Greece and the euro zone dodged another bullet Friday. After tense negotiations, they stumbled into an 11th-hour agreement — at least in principle — on a four-month extension of the external funding program supporting the country's reform and recovery.
Financial markets celebrated; and it didn't take long for some of the negotiators to publicly declare victory, though the two sides presented competing (if not mutually exclusive) narratives.
Rather than a decisive breakthrough, Friday's agreement was a small step in a drawn-out and complicated process. Its robustness will be tested as early as today when Greece is required to present a list of policy intentions for the approval of euro-area finance ministers.
But that endorsement is just one of the challenges facing Greece before it can sustainably reset its working relationship with its European partners and consolidate its membership in the currency union.
Once Greece gets past today's hurdle, the agreement will be subject to approval by the parliaments of several euro-area members. These political discussions will be lively, and will expose two conflicting views of the road ahead.
In some parliaments — particularly those of Germany and Finland, but also some debtor countries — the major concern will be whether, yet again, the euro zone has succumbed to pressure from Greece. This discussion will be based on a narrative that still characterizes Greece as profligate and unwilling to live within its means.
In other countries, and particularly Greece, the worry is that any agreement will be little more than a repackaging of the crushing austerity conditions that are seen to have spread poverty and hindered economic recovery, jobs and prosperity.
