Editorial: the brittle edge-of-knife deal

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When asked by Postimees to sum up 2009 (our toughest in recent history), the twice prime minister Mart Laar stressed this: «IMF control and Latvian path avoided.»

While interviewed by Mihkel Raud on TV in February of said year, Mr Laar had already warned in case government failed to cut the budget: «Then, welcome to IMF bondage!»

As buoyed by low debt and reserves, Estonia sailed the last crisis on its own. Not as lucky, Latvia was forced to ask for EU and IMF assistance – thus accepting the conditions. Among other measures in Latvia, the parliament passed the pensions cut which in Estonia was deliberated but never executed. Even so, even in Latvia the court afterwards judged the decision unconstitutional.

Meanwhile, Latvia is an excellent example of how, by decisive action, a nation can get out of dire financial straits. They never needed the entire sum promised by the institutions. As we remember, Estonia at the time stood ready to loan Latvia some money.

If what Latvia went thru back then was bondage – citing Mr Laar – how will one even describe the Greek situation today?! As Monday was dawning and eurozone heads of governments sat convened in Brussels, a storm was brewing in social media. Based on the bits of info leaked, it was assumed Greece was faced by financial occupation by Germany, or else the debt-ridden nation would be turned into a North-European colony. Whatever was published afterwards on the meeting proved a bit softer. The sessions at Greek parliament will not be chaired by trustee in bankruptcy.

But the final document is nothing lenient. By as soon as tomorrow, the Greek parliament needs to pass four measures, including a simplification of VAT and broadening of tax base, «improve long-term sustainability of pensions system», establish semi-automatic costs cuts should state revenue fall below expectations. And this is far from all. For the worth of €50bn, Greece must hand assets into a privatisation fund (which will not be managed from Luxembourg but by Greece itself, though), depoliticise the governing system etc.

At that, no easing of debt burden is granted to Greece in return. If they do what they promised, a new loan from ESM is available, and payments schedule may be lengthened.  

Thus, there’s precious little that prime minister Alexis Tsipras can present to his nation as victory, such as was promised in the referendum campaign. Truth be told, it would be a miracle indeed should a political storm fail to hit Greek domestic policy in answer what he brings home from Brussels – such as topples the current government and demolishes promises by Mr Tsipras to European colleagues. Let’s hope Berlin, Brussels, Helsinki and Tallinn have a plan at hand should that happen.