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Commentary: Grexit avoided, difficult road ahead

Xinhua, July 14, 2015 Adjust font size:

A bailout agreement between Greece and eurozone countries following marathon negotiations avoided the possibility of "Grexit," but there is still a lot of work to do for the stability of the single-currency bloc.

After overnight talks that ended Monday morning, the leaders of eurozone countries reached an agreement, which would keep Greece afloat provided the Greek government implements harsh austerity measures in the coming days.

The night was perhaps the most painful one in the history of the euro zone.

The options were clear: the Greek government had to either agree with the terms of its creditors or leave the single-currency bloc.

Greek Prime Minister Alexis Tsipras made the right decision to safeguard the country's European future and avoided a disorderly default with dramatic consequences.

However, the agreement reached in Brussels is very difficult for Greece. Within two days, the Greek Parliament needs to vote in favor of reforms it had not implemented for approximately five years.

Measures include the broadening of the tax base to increase government revenue and the change of the pension system. The Greek government is also asked to amend legislation introduced after its election victory or present clear compensatory equivalents.

All these herculean tasks need a stable political environment in the country. Should the Tsipras government only be in power for a short period of time, instability will return and the patience of Greece's creditors will be gone.

The agreement reached in Brussels, if implemented, will give an opportunity to the Greek government to bring fresh capital for banks, cover fiscal gaps and restore investor confidence.

Although it is certainly tough, a proper implementation might guarantee better results and a possible renegotiation for better terms in the future.

In the long run, Greece needs substantial structural reforms for economic growth. The country should take Monday's agreement as an opportunity to embark quickly on drastic reforms. Endi