Seems like Greece has caved:
Greece’s Left-wing Syriza government has agreed to draconian austerity terms rejected by the Greek people in a landslide referendum just five days ago, capping one of the most bizarre political episodes of modern times.
Prime minister Alexis Tspiras sought to put the best face on a painful climbdown, recoiling from a traumatic fight that would have led to Greece’s ejection from the euro as soon as Monday. He implicitly recognised that the strain of capital controls and economic collapse has been too much to bear.
“We are confronted with crucial decisions. We got a mandate to bring a better deal than the ultimatum that the Eurogroup gave us, but we weren’t given a mandate to take Greece out of the eurozone,” he said.
Hopes for a breakthrough set off euphoria across Europe’s stock and bond markets, though Greece still has to face an emergency meeting of Eurogroup ministers on Saturday, and probably a full-dress summit of the EU’s 28 leaders on Sunday.
A top Greek banker close to the talks said there is now a “90pc chance” of clinching a deal, thanks both to intervention behind the scenes by a team from the French treasury and to aggressive diplomacy by Washington.
Inflows of tourist cash means that there is still €2.75bn of liquidity available, enough to keep ATM machines stocked until Monday night. Greeks will be able to withdraw the daily allowance of €60. Pensioners will continue to draw €120 a week.
That means that the crisis will be renewed once more in a few months time. Not often I quote William Hague:
Economics has few laws, which is why economic forecasts are so maddeningly unreliable. If it has one law, it is this: that if you fix together some things which naturally vary, such as interest rates and exchange rates, other things, such as unemployment and wages, will vary more instead. And in a single currency zone, which has exactly this effect, you can only get around these problems by paying big subsidies to poorly performing areas, and expecting workers to move in large numbers to better performing ones.
This is what happens in the US, or indeed within Britain. In general it works. In the eurozone it does not work, because either Greeks have to cure their poor economic performance or Germans have to pay them big subsidies, and neither are willing or able to do so. This, in a sentence, is the problem of the eurozone, and continued denial of it will only make it worse.
But maybe there’s another twist in the plot yet.