gwb has touched on what is most likely the very practical reasons why an agreement could finally be reached. This is yet another putting-off of the inevitable. All countries need to have a good mechanism for coordinating monetary policy with their current economic situation. The EU arrangement is missing this necessary ingredient. There has been one temporary patch after another applied, but none of these measures go to the root of the problem. This agreement just now announced is not a good deal for either Greece or the rest of the EU.
Greece, I would hope, will use whatever breathing space the current agreement allows to explore monetary alignments apart from the European Monetary Union. A monetary alignment of the PIGS plus France is something worth exploring. A monetary union will be difficult to sustain among culturally diverse countries, but it can not possibly be sustained without both a common central bank and a common bond. Without a common bond, it's very difficult for the central bank to use monetary policy as a tool for addressing economic ups and downs.
Greece needs stimulus money, but the package announced is too small and has too many strings attached. This is an agreement that gives with one hand but takes with another. The Government in Athens will not be able to use the announced 35 billion stimulus package to its maximum beneficial effect because of the strings attached. On the other hand, no truly propitious agreement could have been reached, because the EMU lacks a eurobond. The current agreement will at least buy time.
Greece, I would hope, will use whatever breathing space the current agreement allows to explore monetary alignments apart from the European Monetary Union. A monetary alignment of the PIGS plus France is something worth exploring. A monetary union will be difficult to sustain among culturally diverse countries, but it can not possibly be sustained without both a common central bank and a common bond. Without a common bond, it's very difficult for the central bank to use monetary policy as a tool for addressing economic ups and downs.
Greece needs stimulus money, but the package announced is too small and has too many strings attached. This is an agreement that gives with one hand but takes with another. The Government in Athens will not be able to use the announced 35 billion stimulus package to its maximum beneficial effect because of the strings attached. On the other hand, no truly propitious agreement could have been reached, because the EMU lacks a eurobond. The current agreement will at least buy time.
