In my last post on this topic, I noted that Greece had accepted the terms of an unprecedented bail out, but questioned whether that meant we’re done with the whole mess now. I suggested that we were not, for several reasons.
Since then, social unrest in Greece, in anticipation of the austerity measures, has increased. Three people choked to death in Athens when rioters set fire to a bank as part of a protest against the wage and pension cuts agreed to in concession for the EU/IMF bailout. Strikes also shut down Greek airports, tourist sites and public services. 50,000 demonstrated against planned public spending cuts and tax increases.
As I’ve said several times now, I don’t see how these austerity measures can be successfully implemented. The problem is more than an economic or legal one, but a social and political one.
Consensus seems to be emerging now that Greece will indeed be forced to restructure. The only question is when. For example, both Ken Rogoff and Martin Wolf believe that a restructuring is likely. Paul Krugman goes further: Greece is likely to restructure and also to leave the Euro.
Query: if that’s the case, then why put off the inevitable? Is it better to restructure now, rather than later, before things potentially get worse? I may return to that question in a future post, or see if I can encourage our informal counsel of sovereign debt experts to address it.
Naturally, these developments serve to fan the contagion fears that have been circulating for some time. For now, I’ll leave you with those thoughts and the visual below, courtesy of the FT. Though the chart is somewhat hard to read, and scary as that giant Greek spike is, perhaps the place to focus now is on the lower lines just starting to separate themselves from the pack, especially Portugal.
Greece Gets Bailout: Are We Done Now?
The Greek Bailout: War Versus Dishonor
What Do Those Greek Debt Contracts Say?
Greece: Argentina, Uruguay, or Twin Engine Plane?
Blame It On Derivatives, Blame it On Goldman Sachs, Blame It On the Nazis. But Don’t Blame the Greek Crisis on Greece
The Greek Crisis: Economic Meltdown or Mental One?
The Modern Greek Drama: Comedy, Tragedy, or Both?
The Modern Greek Drama, Part 2
Verge of the Unböring (The Modern Greek Drama, Part 3)
Is 2010 The Year of Odious Sovereign Defaults?
Photo source: Reuters