The bailout is dead, long live the bailout

But what Greece needs is a plan for growth.

The agreement reached in the early hours of Tuesday is indeed of paramount significance. It draws a line under months of speculation around the Eurozone's response to the Greek sovereign debt crisis. It reduces Greece's debt obligations by more than 50 per cent and at the same time decreases the interest rate Greece has to pay for the remaining of its debt, allowing the country to turn the corner and move forward with a significantly reduced debt burden.

But it is worth acknowledging that most of the €130bn is aimed at providing "sweeteners" to private sector bondholders for agreeing to participate in the debt restructuring, to capitalising Greek banks so they don't bring down with them European banks in case of a default and to paying off interest.

What is left will be used to service Greece's remaining debt, leaving very little to be invested in the Greek economy and measures to achieve growth.

With the private sector weakened by recession, consumer confidence at an all-time low and foreign direct investment unlikely to come while uncertainty about the country's future persists, growth can only come from public sector investment.

Reducing Greek debt is an important step towards fiscal health but if the country is to prove wrong the Cassandras who argue that a default is inevitable, the EU must put together a "Merkel Plan" to be invested in growth-generating measures in Greece.

That fund should be separate to the one aimed at paying off the Greek debt and it should focus on the following things; promoting entrepreneurship and offering assistance to start-ups and small businesses across the country, rebuilding tourist infrastructure, investing in research and development, harvesting renewable energy available in abundance in the country and training the already very well educated workforce in new technologies and specialised manufacturing.

In the meantime a coalition government of national unity is needed to implement the ground-breaking reforms necessary to make the most of the investment mentioned above. A single individual or a single party cannot undertake the Herculean task of changing the Greek economy and political system.

The coalition government should commit itself to confronting vested interests by liberalising the professions and opening the economy to competition, as well as reforming the tax system and tackling tax evasion. Tens of billions are wasted every year due to tax evasion and the black economy. Equipping the system with the necessary mechanisms to collect taxes effectively and, above all, fairly can make an enormous difference to Greek finances.

At the same time billions can be saved by downsizing the public sector, mainstreaming its operations and making it more efficient in delivering true public value and services.

Last but not least, the clientalistic relationship between the electorate and their elected representatives must be severed, and for that to happen a combined effort is needed, both by ordinary Greeks and their leaders.

"Buying" votes in return for political patronage is responsible for the unsustainable size of the Greek public sector. Offering assistance for start-ups and SMEs, re-awakening the Greek spirit for entrepreneurship and making the economy fertile for competition and open to new entrants will offer more employment prospects and make a job in the public sector less appealing.

Taking those steps will go a long way towards regaining the trust of Greece's EU partners as well as that of the markets. Changing Greece cannot happen overnight so trust is imperative if Greece is to be given enough time and space to reform its political system and re-engineer the economy, which is the only way to achieve growth.

The future for Greece and its people does not have to be dire. The EU has invested a lot in helping Greece and the Greeks have sacrificed even more to remain in the Eurozone. Avoiding a default is in Greece's, in the EU's and the UK's interest. But without growth all this effort and sacrifice will be for nothing.

Petros Fassoulas is chairman of the European Movement.