Prepare for a third Greek bailout

If the eurozone's debt deal means neither side was willing to risk a Greek exit, the same process will be repeated when pressure builds again.

At last the tortuous process leading to agreeing a second Greek bailout has ended. The main significance of the deal is that it was agreed. After all, many market participants had begun to fear that it would not be and that Greece would default. Accordingly, some were worrying about the potential consequences of a euro break-up scenario that they believed might have made the Lehman bankruptcy and its aftermath look trivial.

Of course, the deal does not solve Greece’s problems. Thus, it is widely recognised that we will probably be worrying about Greece again later. The analysis conducted by the International Monetary Fund is said to recognise the risks that the necessary competitiveness adjustment could come about via an even deeper and more protracted recession, which could imply that the debt-to-gross domestic product ratio ends up at 160 per cent of GDP in 2020, rather than the 120 per cent for which the program is aiming. Besides, the process may be 'accident prone'. For example, it is possible that the Greek government that emerges after elections due in April will ask to renegotiate the deal.

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