Greek Tragedy: End of An Act, Not the Whole Play

Robert Peston
Economics editor
BBC World Service

There is a script which seemingly all eurozone leaders are urged to learn, which is that if the currency union is in the grips of crisis, no solution can or should be found till markets and economy are on the verge of a heart attack.

So it is playing out again, as Greece has struggled to secure adequate loans from its eurozone and International Monetary Fund (IMF) creditors to avoid the disaster of failing to keep up its payments to the IMF.

For months the government, led by Alexis Tsipras, failed to convince these creditors he was taking appropriate and adequate steps to balance Greece's books.

With almost no time left before a de facto default - and, more frighteningly perhaps, with a Greek banking system on the brink of total collapse because savers had lost all confidence that a rescue for their state could be found - Mr Tsipras has come up with a plan that his fellow eurozone leaders see, at last, as the basis for a deal.

So subject to technical talks - on raised taxes for businesses and the wealthy; higher pension contributions; and selective increases in VAT - an actual deal to release life-saving additional loans for Greece may be reached at the end of the week.

But, as per the normal cliched eurozone script, the drama will go on for months.
First, existentially important talks on providing relief to Greece on its excessive debts is to be deferred for negotiation in coming months.

Second, the flight of savings and deposits from Greek banks has been so great that they have almost exhausted the assets or collateral in their possession that is available to swap for life-saving loans from the Bank of Greece and European Central Bank.

So unless Greeks can be persuaded to start retrieving their cash from under their mattresses to deposit in banks, Greek banks will remain perilously close to collapse - and will struggle to provide the finance that the sick Greek economy so desperately needs.