levels (which would be around 60-80% of GDP rather than the arbitrary number of 120% chosen by the troika). More attention should therefore be paid to attempts to spur growth in Greece, for example the idea of a new 'Marshall Plan' for Greece advocated by the new president of the European Investment Bank.
