Testing times ahead in Greek crisis

AFTER months of deepening financial crisis in Greece, the three-year loan package now agreed of 110 billion (£95bn) – twice the figure envisaged in March – must surely mark a successful conclusion. But the euro fell against almost all currencies yesterday.

Huge tests lie ahead. First, the terms have to be accepted by the Greek public. They include a sales tax raised to 23 per cent, scrapping of bonus wages for public sector workers, a raising of the retirement age for women – and regular inspection by the IMF. This is austerity heaped upon austerity and could plunge the economy into a deflationary spiral. A general strike has been called for later this week.

Second, the deal will test Germany and support for chancellor Angela Merkel in pending elections that could deprive her coalition of a vital majority. Initially Germany, as the biggest contributor, was initially asked for 8bn (7bn). Now it is in for more than 20bn. Merkel's signature on the deal could trigger an appeal to the German Constitutional Court – which could critically delay the package.

And third, it is a massive test for the eurozone, whose officials have fumbled and footered. As the package was presented as one to stave off a crisis for the euro (not a bail-out for Greece) it could pave the way for appeals from other highly indebted countries such as Spain, Portugal and Italy. For these reasons this may be less the end of this crisis than the end of the beginning.