Editor's Note: Greece is a country in crisis. Facing financial, political and social uncertainty, Greece's ruling Syriza party has been trying to cut a deal with the European Union to keep the Greek economy afloat. But European institutions and prominent member countries such as Germany are reaching the limits of their patience when it comes to tolerating Greek debt. Something has to give, and Athens is in an extremely vulnerable position. Stratfor is logging the latest developments in this crisis update.

Aug. 26

Less than a week after outgoing Greek Prime Minister Alexis Tsipras announced his resignation, the country's political landscape is still fragmenting. At the heart of the deteriorating political situation is the collapse of Greece's ruling Syriza party. Former Energy Minister Panagiotis Lafazanis and parliamentary Speaker Zoi Konstantopoulou, both former Syriza members, have each announced plans to create their own parties. Meanwhile, several of Syriza's central committee members tendered their resignations Aug. 26, and some members of Tsipras' former Cabinet have said they likely will not run for office again in the country's upcoming elections.

The splintering of the ruling party will in all likelihood hurt Tsipras' performance in elections set for the end of September. The Greek leader called for early elections in the hope of ridding himself of the most radical members of his party, allowing him to form a more cohesive government. This strategy made sense at the time, since Tsipras remains the most popular politician in Greece and stands a good chance of being re-elected. However, the successive defections within Syriza will probably siphon votes away from the party. Even though the new offshoots likely will not perform well in the elections, Tsipras will need as many seats in Parliament as possible to form a working government that is capable of implementing Greece's agreement with the European Union.

Still, the departure of Syriza's more radical members may give Tsipras the chance to rebrand himself as a moderate leader. Like most of his adversaries, including the center-right New Democracy, centrist Potami and center-left Panhellenic Socialist Movement, Tsipras is pro-euro in a country where most citizens wish to remain in the currency zone. However, unlike most of his rivals, Tsipras is still perceived as an anti-establishment leader. For now, Tsipras will probably focus his campaign on keeping Greece in the eurozone while fighting corruption and dismantling the country's vested interests. The fact that the opposition is weak and lacks charismatic leaders will ultimately work to his advantage.

The main problem Tsipras will have to confront after elections is that Greece's political fragmentation will make the prospect of forming a single-party government nearly impossible. When he called for early elections, Tsipras likely planned to form a two-part coalition featuring Syriza as the dominant political force. But while a coalition government is probably still in Greece's future, it may not be formed under the terms Tsipras expects. Greece might be left with a multiparty government that is even more fragile than the one that emerged from January's elections. Like its predecessor, Greece's next government will be forced to grapple with internal friction as the country begins to implement the unpopular bailout measures.

Greece's creditors are undoubtedly concerned about the situation in Athens. Several EU officials have gone out of their way to provide assurances that early Greek elections will not derail the bailout program. From their perspective, the fact that most Greek political parties support the agreement means that the reforms stand a good chance of being approved by Parliament, regardless of what coalition is in power.

But this assumption is only partially true. While most Greek parties do indeed support the bailout, internal disputes will slow the implementation process. Depending on the degree of political fragmentation in the wake of elections, coalition talks could take weeks, which might cause Greece to miss its deadlines for reform. If this happens, it could create problems for the governments of several Greek creditors, including Germany, Finland and the Netherlands. Because these governments are already facing skepticism at home regarding the bailout, they may be pushed to take a hard line during multiple reviews of the deal.

Greece may yet be able to delay or even avoid some of these issues. The country is set to hold elections in late September, before creditors' October review of the bailout. If Greek parties manage to form a government in time, they may be able to agree to just enough reforms to pass the first review. But with reviews taking place every quarter, any coalition government faces the risk of losing its cohesion quickly. Even in the best-case scenario, where speedy coalition talks lead to the formation of a new government before the October review, the next Greek government will be as fragile as its predecessors.

Aug. 19

Greece's third bailout program overcame a crucial hurdle Aug. 19, when the German parliament ratified the agreement. During a special session, 454 lawmakers voted in favor of the deal, while 113 voted against it and 18 abstained. Germany's approval of the bailout means that Greece will probably start receiving funds from the European Union in the coming hours. The political situation in Athens, however, is as volatile as ever.

The Greek bailout is controversial in Germany, and it took a lot of work on the part of German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble to convince conservative lawmakers to support it. Both politicians reassured members of parliament that the International Monetary Fund (IMF) will eventually participate in the program and that they would not authorize any write-downs of Greek debt.

Berlin has a dilemma: It wants the IMF involved in the Greek bailout, but it also wants to avoid forgiving Greece's debt. For months, the IMF has demanded a restructuring of the debt, which it considers unsustainable. Germany and other eurozone countries disagree, and, because of the conflict, the IMF will not participate in the initial phase of Greece's bailout program.

However, as Athens and eurozone finance ministers neared a deal, Berlin softened its position, admitting that Greece's debt is unsustainable and offering its own solution to Greece's woes: longer maturities and lower interest rates. This, German officials hope, will convince the IMF of the European Union's commitment to debt relief for Greece and will move the institution to join the bailout later in the year.

The Aug. 19 session at the Bundestag will probably be the last vote related to Greece in a long time, which means that Merkel will have plenty of time to heal the wounds in her party. But it will not be the last time Merkel has to make difficult choices related to Greece: In October, the eurozone will have to assess the progress of the bailout program and start discussing debt relief with Athens. In addition, the bailout has been broken into multiple tranches linked to reforms. Each time the eurozone has to release new money for Greece, conservative lawmakers will pressure Merkel to take a hard stance on Athens.

Opposition to the third bailout is even stronger in Greece, where Prime Minister Alexis Tsipras is dealing with resistance from within his own party. During a vote to ratify the deal at the Greek parliament, government lawmakers' support for Tsipras fell below the minimum number of votes required to survive a potential confidence vote.

As a result, Tsipras is considering calling for early elections. This may sound strange to outside observers (the last thing Greece needs right now is more political uncertainty), but the prime minister is counting on new elections to produce a more cohesive government. For weeks, Tsipras has depended on support from the opposition to pass legislation, but this support will not last indefinitely. In addition, most of the rebel parliamentarians will probably not change their mind any time soon — especially if the dissidents follow through with their recent threat of creating a new party. Early elections would enable Tsipras to be re-elected on a clear pro-reform platform and to build a new government without the rebels. Despite the Greek crisis, Tsipras is still the most popular politician in Greece, and the main opposition parties are weak and fragmented.

To a certain extent, Tsipras is still in control of his fate. The Greek government could be overturned in two ways: through a vote of confidence initiated by the prime minister or a motion of censure initiated by the opposition. The opposition is unlikely to issue a motion of censure because it is not ready for elections. Greek officials have said Tsipras will call for a vote of confidence after Greece makes its payment to the European Central Bank on Aug. 20, and it would only take a couple of abstentions from the opposition and a couple of votes from undecided Syriza lawmakers for Tsipras to survive a confidence vote. But this will not solve any of Tsipras' problems, because his government would still be fragile and divided. Ironically, Tsipras may decide to hold a vote of confidence hoping to be defeated, because this would justify the organization of early elections.

The timing of a potential vote of confidence is important. Some of the most painful austerity measures will be implemented in October, when Athens has to lift tax benefits for farmers and increase taxes for households. Tsipras could decide to hold elections in late September, which would allow him to campaign before the unpopular measures are introduced. Tsipras could also decide to hold the vote in November or December, hoping to receive a promise of debt relief from the creditors after the first review of the bailout. Considering that Athens has to meet tight deadlines for reform if it wants to continue receiving money, Tsipras is likely to delay the elections until after the first review of the program.

The bailout is structured in such a way that Tsipras' popularity is bound to erode and the Eurogroup is going to have to make multiple decisions on whether it can continue to release additional funds. The memorandum of understanding says the creditors have the right to update the requests for reform with each review, which means the negotiations between Athens and its creditors will be constant. German parliamentarians will remain skeptical of Greece's desire to reform, while politicians in Athens will try to mitigate some of the reforms they recently promised to introduce. Even though Greece has received Germany's reluctant support, political constraints in Berlin and Athens will continue to create multiple crisis points down the road.

Aug. 14

Greek Prime Minister Alexis Tsipras gained another bittersweet victory Aug. 14, when eurozone finance ministers approved a bailout program for the Mediterranean nation worth 86 billion euros (95.5 billion dollars). The program will include around 25 billion euros to recapitalize Greek banks. According to the deal, Greece will receive 26 billion euros in the coming days, with additional funds to be disbursed in tranches over a three-year period. The agreement has yet to be ratified by several eurozone parliaments, most notably the German Bundestag, which will vote on it early next week.

Despite the positive signals coming from Brussels, Tsipras is facing an extremely complex situation at home. Stratfor’s third-quarter forecast predicted that, "the Greek government under Syriza is likely to fall, either from a banking crisis or from a rebellion within its own ranks upon signing a deal." On Aug. 14, the second of these two scenarios began to materialize when the Greek government approved the memorandum of understanding for the third bailout, but Tsipras lost significant support from members of his own party.

During the vote, 43 Syriza lawmakers opposed the deal or abstained, forcing Tsipras to once again depend on the opposition to approve the agreement. While Tsipras has faced rebellion from within his party ranks in the past, the Aug. 14 vote is crucial because only 118 government lawmakers voted in favor of the bailout. According to the Greek Constitution, governments need a minimum of 120 votes to survive a motion of confidence. On Aug. 13, rebel Syriza lawmakers called for the creation of a "front" against the bailout.

This puts Tsipras in a vulnerable position. Over the past month, he has depended on the opposition to pass legislation required from the European Union. From now on, however, he might require support from the opposition to even keep his post. If an opposition party calls for a motion of censure, the prime minister might not survive.

Scenarios for a Vote of Confidence

Syriza members said Tsipras would call for a vote of confidence in his government after Aug. 20, when Athens has to pay around 3.2 billion euros ($3.55 billion) to the European Central Bank. By doing this, Tsipras would force Syriza lawmakers sitting on the fence (11 lawmakers abstained during the Aug. 14 vote) to define their position. It would also force the moderate opposition to state clearly whether it wants early elections. Despite the Greek crisis, Tsipras is still the most popular politician in Greece, and he stands a good chance of being re-elected. The prime minister is counting on the fact that the opposition does not really want early elections.

Greece’s current situation could now give way to one of four main scenarios:

1. Tsipras could decide not to call for a vote of confidence and continue to rely on the opposition to approve the reforms included in the bailout program. This option is dangerous because Tsipras' government would continue to hang by a thread.
2. The opposition could back Tsipras in a vote of confidence or a motion of censure. Even if this were to take place, Tsipras would not be completely safe, and any disagreement with the opposition could cause his government to fall. This situation would also force the opposition to openly support Tsipras. In recent days, moderate parties have said that they support the bailout but not the Syriza government.
3. Tsipras could convince undecided Syriza lawmakers to support him and the opposition to abstain or to not be present during a vote of confidence. This would make things somewhat easier for the opposition because the moderate parties would not be forced to openly support Tsipras. This would also give the opposition more time to start preparing for potential elections later in the year.
4. Tsipras could fail to win support from the opposition and the undecided lawmakers. This would lead to his defeat in a vote of confidence and the call for early elections.

These four scenarios have a common characteristic: political fragility. Under the first three scenarios, Tsipras would remain in power for a few more weeks or months. Under the fourth, he could lose his job by the end of August. In either case, Stratfor's forecast remains unchanged: Greece is headed toward early elections for the simple reason that the current political situation is unsustainable.

The timing of the elections is important. The Eurogroup has suggested that Greece’s bailout program should be reviewed in October. If the creditors issue a positive assessment of the evolution of the program, the lenders would be willing to start discussing debt relief. The best-case scenario for Tsipras is to call for early elections after the October review, for two reasons. First, after October, Greece would probably have three more months before the next program review, which would allow Athens to slow the pace of reform during the electoral campaign. Second, Tsipras would be able to campaign on a promise of debt relief.

The worst-case scenario for Tsipras would be to have to mount an electoral campaign before the October review. Under this scenario, Tsipras would be both campaigning and introducing painful austerity measures. The creditors, in the meantime, would be dealing with a government in Athens that could be voted out of office in the immediate future.

A Fragile Deal

The Greek government recently celebrated the fact that the memorandum of understanding allows Athens to achieve lower fiscal surplus targets than originally discussed. But since the Greek economy is expected to continue to contract in 2015 and 2016, even the new and relatively soft fiscal targets will be hard to hit. In addition, the creditors recently admitted that even if Greece were to successfully implement the program, the country's debt would only fall below 120 percent of GDP in the 2030s. (This is the threshold at which Greek debt would become sustainable, according to the International Monetary Fund.) The IMF will consider whether it will participate in the program later in the year. This could be problematic, because it is pushing for debt write-downs for Greece, something that Germany and others oppose.

Even if the Eurogroup and, more important, the German Bundestag ratify the third bailout, the Greek crisis will continue. Berlin is skeptical of Athens' ability — and willingness — to implement the ambitious reforms described in the memorandum of understanding. As a result, the creditors will break the bailout into several tranches, directly linked to a timetable for economic and institutional reforms. This will continue to generate friction between Athens and its creditors, which means that the program could be abandoned at any point in the next three years.

Aug. 11

After two weeks of negotiations, Greece and its creditors reached a deal on the terms of a three-year bailout on Aug. 11. According to Greek Finance Minister Euclid Tsakalotos, only a few “small details” still need to be discussed before the agreement can be formally announced. Athens’ goal is to get the deal approved by the Greek Parliament by Aug. 13, in the hopes that the Eurogroup will ratify it by the end of the week. After that, several eurozone parliaments, including Germany’s, will then need to approve it. The deal will likely make it through this process.

Greece is hoping to receive some rescue funds by Aug. 20, when it has to repay a loan worth some 3.2 billion euros (around $3.52 billion) to the European Central Bank, but it is still unclear how much money Athens will receive and when. The overall size of the third bailout program is roughly 86 billion euros, but the money will be disbursed in multiple tranches. Greece would like to receive a first tranche of some 25 billion euros in time to make the ECB loan repayment, recapitalize Greek banks, and repay the bridging loan the country received in July. The final size of the bailout will also depend on whether the International Monetary Fund decides to participate, which could happen later in the process. The IMF has said it will only participate if Greece is given debt relief, a concession some eurozone members are not yet willing to make.

The agreement is the result of a few compromises by the creditors and several concessions by Greece. The list of “prior actions” that Athens has to introduce before it receives any money includes: phasing out early retirement, raising taxes for Greek islands, eliminating fuel subsidies for farmers, introducing new taxes for shipping firms, and establishing a timetable for the privatization of state-owned companies. The creditors, in return, will accept lower fiscal targets for the Mediterranean nation and let Athens introduce some reforms later in the year — including a controversial review of collective bargaining mechanisms and collective dismissals.

The most immediate result of the deal is that Greece will remain in the eurozone and avoid a default — at least for a few more months. Greek Prime Minister Alexis Tsipras lost support from a sector of his ruling Coalition of the Radical Left, or Syriza party, but he is counting on moderate members of the opposition to ratify the third bailout. This means that the Greek Parliament should ratify the deal. The German government remains very skeptical of Greece’s ability to live up to the terms, but Berlin will probably support the agreement anyway. Germany wanted Athens to request a short-term bridging loan to buy time to continue negotiations. From the German point of view, the thoroughness of the agreement is more important than the speed with which it is implemented. But the French government and the EU Commission pushed decisively for a formal bailout program now. As a result, the Greek bailout will do little to ease the frictions among Berlin, Paris and Brussels. 

The current state of political concord will not last. In late July, Tsipras temporarily defused a rebellion within Syriza by calling for a party congress in September. The congress will probably reinforce Tsipras’ leadership of Syriza and cement support for the bailout program, but at the cost of formally splitting the party. The prime minister will likely decide to hold early elections while his popularity remains high, which means that the Greek government could find itself in the middle of an electoral campaign while still attempting to pass controversial policies. Germany and other northern eurozone governments will continue to push for reforms, because the bailout will link the disbursement of money to a strict timetable of measures.

More important, the agreement leaves some important questions unanswered. Debt relief, for example, remains the elephant in the room. By accepting a third bailout, Tsipras abandoned most of his campaign promises. For him, obtaining a concrete promise of debt relief from the creditors would be a significant victory that would somewhat soften the political and social pain of introducing additional austerity measures. Thus, Athens will continue to push in this direction.

However, Greece will probably not obtain such a promise, at least until late November or early December. The German government wants to see progress on some of the reforms before discussing debt relief. Portugal and Spain will probably refuse to discuss the issue until after each hold its next general election (in October and either November or December, respectively). In addition, though it may somewhat lighten the load on government finances, the “extend and pretend” strategy (offering longer maturities and lower interest rates for Greece’s debt) will not in itself reduce Greece’s debt-to-GDP ratio, especially since the Greek economy is expected to contract between 3 and 4 percent this year and likely continue to shrink in 2016.

July 31

July 29

As negotiations over Greece's third bailout program continue, the ruling Syriza party struggles to remain united. Prime Minister Alexis Tsipras' decision to introduce painful austerity measures in return for new financial aid has caused conflict within Syriza. A Cabinet reshuffle earlier this month was not enough to appease dissent, and now the party is considering calling a special summit to define its future.

Syriza, or the Coalition of the Radical Left, was divided long before it won January's general elections, with some members believing Greece should remain in the eurozone and others pushing for a return to its former national currency, the drachma. These disagreements were temporarily settled during a party congress in 2013, when Syriza decided that its official line would be to support the euro. But Tsipras' recent decision reignited the debate. Former Energy Minister Panagiotis Lafazanis, leader of a group of rebel lawmakers known as the Left Bloc, demanded the return to the drachma and accused Tsipras of betraying the people who voted against austerity in the July 5 referendum.

Recent revelations by former Finance Minister Yanis Varoufakis about an alleged plan to return to the drachma are adding fuel to the fire. On July 29, Deputy Finance Minister Dimitris Mardas warned that leaving the eurozone would result in a substantial devaluation that would hurt Greece's imports and lead to a decline in real income for Greek households. Tsipras understands that the party divisions are not sustainable in the long run, and believes Syriza should hold a new party congress (potentially in September) to decide on an official position and to force dissident members to either accept the party's line or resign. Syriza's central committee will meet July 30 to debate whether to hold a party congress.

Early elections seem likely, but their exact date will depend on domestic and foreign factors. Tax hikes and spending cuts will have a negative impact on most Greeks, and Tsipras will likely want to hold early elections to form a more cohesive government while his popularity remains high. However, he needs to extract concessions from Greece's creditors first, especially on debt relief.

After having retracted on most of his campaign promises to receive a third bailout, Tsipras is counting on the promise of debt relief to show voters that the sacrifice is worthwhile. But Greece is unlikely to be promised debt relief in the short term. Portugal and Spain will hold general elections between October and December, and the conservative governments in Lisbon and Madrid oppose leniency to Athens. In Germany, conservative parliamentarians want Greece to implement further reforms before debt relief is negotiated.

As a result, Tsipras will probably decide to complete the bailout negotiations before calling for elections. Athens' goal is to have a deal by August 20, when Greece has to pay 3.2 billion euros to the European Central Bank. An agreement is likely, but it may not happen as fast as Athens wants. The creditors are demanding additional reforms before approving a third bailout for Greece, which could create further problems for the unofficial alliance between Syriza and the moderate opposition. If no agreement on a third bailout is reached by mid-September, the creditors are likely to authorize a new bridging loan for Greece, so that Athens can make its payment to the ECB in time. Greece will not default on its debt with the ECB or leave the euro in the coming weeks, but a Grexit is still probable in the long run.

The recent calm in Greece will not last. The measures demanded by the creditors will keep Greece in recession, and most households will not see their economic situation improve any time soon. Most Greeks are still supportive of eurozone membership, influencing the government's actions. But as the economic crisis persists and with political fragility set to continue, pressure for a Grexit (both domestic and foreign) will probably resurface later in the year.

July 21

The Greek crisis entered a brief phase of relative stability July 20 when the Greek government made a payment to the European Central Bank just in time to avoid a default with the institution. On the same day, Athens paid a debt to the International Monetary Fund that had been in arrears since late June. Greek banks also reopened, though capital controls will remain in place for the foreseeable future.

The "new normal" in Greece also means that the country will become more expensive for Greeks and visitors alike (new value-added tax rates also came into effect July 20). This will be followed in October by other controversial reforms, such as higher taxes for tourism-related activities and the abolition of value-added tax discounts for some Greek islands. Moreover, the "new normal" does not mean the crisis is over. On the contrary, the Greek economy will probably see another year of deep contraction in 2015, and political instability will continue.

The current period of relative calm has also come at great political cost to the Greek government. Greek Prime Minister Alexis Tsipras reshuffled his Cabinet on July 18 to remove some of the most radical members of his team, including former Energy Minister Panagiotis Lafazanis, the leader of Syriza's so-called Left Platform faction. Changing the Cabinet, however, will not be enough to stabilize the political environment. The approval of the deal with the creditors created a split within Syriza, and Tsipras now depends on support from the opposition to pass legislation.

This will probably force the prime minister to call early elections to try to form a more cohesive government that can implement Greece's third bailout. Tsipras will probably wait for the end of negotiations with creditors before dissolving his current government. The talks to finalize the third bailout will take several weeks, with the new program announced no earlier than mid-August. Some Greek officials have suggested early elections could take place in September or October. This indicates Tsipras wants the Greeks to vote again before tax hikes and spending cuts cause him to lose popularity among voters.

In the case of early elections, both Tsipras and the opposition will have to make strategic decisions. The prime minister is still the most popular politician in Greece, so he will likely perform well. However, even if he is re-elected, he will have the tough task of introducing unpopular measures. The moderate opposition parties (center-right New Democracy, center-left Panhellenic Socialist Movement and centrist To Potami) will have to decide whether to form an electoral alliance or remain divided. Neither of these options is ideal. An alliance could prove difficult because the parties would have to agree on a common candidate, while remaining divided would probably weaken their chances of winning. The election could be further complicated if rebel members of Syriza choose to form their own left-wing party. Since the Greek economic crisis is far from over, there is even room for the emergence of new anti-system parties.

Greece's apparent sense of normalcy will continue to be tested in the coming days. On July 22, the Greek Parliament will vote on a second round of measures stipulated by creditors, including reforms on banking regulation and the civil justice system. These reforms are not as controversial as those introduced last week and will likely be approved. The Greek government announced that in the coming weeks it will introduce some politically sensitive reforms, including measures to discourage early retirement and new forms of taxation for farmers. These will lead to more friction within the ruling coalition.

However, these are all "prior actions" that Greece has to approve before the creditors authorize the formal beginning of negotiations for a third bailout. Even if the respective parties sign a memorandum of understanding by mid-August, the agreement will involve permanent negotiations between Athens and its creditors, as well as periodic performance reviews by lenders. This means that there will be permanent sources of friction between Athens and the eurozone, as well as tensions within the Greek government, regardless of who is in charge. The Greek crisis is not over, and Athens' place in the eurozone is not secured, meaning any sense of "normalcy" is only a fleeting mirage.

July 16

This week is proving to be one of Pyrrhic victories for the Greek government. On July 13, Athens reached a deal with its creditors to begin negotiations for a third bailout for the country, only a few days after Greeks voted against austerity in a referendum. Then, early on July 16, the Greek Parliament approved a list of painful reforms, including spending cuts on pensions and higher taxes. The vote was extremely controversial, both inside Parliament and out. Though the austerity measures were approved, 32 lawmakers from the ruling Coalition of the Radical Left party, known commonly as Syriza, voted against the reforms, whole another six party members abstained. This forced Greek Prime Minister Alexis Tsipras to once again depend on support from the opposition. Meanwhile, outside Parliament, Athens saw its most violent protests of the year.

Tsipras is investing significant political capital in measures he has said he does not believe in, but which the creditors consider necessary to keep Greece in the eurozone. He is certainly paying a steep political price for his moves, and the status quo in Athens will change soon — by either a Cabinet reshuffle and/or the announcement of a new government. (A minority administration with Syriza loyalists is possible, since the opposition has said it does not want to enter the government.) With such a fragile political situation, early elections are likely also in the cards.

These politically costly measures are meant to secure a bridge loan from the European Union so that Athens can make debt repayments to the European Central Bank due July 20 and Aug. 20, as well as its overdue obligations to the International Monetary Fund. Later on July 16, the European Union will probably authorize a loan of some 7 billion euros (roughly $7.6 billion) for Greece from the European Financial Stability Mechanism, a fund with contributions from all 28 EU members (including those not in the eurozone) and backed by the EU budget. The United Kingdom initially protested the idea, arguing that London was promised in 2010 that the fund would not be used to bail out eurozone countries. While London has since softened its position and will probably authorize the Greek loan, Brussels' broken promise does not help the cause of those who want to keep the British in the European Union.

Tsipras' controversial decisions are also meant to convince the European Central Bank to continue providing emergency liquidity to Greek banks, which have now been closed for more than two weeks. On July 16, the European Central Bank will meet to discuss whether to increase funding for Greek banks or to continue at current levels. In the meantime, capital controls are likely to remain in place in Greece.

A successful vote in the Greek parliament was a precondition for the rest of the eurozone governments to formally begin negotiations over a third bailout. Several countries also require authorization from their own parliaments before the talks can start. These votes will take place July 16-17 and will be particularly controversial in Finland and Germany, where conservative lawmakers are skeptical of Athens' commitment to reform. (Update: The Finnish parliament authorized the beginning of negotiations with Greece on July 16.)

The irony behind this troubled process is that all these steps are meant only to set the stage for the beginning of new negotiations, and it will be weeks or even months before Athens receives any money from the new bailout program. The bargaining over a third bailout will probably be as traumatic as the negotiations of the past five months, and the European Union will continue to link the disbursement of money to a strict timetable of reforms and external reviews. The Greek Parliament still has to introduce new reforms by July 22 and create a special fund to privatize state-owned companies — two measures that will continue to generate friction in an already fragile government.

In the meantime, the Greek economy will keep deteriorating, with the European Commission admitting today that Greece's gross domestic product could shrink by as much as 4 percent this year. Though Tsipras is investing significant political capital on this process, so is the European Union. The tortuous bargaining process has once again exposed Europe's fault lines and raised new questions about the viability and even the supposed benefits of the European Union, both in Greece and elsewhere on the Continent. 

July 13

After a marathon meeting of the heads of eurozone governments, European Council President Donald Tusk announced July 13 that Greece and its creditors had reached a deal on a bailout worth 86 billion euros (around $95 billion). Between now and July 15, the Greek parliament will have to approve the broad agreement and introduce some of the initial measures, including spending cuts, tax hikes and pension reforms. After that, parliaments from several eurozone countries, including Germany and Finland, will have to ratify the agreement. Only then can formal negotiations over a third bailout begin — a process that could take weeks. In the meantime, Greece may be granted a bridge loan of an unspecified amount. The Eurogroup will start negotiations for a bridging agreement later today.

The goal is to make enough progress before July 20, when Athens has to repay 3.5 billion euros to the European Central Bank. However, a week is a very long time in the Greek crisis, and several things could derail the process. To begin with, the Greek parliament will have to ratify the deal, a process that will be extremely difficult considering that several members of the ruling Coalition of the Radical Left party, commonly known as Syriza, have already opposed the agreement. According to Labor Minister Panos Skourletis, Prime Minister Alexis Tsipras' majority in the parliament is in question. Tsipras will probably receive support from some opposition parties (the centrist To Potami party, for example, already promised to support the government), but his government may not survive the ratification process. A Cabinet reshuffle seems likely in the coming hours, and depending on the intensity of dissent, a complete reconfiguration of the government or early elections cannot be ruled out.

Greece made substantial concessions during the negotiation. In addition to the commitment to pass painful reforms in the next three days, Athens accepted the creation of a fund of 50 billion euros consisting of Greek government assets that will help pay down part of the country's debt and recapitalize its banks. In the coming days, a panel of experts will be asked to decide which assets will be used and how the funds will be monetized — a process that will involve the privatization of state-owned companies. This could prove difficult to digest both for Greek lawmakers and for voters who, only a week ago, rejected austerity in the government-sponsored referendum. The only silver lining for the Greek government is that the Eurogroup accepted that some of the money of the special fund could be used for an investment program to help revitalize the Greek economy. 

July 13 will also be a crucial date for the future of Greek banks, because the ECB is expected to decide on whether to continue providing emergency liquidity to Greek banks. Greek banks depend on ECB support to survive, and today's agreement, even if a fragile one, will probably be enough for the Frankfurt-based institution to continue keeping them afloat. That said, capital controls are unlikely to be lifted any time soon. 

July 10

Almost a week after the Greeks voted against austerity, the government in Athens presented its creditors with a new list of proposals very similar to the plan that was rejected in the referendum. On July 9, Athens asked for a three-year bailout of roughly 53 billion euros (about $59 billion), and the updated document includes proposals for reforms in pensions, taxation, and privatizations, all of which were originally considered red lines by the ruling Coalition of the Radical Left, known as Syriza.

Athens is making these proposals under significant duress. Greece's banks have been closed for two weeks, and Greek banks have come dangerously close to losing access to emergency liquidity assistance from the European Central Bank. The Greek population has so far remained calm, but social unrest may not be avoidable should the Greek banking sector collapse. More important, failure to reach a deal with the creditors by July 20 (when Greece must repay 3.5 billion euros to the European Central Bank) would make a Greek exit from the eurozone almost impossible to avoid. Germany's strategy has worked: Berlin was counting on Athens to become desperate and make last-minute concessions that seemed unlikely only a few weeks ago.

Prime Minister Alexis Tsipras is now facing a very delicate political situation at home. Syriza's more radical members, known as the Left Platform, have criticized the proposals and suggested they may vote against them. Tsipras ensured that the proposals did not include significant cuts in military spending, a sensitive issue for the government's junior coalition partner, the Independent Greeks party. However, the proposals do include higher value-added tax rates for some Greek islands, another sensitive issue for the Independent Greeks.

The Greek parliament is currently debating the proposals, with a vote expected around midnight (Greek time). The package of reforms will be approved, because several opposition parties will support it. The key question is how many lawmakers the government will lose in the process. The Greek government has a majority of 11 seats in parliament, so a rebellion among representatives of Syriza or the Independent Greeks could lead to an ambiguous situation in which the proposals are approved but the Greek administration loses its majority. This could force Tsipras to either lead a minority government, attempt to form a government of national unity or call for early elections.

In the meantime, the creditors are holding meetings of their own to assess Greece's proposals. Several eurozone governments, most notably France, have praised the latest package of proposals. But others, led by Germany, remain skeptical. So far there has not been any significant friction between Paris and Berlin over the Greek crisis. In recent weeks, however, France has pushed more persistently for an agreement. The creditors could release some early assessments of the proposals July 10, but the real assessment will arrive July 11, when the Eurogroup will meet to formally debate the issue.

The important thing to keep in mind is that these are only preliminary procedures, because Greece will not receive a third bailout immediately. The Greek proposals are only "prior actions" that Athens is promising to take to convince the creditors of its commitment to an aid deal. The document that was presented July 9 says that most of the reforms will be implemented between July and October. Controversial issues such as the pension reform and the rise in value-added tax for hotels and islands, for example, would only be introduced by October. This means that even if the Greek government survives the July 10 vote in parliament, the next four months will continue to test Athens' resilience.

While Greece will not receive a third bailout immediately, the Eurogroup meeting will be crucial because a favorable assessment by the creditors would allow the European Central Bank to continue providing emergency liquidity to Greek banks and temporarily defuse the threat of a collapse of the sector. In addition, Athens will need some kind of short-term financial assistance to deal with about 7 billion euros in debt maturities in July and August. The German government might support this idea because Berlin is interested in a step-by-step approach, linking the disbursement of money to economic reforms. This could include around 3.3 billion euros in bond profits Greece is owed by the European Central Bank.

All in all, the silver lining for the Greek government is that, in the coming months, Athens could have the chance to discuss the sustainability of Greece's debt. The Eurogroup entered the negotiations in February ruling out any form of debt relief for Greece, but under pressure from the International Monetary Fund and, to a lesser extent, the United States, it has softened its position. The prospect of some kind of relief (a write-down seems impossible) will make it somewhat easier for some Syriza members to support a deal. However, the Greek government will probably remain in a very fragile situation, as the creditors' supervision of the Greek economy is unlikely to end any time soon.

July 8

On July 8, Greece formally requested a three-year loan of an unspecified amount from the European Stability Mechanism, the European Union's bailout fund. In the request, Greece said it would present a detailed list of economic reforms, including "tax-related measures" and "pension-related measures," by July 9. The document also says Athens wants to "explore" measures to make its debt more sustainable.

The request is meant to be the basis for an agreement on July 12, when the heads of state of the European Union will hold yet another summit to discuss the future of the Mediterranean nation. Greece needs to reach an agreement with its creditors before July 20, when it has to repay 3.5 billion euros (about $3.8 billion) in debt to the European Central Bank. Greek banks are depending on emergency liquidity from the ECB to survive, and defaulting on the country's ECB debt would probably sever that lifeline.

Despite recent moves to secure a deal, an agreement remains elusive. Athens and its creditors are still trapped in deadlock: the Eurogroup wants Athens to introduce reforms before disbursing any money, while the Greek government wants money to be released as fast as possible and prefers reforms to be implemented over time. Some creditors suggest Greece should first sign a short-term deal and, should it implement reforms, receive a third bailout later in the year. However, now that Greece has voted against austerity, Athens probably will not be open to more spending cuts, though its creditors will be pushing for tougher measures in light of Greece's deteriorating economic climate. 

In addition, debt relief is a point of contention. Athens understands that a debt write-down is out of the question, but it would like to secure at least a promise of longer maturities and lower interest rates. However, German authorities have said Berlin is not even considering the idea of extending Greece's maturities.

Even if the Eurogroup were to approve Greece's plan, parliaments in countries including Germany and Finland would have to ratify it. This would be particularly difficult in Germany, where several lawmakers from the ruling conservative Christian Democratic Union/Christian Social Union parties would probably oppose it. More recently, even members from Germany's center-left Social Democratic Party have hardened their stance on Greece. This could complicate an already tight timeline, since the ratification may not arrive in time to avoid a Greek default with the ECB.

Germany's strategy so far has been to stand firm, counting on the quick deterioration of the social, political and financial situation in Greece to force the government in Athens to make concessions. Should Greece fail to make a deal by July 20, its government would probably have to introduce some kind of parallel currency (most likely in the shape of IOUs or Tax Anticipation Notes at first) to recapitalize banks and pay pensions and salaries in the public sector. While this move may be legal at first (the ECB could tolerate it so long as the Greek government did not give it the status of legal tender), it would be a de facto path toward a Grexit.

July 7

Sixteen of the 18 other eurozone countries are in favor letting Greece leave the currency union, unnamed sources in Brussels said July 7. According to the same report, new Greek Finance Minister Euclid Tsakalotos — who was sworn in late on July 6 — and Greek Prime Minister Alexis Tsipras received backing from the heads of almost all of Greece's parties for its plans to secure a deal on additional bailout funds with Europe. Tsipras will reportedly propose a deal based on the most recent set of bailout proposals, though Athens will also ask for more gradual implementation of certain measures, sources said. The Syriza party seemingly got the outcome it wanted, appearing to put Germany on its back foot — but this is not necessarily the case.

July 6 

Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel agreed July 6 that Greece would present its proposals to a eurozone summit July 7. However, according to the German Finance Ministry, Germany will not consider reducing Greece's debt. 

Greeces referendum rejecting Europe's bailout terms solves nothing, and serious, solid proposals from the Greeks could still produce solid discussions, French Finance Minister Michel Sapin said. Meanwhile, a French government spokesman said that none of the leaders involved in the negotiations with Greece wishes to kick Greece out of the eurozone. European leaders will meet July 7 in Brussels for an emergency summit to discuss the next steps in the Greek economic crisis. The meeting comes on the heels of Greek voters resoundingly rejecting Europe's bailout terms in a referendum. French President Francois Hollande and German Chancellor Angela Merkel will also meet July 6, and the German and French finance ministers will meet with their Polish counterpart in Warsaw. 

In another blow for Athens, Greek Finance Minister Yanis Varoufakis resigned July 6, according to a statement on his website. The move comes shortly after Greek voters resoundingly rejected Europe's bailout terms in a referendum on July 5 — an outcome Varoufakis had supported.

Geopolitical Diary: "The ball is in their court now" has been a recurring statement throughout the Greek crisis — one that now seems particularly appropriate as the tennis tournament in Wimbledon enters its second week. The media turned its head after Greek Prime Minister Alexis Tsipras pulled off a "no" result in the July 5 Greek referendum, the equivalent of a fizzing backhand topspin. Now the crowd is looking at the creditors to see what kind of a return they will be able manage. The "no" option commanded 60 percent of the Greek vote, and the dominant media narrative holds that this is a devastating setback for German Chancellor Angela Merkel. Now Merkel will have to be more obliging to Greece to prevent the country from exiting the eurozone and wrecking her legacy. She cannot be the chancellor who allowed the eurozone to unravel, this story goes. Read the full Geopolitical Diary here: The Ball Is Still in Greece's Court.

July 5

Voting in the Greek referendum is underway, with voter turnout reaching 35 percent by 5 p.m. local time. The referendum will decide whether or not Greeks choose to accept international creditors' proposals for more austerity in exchange for loans needed to avoid default and a banking collapse. Polling stations will close at 7 p.m. and early results of the referendum are expected to be announced at 9 p.m. 

Europe will not "desert" Greece regardless of the outcome of the July 5 referendum and may provide it emergency loans, European Parliament President Martin Schulz said. But he warned the assistance would not be a lasting solution. Schulz also told German radio that Greece would have to introduce another currency if the no vote wins. Greeks are voting in a referendum on whether to support the terms of the country's potential bailout deal with its international creditors. A spokesman for the ruling Syriza party said the result of the opinion polls would enable the government to move ahead quickly to reach a deal with creditors. Italian Foreign Minister Paolo Gentiloni said that now is a right time to start trying for an agreement again.

Analysis: The Greeks have voted no. After a week of speculation, rumors, threats, and pro- and anti-agreement demonstrations, early results show that 61 percent of the Greeks voted against the terms that the country's creditors requested in exchange for additional funding. It is a victory for the ruling Syriza party, which campaigned for the no vote, but one that will probably come at a high price for Greece. While Prime Minister Alexis Tsipras said he would return to the negotiation table to reach an agreement with the creditors, most governments in the eurozone have said they would not offer better conditions for Athens. More important, the referendum's result will create even more uncertainty about the future of the country's banking sector. Read the full analysis here: What 'No' Means After Greece's Referendum.

Greek opposition leader Antonis Samaras resigned July 5 after 61 percent of Greeks voted no in the Greek referendum. Meanwhile, German Chancellor Angela Merkel and French President Francois Hollande are reportedly calling for a special summit July 7 to discuss the Greece crisis. Senior French leaders, including Hollande, have also called for talks to resume immediately with Greece. Eurozone finance ministers are due to meet July 6 to discuss the referendum as well.

July 3

Greece's prime minister urged voters to reject what he called "blackmail" and vote "No" when they cast their ballots in a referendum on Greece's bailout on July 5. In a television address, Greek Prime Minister Alexis Tsipras said Greece's eurozone membership is not at stake, though EU leaders have said a "No" vote could lead to Greece's exit from the monetary bloc. Moreover, EU politicians have staunchly denied Greece's claims that a "No" vote on the referendum would strengthen Athens' position in bailout negotiations. Even if Greece and its creditors reach an agreement, the referendum battle has made Greece's eurozone membership more precarious.

Elsewhere, Greece's Council of State court rejected an appeal two Greek citizens made against the July 5 referendum on a bailout package. The court's decision means the vote will be held as scheduled. The referendum could have momentous political repercussions for the European Union.

July 2

The Syriza-led Greek government will accept the proposals made June 25 by Greece's creditors if the "yes" vote wins in country's upcoming referendum on the deal, Greek Finance Minister Yanis Varoufakis said July 2. Syriza is campaigning for a "no" vote in order to restart negotiations and reach an agreement that includes debt restructuring. Varoufakis said he would resign if the "yes" vote wins and that he would rather cut off his arm than sign another "extend and pretend" agreement with Greece's creditors. However, Greek Prime Minister Alexis Tsipras would sign the deal, Varoufakis said. If the "no" vote wins, he said, a deal could be imminent, as the government has proven willing to cross Syriza's red lines for the sake of Greece and the rest of Europe. The Syriza government has delivered two conflicting messages — one to its creditors and one to the Greek public.

Geopolitical Diary: Athens' decision to hold a referendum on austerity July 5 and the creditors' strategy of delaying the continuation of negotiations until after the vote have only exacerbated the Greek crisis. Greek Prime Minister Alexis Tsipras suggested he could resign if people vote in favor of the current agreement, but a vote against the deal could also bring about the collapse of the government and seriously damage the Greek banking sector. Regardless of the outcome of the vote, a Grexit remains possible and could have serious geopolitical consequences because of Greece's position in the Eastern Mediterranean. Should Greece leave the common currency, both the European Union and the United States will make substantial efforts to keep Athens in the European Union and NATO. Read the full Geopolitical Diary here: Referendum Battle Aggravates the Greek Crisis.

July 1

Greek Prime Minister Alexis Tsipras has delivered two conflicting messages in the past 24 hours. One was directed at Greece's creditors and the other at the people of Greece. First, Tsipras sent a letter to lenders promising dramatic concessions in exchange for various demands, including some debt relief. Later in the day, however, he delivered a speech to the Greek people confirming that the July 5 referendum would go ahead as planned and asking them to unite and vote "no" to the unreasonable demands of Greece's creditors.

Tsipras is in a tight spot — the walls are closing in on either side and he is making alternating efforts to push them back. From one direction, Greece's creditors are applying economic pressure in order to cause massive problems within the country. On the other, Tsipras has a referendum approaching that might very well bring about the collapse of his government.

The freeze on the European Central Bank's liquidity assistance and the ensuing bank closures have left Greece's elderly population lining up for hours in the streets to receive a fraction of their previous pensions. Meanwhile, Greek businesses struggle to keep their doors open, and shop shelves are expected to empty as early as next week. Although the atmosphere is still calm in the streets, economic problems are weighing heavily on Greeks. In his speech, Tsipras promised the Greek public that the current state of affairs was only temporary. With this message, he is trying to send positive messages to the creditors to prevent them from implementing more measures that might ratchet up even more popular pressure (among the lenders, the ECB is the most able to implement such measures). However, the timing of Tsipras' requests — asking for an extension of the existing bailout too late for it to be ratified — and the fact they were not complete capitulations suggests that he did not expect them to be granted. His tactic has the added bonus of painting Greece's creditors as unreasonable ahead of the referendum.

If the public votes "yes" on July 5, as Greek businesses are reportedly urging their employees to do, it will be difficult for the current government to remain in power because the party, the Coalition of the Radical Left, or Syriza, has campaigned strongly for "no." To remain in power and to keep the Syriza dream of a new deal alive, Tsipras is delivering one message to one side and another to the other. This might have worked in the days of galloping messengers and palace decrees, but in the modern age of instant media and global news, the disconnect is clear to both sides. This has eroded the government's credibility. It is Stratfor's view that this fragile balance cannot be maintained, and no matter the result of the July 5 referendum the government could collapse soon after — if not before. No matter how hard Tsipras pushes back at the walls, it seems as if they will soon close in on him.

June 29

The European Central Bank announced June 28 that, for the first time since the resurgence of the Greek crisis in January, it would not be raising emergency liquidity assistance for Greece's banking system. The announcement came in response to Athens' decision to hold a referendum on the bailout measures on July 5. The preceding days' uncertainty had led to a significant increase in withdrawals from Greek banks, and the ECB's decision made it inevitable that the banks would not be able to open. Sure enough, later that day, the Greek government announced that the banks would not open on June 29, and a later release revealed the full extent of the capital controls that have now been implemented until after the referendum.

These controls are relatively limited at this stage. To protect Greece's tourist industry, foreign visitors will still be able to use ATMs to access funds from banks in their home countries. Greek citizens cannot, however, withdraw more than 60 euros (roughly $67), though domestic transfers and payments are still allowed. These controls can be expected to become swiftly and increasingly unpopular.

Meanwhile, Athens and its international creditors have been working hard to spin the referendum in their favor. If asked whether they want more austerity reforms, Greek voters would probably say no. But, if asked whether they want to stay in the eurozone, the same Greeks would probably say yes. The government is trying to make the referendum about reforms, while the Europeans are making a "no" vote tantamount to "saying no to Europe." In this spin game, the creditors are likely to win. A message from Europe that a "no" vote would lead to a so-called Grexit should resonate more than an assurance from Athens otherwise, on the basis that it takes two to maintain a monetary union.

One reason Greece might have suggested the referendum was to gain concessions from creditors theoretically motivated by a desire to sway the vote in the "yes" direction. If this was the case, it is unlikely to be successful. The creditors have a keen eye on the precedents being set in the crisis; appearing to cave into "blackmail" could reinvigorate Podemos, the Spanish equivalent of Greece's ruling Coalition of the Radical Left party (known as Syriza), just months before a general election in Spain.

Any Greek hopes that the markets would collapse, applying additional pressure on the creditors to soften their position, have also been deflated by the negative (but by no means violent) reactions in the bond, stock and currency markets. The so-called firewalls erected predominantly by the ECB, the Outright Monetary Transactions instrument, and the quantitative easing program appear to have successfully contained Greece's effects on bond, stock and currency markets for the time being, though these barriers will be sorely tested again on July 6 in the event of a "no" vote. 

After a weekend of activity, it looks likely that only a war of words will persist throughout the coming week. The banking system is on ice, the referendum bill has passed the Greek parliament, and the creditors are unlikely to change their position. Of course, the Greek government may decide that it has misjudged the situation and backtrack on its maneuverings. Still, the political capital Athens has already spent in this undertaking makes such a decision unlikely. Greece also will probably not make its 1.6 billion-euro bundled debt payment to the International Monetary Fund, which was due to be paid by June 30. For the next week, a fraught wait and a large number of opinion polls look to be the order of play.

June 24

Greece and its lenders spent June 24 exchanging proposals to reach an agreement before Athens' second bailout program ends June 30. Greece promised to introduce 8 billion euros (around $8.9 billion) in spending cuts and tax hikes for the next 18 months, but its creditors (especially the International Monetary Fund) expressed concerns about the plan focusing too heavily on higher taxes instead of spending cuts and economic reforms.

More important, members of the ruling Coalition of the Radical Left party, known as Syriza, and its minor coalition partner, the Independent Greeks, have suggested they could vote against the deal. The two parties have a parliamentary majority by just 11 seats, so it would not take many dissenting votes among the coalition's ranks to kill an agreement with Greece's creditors. Thus, even if Greece and its lenders reach an agreement in the next few days, the key challenge for the Greek government will be to ratify it at home. Considering Greece's complex political situation, several scenarios could unfold.

Scenario 1: A Deal is Reached and Ratified

The first scenario involves Greece and its lenders reaching a deal and the Greek parliament ratifying it by June 30. For this to happen, Greek Prime Minister Alexis Tsipras would need to appease dissenters within his coalition government and experience only a few defections.

If this happens, other eurozone countries could easily call for emergency meetings of their parliaments to ratify the deal. The key countries to watch include Germany and Finland, where many parliamentarians are skeptical of providing further assistance to the Greek government. The creditors would then start releasing some (but not all) of the assistance funds within a few days. This should allow Greece to handle its significant debt payments to the IMF (due June 30, though this deadline could be postponed) and to the European Central Bank in July and August, avoiding a default for a few months.

However, this scenario would still present problems. First, Greece's creditors would link the disbursement of money to economic reforms. As a result, Athens and its lenders would continue to negotiate intensively, and the creditors could once again threaten not to release the money unless the Greek government honors its promises. Second, friction between Athens and its lenders would escalate again later in the year anyway, when they resume negotiations over debt relief and a potential third bailout package.

Scenario 2: A Deal is Reached, but Not Ratified By the Deadline

In the second scenario, Greece and its lenders reach a deal, but Athens fails to ratify it by June 30. This scenario could occur either because of friction within the Greek government or because Tsipras takes extra time to appease dissenters.

This scenario would likely not be particularly traumatic, because the IMF could decide, since Athens and its creditors have reached a deal, to give Greece a few extra days to make its June 30 debt repayment. According to IMF rules, countries can delay the repayment for roughly a month before the institution proclaims a default. The European Central Bank could also raise the cap on the short-term debt Athens is allowed to issue.

The longer the ratification is delayed, the more nervous Greek savers could get, and thus capital controls would become more likely. However, the existence of a deal (even if it is not a fully ratified one) should help ease concern about Greece's banking sector. As with the previous scenario, the next challenge would be to negotiate a third bailout and additional debt relief.

Scenario 3:  The Greek Opposition Approves the Deal

In the third scenario, Greece and its lenders reach a deal, but the Greek government is forced to rely on the opposition to ratify it. Already, parties such as New Democracy, the Panhellenic Socialist Movement and The River have suggested they would support the deal. Thus, the agreement could be approved by the Greek parliament, even if there was a rebellion within Syriza. However, this scenario would trigger early elections or a referendum because Tsipras probably would not want to be held hostage to the opposition.

This is the most complex scenario, because though the Greek parliament would have approved the deal, there would not be a government to enforce it. If this happens, Greece could appoint a caretaker government that would be in charge of making the repayment to the IMF and the European Central Bank and overseeing early elections. Capital controls, or at least a bank holiday, would probably have to be introduced to protect Greece's banks during the turbulent electoral period.

In the case of early elections, Tsipras would probably campaign on a pro-agreement agenda, defending the deal he negotiated in Brussels. He would likely be re-elected with a more coherent majority. Syriza would probably lose its most radical members, and Tsipras would take charge of a more traditional center-left force.

Scenario 4: The Greek Parliament Rejects the Deal

The fourth scenario sees Greece and its lenders reaching a deal, with the majority of the Greek parliament voting against it. This would accelerate a default. However, this possibility is the least likely, because at least two-thirds of Syriza and most of the opposition would support the deal. The third scenario is more likely.

Scenario 5: The Deal is Not Submitted to Parliament

In the fifth scenario, Greece and its lenders reach a deal, but Tsipras decides not to put it to a vote in Parliament. This scenario includes at least two alternatives. First, Tsipras could decide to request approval from Syriza's Central Committee before taking the agreement to the Parliament. Should the party leadership reject the deal, the prime minister could decide to hold a referendum in search of a clear mandate from Greek voters. Second, the prime minister could have the Cabinet, rather than the Parliament, approve the agreement with Greece's creditors. When Greece requested a bailout extension in February, Tsipras decided not to put it to a vote and to have the Cabinet approve it instead. This was possible because the bailout extension did not involve any concrete measures that had to be approved by the Parliament.

Under this scenario, Athens could decide to approve a comprehensive package of "intentions" and then put every single reform to a vote, trying to convince the rebels on a case-by-case scenario. This option seems unlikely, because the Greek Parliament could feel betrayed and issue a motion of no confidence against Tsipras. This would put the opposition in an awkward situation, since they would have to decide whether to support Tsipras in the vote. This scenario is also unlikely because Greece's lenders would probably refuse to disburse money without a formal ratification from the Parliament.

Regardless of which scenario materializes, the Greek crisis is far from over. Some scenarios would be more traumatic than others, but all include continued negotiations between Greece and its lenders. The threat of a "Grexit" will not go away in the foreseeable future. Even if the Greek Parliament ratifies a deal quickly, Athens will continue to push for debt relief, and its creditors will continue to seek reforms in exchange for additional funds. The more traumatic scenarios involving a rebellion within the Greek government and elections or a referendum would only complicate the process, push Greece closer to introducing capital controls, and increase the likelihood of a disorderly default.

June 22

Eurozone finance ministers met June 22 to continue discussing Greece's future after Greek Prime Minister Alexis Tsipras presented an updated list of proposals for economic reform a day earlier. Greece and its creditors did not reach an agreement, but Eurogroup President Jeroen Dijsselbloem expressed optimism that the two sides would settle on a deal later in the week. Still, he stressed that Athens and its lenders are still debating what "prior actions" Greece must take before financial aid is disbursed.

Though the details of Greece's latest proposals have not been released, Greek media have suggested that they include reforms on taxes and, more important, pensions. According to various reports, the Greek government offered to gradually increase the national retirement age and abolish early retirement. The question is whether Greece's proposal for "progressive" reform will be good enough for the European Union and the International Monetary Fund, which have asked Athens to cut spending on pensions — a red line for the Greek government. It is unclear whether the proposal insisted on debt relief, one of the ruling Syriza party's core demands and a highly controversial issue in the European Union. Greece's creditors may promise to negotiate debt relief in the future, but they are unlikely to take concrete action in the current round of negotiations.

Dijsselbloem's reference to "prior actions" that must be taken before any money is unlocked confirms that Greece's creditors are worried not only about Athens' proposals but also about the government's ability to enforce them. The European Union is not alone in its concern: According to German media, the German Finance Ministry sent a report to the Bundestag, Germany's parliament, that said Athens should request an extension of its bailout program and agree to implement a list of measures before any funds are released.

Meanwhile, Greek banks remain in a fragile situation. The European Central Bank once again decided to raise emergency liquidity for Greek banks, and it will assess whether further increases are necessary in a follow-up meeting June 23. ECB President Mario Draghi has said the organization will continue to extend emergency liquidity to Greek banks as long as they remain solvent, but ECB action depends on the banks' ability to provide eligible collateral — an ability that is quickly eroding. Capital flight has accelerated over the past few days, bringing the Greek government ever closer to having to introduce capital controls (or at least a bank holiday to keep people from withdrawing their savings). Eurozone officials are optimistic about the progress of negotiations, but Greek savers are growing more restless each day.

June 19

The Greek crisis continued to escalate June 18, when Athens and its lenders failed to reach an agreement at a meeting of eurozone finance ministers. After the meeting, European Council President Donald Tusk announced that eurozone leaders would hold an emergency meeting June 22. The meeting creates an additional chance for negotiation before another European Council summit is held June 25. The move also confirms that the debate between Athens and its lenders has become purely political rather than financial, and prime ministers and presidents have replaced finance ministers and EU officials as the main negotiators.

Things were relatively calm in Greece on June 19; banks were operating normally after the failed Eurogroup summit. Still, Greek banks are under massive stress, and multiple reports suggest that capital flight has accelerated this week. During an emergency meeting June 19, the European Central Bank decided once again to provide Greece's banks with additional liquidity.

In the meantime, the Greek government continues to play the Russian card. On June 19, Greek and Russian officials signed an agreement to build the Greek section of the Moscow-sponsored Turkish Stream natural gas pipeline. According to Russia's energy minister, Alexander Novak, the two countries will have equal shares in the pipeline, which will start construction in 2016 and should be ready by 2019. Though Russian officials expressed interest in investment and trade with Greece, no bilateral loans were announced.

In recent weeks, Athens and its creditors came closer to agreement on issues such as deficit targets and tax reform. The Greek government also accepted cuts to defense spending, though the European Union and the European Central Bank are demanding deeper cuts. Athens, however, has held fast to its demands for debt relief and continues to refuse to introduce significant reforms to its pension sector.

The Greek government, led by the Coalition of the Radical Left party, or Syriza, is looking for a deal that will allow the country to remain in the eurozone — but one that is different to those reached by previous Greek administrations. At this point, it looks as if Greece will get little more than a temporary agreement to buy it and its partners a few extra months of continued negotiations. Greece will probably not receive any form of debt relief in the current round of talks.

Next week will be crucial for the future of Greece. Should Athens and its creditors fail to reach a deal by June 25, things could spin out of control for the Greek government, which would probably be forced to introduce capital controls to prevent a run on Greek banks. While failing to pay its maturity to the International Monetary Fund on June 30 would not immediately represent a default, it would accelerate panic in Greece and potentially in international markets. Under these circumstances, a political crisis would probably lead to early elections. Syriza is the most popular party in Greece, but the decision whether to campaign on the promise to resume negotiations with Greece's creditors could break the party.

June 12

Even amid worries that a Greek exit from the eurozone is becoming increasingly likely, Greece has bluntly refused help from the International Monetary Fund. On June 11, IMF negotiators returned to Washington from Athens with reports that their Greek counterparts had called the agency "not needed" and said that its contribution was "not constructive."

Meanwhile Bild, the well-connected German tabloid, said that German Chancellor Angela Merkel was not ruling out the possibility of Greece's exit — a change of tone on the part of the German leader, who until now has consistently trumpeted the message, "preserve the union at all costs," as a counterweight to the much more hardline views of German Finance Minister Wolfgang Schaeuble.

Reports have also emerged that the eurozone countries have been debating possible courses of action if Greece and the European Union should fail to reach an agreement. The German government has also been discussing capital controls for Greece. This violates what many consider to be the key rule of capital controls — that they should not be discussed publicly. Open discussion encourages market players to swiftly remove their funds before they get trapped, undermining the purpose of the controls.

All hope, then, may seem lost. Important players appear to have washed their hands of the talks, and previously conciliatory and influential parties have changed their stance. Therefore, the only thing left to do is prepare for the inevitable default, capital controls, a "Grexit" and the subsequent breakup of the eurozone, right?

Not quite. The Greek tragedy has now been ongoing for five years. By this stage, all the players know their roles very well, even more so on the creditor side, since the government led by Greece's Coalition of the Radical Left, or Syriza, was elected only in January. The media now weaves back and forth between optimism and cynicism. Negotiations look promising one week and hopeless the next as both sides use the news to send messages in turn to the public, to each other, to the markets, and even to members of their own parliaments. The threat of negative news moving markets and causing problems, which would be so powerful in other countries, is somewhat nullified in Greece's case by two aspects: First, most of the country's debt is held by the public sector creditors with which Athens is currently in negotiations. Second, the European Central Bank has thus far shown itself to be happy to support Greece's banks, even while rivers of cash flow out of them. Earlier this week, for example, the European Central Bank raised its emergency liquidity assistance limit by the largest amount so far.

This is not to say that the situation will never get serious. A hard deadline and a soft deadline loom this month. The hard deadline arrives June 30, when Greece's current bailout program ends and the month's IMF payments are due. And on June 18, the Eurogroup meeting will offer an opportunity to strike a deal. Unfortunately, in this play, few actors base their decisions on whether it is "a good time." Chances are high that an agreement will be struck at the last possible moment. In the meantime, however, the media will no doubt continue to swing wildly been hope and despair.

June 11

Greece's negotiations with its lenders are progressing slowly as the parties continue to have difficulty finding common ground. In the meantime, rumors out of Athens and Brussels suggest that a short-term agreement is in the making. The supposed deal would involve extending the current bailout so Greece would receive the final tranche of 7.2 billion euros ($8.1 billion) along with nearly 11 billion euros in extra funds that had been allocated to recapitalize Greek banks. An extension of the current bailout could bring Greece temporary relief without creating too much resistance from Germany.

Extending the current bailout program would allow Greece to pay the almost 7 billion euros in maturities it owes to the European Central Bank in July and August. After August, Greece's maturities drop substantially for almost a year, which will theoretically reduce the threat of a default. This would give Athens and its creditors the opportunity to negotiate under calmer conditions.

From the Greek perspective, paying the European Central Bank could help Athens qualify for the bank's quantitative easing program. When the central bank launched its program earlier in the year, it excluded Greece on the grounds that the Frankfurt-based institution owned too much Greek debt. Should Athens be included in the quantitative easing program, its bond yields would probably decrease, making it easier for Greece to return to bond markets at some point in the future.

An extension of Greece's bailout would also make sense for Germany. Chancellor Angela Merkel is facing increasing resistance from the German parliament against extending further financial help to Athens. A third bailout program could be too controversial for the Bundestag. Several members of Merkel's Christian Democratic Union party and its sister party, the Christian Social Union, have said they would oppose it. While Merkel enjoys a comfortable majority in parliament, she will likely want to avoid triggering a political crisis. An extension of the current bailout could be somewhat more acceptable to German parliamentarians, because it would not involve new money. Even this idea, however, is likely to irritate some factions within the German government.

In recent weeks Germany has changed its position regarding Greece. When negotiations first began, Berlin's official line was to dismiss the reports that a Greek exit from the eurozone would cause substantial financial harm to the regional bloc. Over time, Merkel started to emphasize the negative geopolitical consequences of a Greek exit. She then took on a more prominent role in the negotiations, which caused friction with Finance Minister Wolfgang Schaeuble when it reduced his role in negotiations. Even if Merkel leads a grand coalition — and her center-left partners at the Social Democratic Party probably will support the decision to continue financial assistance to Greece — Merkel cannot alienate Schaeuble, who carries significant weight within the center-right. This will force Merkel to seek a compromise that is acceptable both for Greece and the rebels within her party.

While a temporary deal is probably the best thing Greece and its lenders can hope for in the current environment, it would leave many questions unanswered. The main one is the status of Greece's outstanding debt. The left-wing Syriza party began negotiations in January by seeking a write-down of Greek debt. But the eurogroup would not even begin negotiating on those terms, so Athens changed strategy and proposed a "debt swap." This would mean that Greece would receive a loan from the European Union's permanent bailout fund, then use that money to repurchase debt currently held by the European Central Bank. Athens has included a version of this idea in its most recent request to the European Union, earlier in the week. But while a bailout extension may be easier for the Europeans to digest than a write-down, the political conditions are still not ripe for giving an economically unstable Greece even more financial assistance.

The second question is whether a bailout extension would actually solve anything. Greece could use the 18 billion euros that are rumored to be on the table, but that would not make the country's debt any more sustainable or Athens' fiscal gap any smaller. More important, even a theoretically more acceptable idea such as a program extension would come with strings attached. The European Union and the International Monetary Fund will no doubt ask for reforms in exchange for the money, and it is very unlikely that a Greek government that thinks it has already compromised enough, will cross its "red lines" in negotiations to enact the kinds of reforms Europe will demand.

As a result, any potential deal that Greece and its lenders reach at this point would not produce any lasting solutions, only add a new chapter to the ongoing saga.

June 5

On June 4, Athens announced that it would bundle together the 1.6 billion euros ($1.8 billion) in maturities it owes to the International Monetary Fund in June. As a result, Athens will not make the four payments it was scheduled to make this month but will instead lump these into a single payment June 30. Though this is allowed under International Monetary Fund rules, it has rarely been done. This means that Athens has delayed the possibility of a default for three more weeks. It also means, however, that Greece will have to make a large payment by the end of the month.

The Greek government's strategy is meant to buy time. This week, Athens and its creditors each presented their own proposals for an agreement. Both sides have compromised on issues such as primary surplus targets and value-added tax rates, but they continue to disagree on labor market and pension reform. More important, Athens is once again pushing for debt relief — a core element of the electoral campaign for the ruling Coalition of the Radical Left party, known as Syriza, but a non-starter for the European Union. Greece's decision to delay the payment of International Monetary Fund debt means that Athens and its creditors could continue negotiating until the end of the month, when Greece's second bailout program formally ends.

But Athens is also buying time at home. Stratfor has long said that even if the Greek government reached an agreement with its lenders, it would have a hard time selling it to the Greek parliament. In recent hours, several Syriza members criticized the proposals made by the European Union and the International Monetary Fund, accusing Greece's creditors of ignoring Greece's economic crisis. Syriza and its junior coalition partner, the Independent Greeks, control 162 of the 300 seats in parliament. This means the government could not easily manage an internal rebellion. While estimations vary, roughly one-third of the party's lawmakers are believed to be "rebel" lawmakers.

In recent days, many opposition parties have said they would support an agreement between Greece and its lenders. This could create a chaotic situation in which the Greek government approves the deal with support from the opposition but without support from its own lawmakers. In that case, Greek Prime Minister Alexis Tsipras would likely call early elections to avoid becoming a political hostage to the opposition.

While Greece and its lenders negotiate, German media reported that German Chancellor Angela Merkel is willing to support an extension of the current bailout program, which would involve releasing around 11 billion euros in funds that were allocated to recapitalize Greek banks. While this option could be easier for the Bundestag to approve, it would support Greece only through the summer (Greece faces some 7 billion euros in debt maturities to the European Central Bank in July and August). Regardless of the veracity of this rumor, Merkel is limited in how flexible she can be with Greece because of domestic political factors.

In recent days, Merkel pushed for a political solution to the crisis, aware of the geopolitical repercussions of a Greek exit from the eurozone. This is a change of direction for Germany that makes an agreement more likely, but now Merkel, like Tsipras, has to formulate a deal that is acceptable for her own government.

Knowing that the negotiations have entered a mostly political stage, Tsipras once again decided to play the Russian card. On June 5, he held a short telephone conversation with President Vladimir Putin to discuss Greece's potential participation in the Moscow-sponsored Turkish Stream Pipeline. Tsipras understands that the European Union and the United States favor the Azerbaijan-sponsored Southern Corridor projects and is playing the Russian card to show that his government still has options.

June 2

Negotiations over Greece's future have entered a purely political phase as officials in Berlin and Athens hold a series of emergency meetings to reach a mutually acceptable deal to prevent a Greek exit. On June 1, German Chancellor Angela Merkel received French President Francois Hollande, EU Commission President Jean-Claude Juncker, European Central Bank President Mario Draghi and International Monetary Fund Director Christine Lagarde for an emergency meeting to discuss the situation in Greece. At the same time, Greece's Prime Minister Alexis Tsipras held a Cabinet meeting in Athens to draft a new proposal.

European Commission spokeswoman Annika Breidthardt said June 2 that "many papers" are being exchanged between Athens and its creditors. The details of the negotiations are unclear, but EU Commissioner Pierre Moscovici said June 2 that Athens had agreed to discuss pension sector reforms, one of the most controversial issues in the talks. Also on June 2, Tsipras announced that his government sent its own proposal to its lenders. Greek media reported that Athens' proposals are focused on issues such as value-added tax reforms and measures to improve government revenue, with no apparent mention of the pension system.

Greece and its lenders will likely reach a temporary deal — meaning that in the coming days or weeks Greece will probably receive funds in exchange for the introduction of mutually acceptable reforms. A Grexit will be avoided in the immediate term, but pressure on Athens to introduce reforms will continue, which means that the Greek crisis is far from over and the continuity of the Greek government remains in doubt.

This imminent agreement raises two questions. First is the IMF's long-term involvement in Greece. In recent weeks, the IMF expressed frustration at Greece's apparent lack of interest in substantial reforms. The IMF's participation in the negotiation is important for several reasons. From a financial point of view, having the IMF abandon the negotiation means its portion of the bailout money would not be delivered. From a political point of view, the German government is interested in keeping the IMF on board because it would make it easier for the German parliament to accept an agreement with Greece.

The second question is the legal nature of the agreement between Greece and its lenders. Greece's current bailout expires June 30. Athens will not be allowed to receive any money from the existing program after that date. In other words, if Athens only receives a portion of the final tranche of the program (7.2 billion euros) in the coming days, the rest of the money will not be available after June 30.

Considering Greece's significant debt repayments in July and August — some 7 billion euros in total — Athens needs money well beyond the end of its bailout program. Any new funds have to be ratified by eurozone governments, which will be controversial in countries such as Germany and Finland. More important, new financial aid for Greece will be linked to additional reforms, which will prove explosive for Syriza. As a result, early Greek elections are still a possibility, even if an agreement between Athens and its lenders occurs.

May 28

Although the Greek crisis is not officially on the current G-7 summit agenda, the Mediterranean nation's uncertain future is at the center of the debate among the world's largest economies. What was originally a technical dispute about Greece's financial situation is evolving into a discussion about the geopolitical implications of a Greek exit from the eurozone and potentially the European Union.

In recent hours, the U.S. delegation to the G-7 meeting has voiced its political and security concerns about a possible Grexit. From Washington's point of view, a desperate government in Athens could turn to Russia for financial help, which would undoubtedly come with obligations. In addition, the United States is concerned that economic collapse in Greece could lead to social and political chaos in which extremist groups, both local and foreign, could flourish. These concerns are not unique to the United States: German officials have made similar statements. Berlin wants to teach Athens a lesson, but it is also worried a Grexit would threaten the survival of the eurozone.

The concerns of world powers are not unfounded. Greece has a strategic interest in maintaining good relations with Russia, because of its dependency on Russian energy, potential Russian investment, and Greece's participation in infrastructure projects such as the Moscow-sponsored Turkish Stream pipeline. Greece also is no stranger to extremist and violent movements. More important, Greece is strategically positioned in the eastern Mediterranean, a region already in flux.

However, despite concerns, Athens and its lenders are far from a deal. In recent hours, several Greek officials suggested an agreement would be reached this week, but officials from the European Commission and the German government were considerably more cautious. On May 28, Vitor Constancio, vice president of the European Central Bank, suggested that a Greek default with the International Monetary Fund would not necessarily force the European Central Bank to stop providing liquidity to Greek banks. This is a notable statement because Greek banks depend on emergency liquidity from the Frankfurt-based institution to stay afloat.

Greece and the eurogroup still have a few days to reach an agreement. Athens has to make its next payment to the International Monetary Fund on June 5. Greece probably has the resources to make the payment, but it is running out of time. Stratfor estimates that Greece will not be able to make its big repayments to the European Central Bank in July and August without external assistance — a reality that will force Greece and the eurogroup to reach a temporary deal.

May 20

After a routine meeting, the European Central Bank said May 20 that it would once again raise the upper limits on Greece's emergency liquidity assistance, the lifeline for the country's banks. Speculation was rife ahead of the meeting that the ECB's Governing Council might vote to increase pressure on Greece to reach a deal by raising the collateral its banks need to gain access to the liquidity. The alternative was to cut off emergency assistance altogether, which would have been a drastic measure. Contrary to the negative forecast, however, the ECB took positive action, as has been the case since the bailout extension deal was struck on Feb. 20.

In a show of confidence, Greek Finance Minister Yanis Varoufakis said during a Greek television interview May 18 that he expected a deal within a week. German Chancellor Angela Merkel and French President Francoise Hollande joined together the following day to urge for a deal before May 31.

Such optimism is probably misplaced. Indications from technocrats taking part in the negotiations suggest that a substantial gap remains between Greece and Brussels when it comes to agreeing on pension and labor reforms. These have been the main stumbling blocks throughout the talks and a lack of progress there bodes ill for the chances of a swift conclusion overall. The other landmark looming on the horizon is the next debt repayment to the International Monetary Fund, which is due June 5. However, since this is 300 million euros (about $333 million) — a small amount compared to previous payments — it is unlikely to instill the urgency required for the two sides to reach a lasting agreement at this stage.

May 13

The European Union reported May 13 that Greece had fallen back into recession after the Greek economy contracted by 0.2 percent in the first quarter. But there was good news for Greece too. The same day, the European Central Bank decided to raise the limit on emergency liquidity funds to Greek banks by 1.1 billion euros ($1.24 billion) to 80 billion euros. More important, the bank decided to leave intact the collateral it accepts from banks in exchange for liquidity. Both of these measures are meant to keep Greek banks afloat.

In the meantime, the Greek government is engaged in intense debate over the country's future. On May 12, Prime Minister Alexis Tsipras held a five-hour Cabinet meeting that will be followed by a second meeting May 13. After the May 12 meeting, several Greek officials suggested that neither early elections nor a referendum on Greece's negotiations with its lenders was on the table. They also said that Athens and its lenders would reach an "honorable agreement" by the end of May. Tsipras will meet German Chancellor Angela Merkel during the European Union's Eastern Partnership Summit from May 21-22, and Greek officials hope that Athens and Berlin will reach a political agreement then.

Greece will likely complete its bailout program by the end of June, but it is still possible that the country will hold a referendum. Starting in July, Greece will be on its own: It will have no bailout package, limited access to financial markets and no liquidity support from the European Central Bank. This will force Athens to make a choice between asking the European Union for additional money and defaulting on its debt. The ruling Syriza party will probably not make a decision without asking voters first, so a vote on the future of the country could take place at some point during the second half of the year.

May 11

The Greek saga played on through another eventful day. Greece and its lenders continued negotiations over the country's bailout program, and Athens announced it would make a debt payment to the International Monetary Fund. These events will temporarily delay a major crisis but confirm that both parties are still far from a permanent agreement. 

Following a summit that focused on Greece, the Eurogroup issued a statement welcoming progress in the negotiations between Athens and its lenders. The statement was markedly different in tone from those made after previous summits, but Greece was still unable to secure funds from the meeting. In fact, the Eurogroup acknowledged that more time and effort is needed to address outstanding points of contention. The Eurogroup is still pressuring Athens to reform labor legislation and the pension system and to continue privatizing state-owned companies — measures that many in Athens resist.

While the meeting was taking place in Brussels, Greek officials announced that they would transfer 750 million euros (roughly $837 million) to the International Monetary Fund to pay a debt due May 12. The move is significant because, after this payment, Athens does not have any IMF debt maturities for almost a month — the next one is due June 4. The decision confirms Stratfor's forecast and temporarily reduces the risk of a Greek default. However, Athens is still calling for a special Eurogroup summit before the end of May to secure funds to pay salaries and pensions.

Stratfor believes that Athens and its lenders will reach a temporary agreement between late May and early June, releasing the final tranche of Greece's bailout. However, any decision will not mark the end of the Greek crisis. Greece's second bailout expires in late June, but, because Athens must repay the European Central Bank 3.4 billion euros in July, both parties will have to return to the negotiation table to discuss a new agreement.

May 6

Greece paid the International Monetary Fund 200 million euros ($224 million) in interest May 6, once again avoiding a default. Athens was expected to make the payment but could have a harder time making a 750 million euro payment that is due May 12. However, Greek Alternate Minister of Finances Dimitris Mardas said that the May 12 payment would be made, even if Athens had to dip into the pension system.

April 29

Greek officials met with members of the Euro Working Group in Brussels on April 29 to discuss Athens' proposals for economic reform and will meet with representatives from the EU Commission, the European Central Bank and the International Monetary Fund on April 30. Athens hopes it can convince Greece's lenders to disburse at least part of the last tranche of bailout funds (some 7.2 billion euros, around $8 billion) sooner rather than later.

According to Greek media, the April 29-30 negotiations focus on measures already promised by Athens, including policies to improve tax collection and fight tax evasion, rather than on new proposals. Greece has also allegedly offered to delay the introduction of controversial measures, such as raising the minimum wage. But eurozone ministers insist that Athens introduce further reform, including of pension rules and labor legislation, and that it continue privatizing state-owned companies. Greek Prime Minister Alexis Tsipras' task will be to meet the demands of both Greece's lenders and the more radical members of his government, who oppose pension cuts, privatization of strategic companies and layoffs in the public sector.

Greece is hoping to reach a deal with its lenders before May 12, when it has to repay 750 million euros to the IMF. Athens also needs funds to pay pensions and salaries. In the meantime, Athens has tried to finance itself through controversial measures such as a decree obliging municipalities to transfer funds to the central bank.

April 25

Greece's governors and other local officials agreed April 25 to lend cash to the central government after Prime Minister Alexis Tsipras assured them the measure would be temporary. The decision comes after Greek lawmakers approved the decree April 24 to force state entities to lend cash to the central government in spite of protests by municipalities and labor unions. It also comes as Athens negotiates with EU and IMF creditors over its proposal for a deal to obtain cash in exchange for making reforms.

April 21

The Greek government has managed to gain a few extra weeks in its push to pay pensions and public sector salaries while avoiding a default on debt owed to the International Monetary Fund. On April 20, Athens issued a decree ordering state entities to transfer their cash reserves to Greece's central bank — a measure that is expected to collect around 2 billion euros ($2.15 billion). This should help Athens pay around 1.6 billion euros in pensions and salaries by the end of April and almost 1 billion euros to the International Monetary Fund in early May.

This measure, however, is controversial. On April 21, the Central Union of Municipalities of Greece threatened to hold demonstrations against the measure and take the issue to the supreme court. But Athens' decree is effective immediately, meaning any measures to block it will not take effect before the Greek government accesses the money. On top of this, Greece's parliament has 90 days to ratify the decree, during which time Athens can legally use the funds. While the Hellenic Parliament will debate the decree on April 22, the Syriza-led government has acquired the space in which to negotiate with its lenders and meet its immediate domestic financial obligations.

These are only delay tactics. The Greek government had been expecting to reach a deal with its lenders during the meeting of eurozone finance ministers April 24-25. However, Athens and its lenders still disagree on issues such as Greece's fiscal targets and privatization. As a result, several EU officials have suggested an agreement will not be reached until mid-May.

Athens' decree has bought Greece just enough time to prevent a default and continue negotiations with its lenders. But the Greek government is running out of time and money. If no agreement is reached in May, Athens will probably not be able to buy more time to prevent a default.

April 18

Athens aims for a deal with its creditors over a reforms package but would not rule out a referendum or early polls if talks reach an impasse, Greece's deputy prime minister said. Athens is stuck in negotiations with its eurozone partners and the International Monetary Fund over economic reforms required by the lenders to unlock remaining bailout aid. Talks are not expected to produce a deal for the approval of eurozone finance ministers at their next meeting in Riga on April 24, as progress is painfully slow.

Understanding the Origins of the Greek Financial Crisis

As Greece attempts to deal with multiple pressing concerns, from its worsening financial situation to political and social unrest, Stratfor Europe analyst Adriano Bosoni examines the various issues at stake in a question-and-answer format in Explaining Greece's Financial Disarray, first published March 22. 

Further Stratfor Analyses on Greece

• To Prevent a Crisis, Greece Promises Reforms - Greece needs support from its lenders to get its next bailout tranche, but problems will resurface when the funds run out.
• Greece Taunts the EU With Austerity Referendum - Greece's Syriza party must decide whether to please its constituents or its eurozone lenders.
• Greece: EU Deal Leaves Questions Unanswered - Greece and its lenders reached a deal Feb. 20, but the agreement postpones several important issues.
• Greece Stands Alone in Its Fight for Debt Relief - Domestic political constraints will prevent other debtor countries from coming to Athens' rescue.