Greece, Greece, More Greece

 Via Reuters:

French Economy Minister Christine Lagarde said she expected a package of 100-120 billion euros ($133-$160 billion) to help Greece out of its debt crisis, and had "good hopes" a deal could be reached by the end of this weekend. . . .

But a bailout will come in return for draconian budget cuts in Greece, where thousands marched on May Day shouting slogans against austerity measures they say only hurt the poor and will drag the country further into recession.

"No to the IMF's junta!," protesters chanted, referring to the military dictatorship which ruled Greece from 1967 to 1974. "Hands off our rights! IMF and EU Commission out!," the protesters shouted as they marched to parliament. . . .

Greece's public sector union has also called a 4-hour strike for Tuesday, on top of a nationwide strike set for Wednesday, highlighting the challenge the government faces in pushing through the cuts it has promised potential lenders.

What’s that old saying about starting to scream as soon as you see the dentist’s drill?  I don’t see how this can inspire confidence in Greece’s ability to deal with its failing economy.

At the same time, a growing number of voices are calling for a preemptive restructuring, rather than attempting to meet existing debt obligations.  For example, Nouriel Roubini and Arnab Das in the FT argue:

The past weekend’s spring meetings of the International Monetary Fund in Washington focused on the Greek sovereign debt crisis – the first such crisis in living memory to concern a high-income country, and in the eurozone no less. Even more telling than the shift of focus from emerging markets is the widening divide in the views of those institutions and governments leading efforts to secure an orderly resolution.

Roubini and Das urge a pre-emptive debt restructuring for Greece – continuing on the current path risks a disorderly default and financial crisis.  Lee Buchheit made a similar point in his guest post here a few days ago.

Moreover, consensus seems to be building around the notion that the crisis has not been handled well.  For example, in the WSJ Stephen Fidler And Marcus Walker argue that:

As the International Monetary Fund and euro-zone governments finalize their debt rescue package for Greece, there is wide agreement on at least one thing: European governments could hardly have managed it worse if they had tried.

Euro-zone governments, held back above all by a reluctant Germany, have taken so long to arrange financial support for Greece that its debt crisis is turning into a wider European conflagration that threatens Portugal, Spain and potentially other indebted countries.

Finally, Felix Salmon reports that Greece is rumored to have already hired restructuring advisors (Lazard).  If that’s true, then things may get interesting very soon.

Related Posts:

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?

Image source: Reuters

Comments

[Eric Muller]

Greece is the word.

[Matt]

Did you happen to read the NY Times article today on the massive, massive tax evasion in Greece? Apparently this is a huge part of the problem, and the government hopes to, at best, make modest improvements in this area, though outsiders think even this is unlikely. My impression is that if a government in Greece tried to make the wealthy comply with their obligations to the country you'd see the real riots, perhaps not so much in the street but in places that matter, and that this would be a much more serious threat to the country. Democracy has ended in countries over tying to make the top groups pay their share, after all.

[Kim Krawiec]

Good one, Eric. I did read it, Matt. $30 billion a year -- amazing. I can't imagine that Greece will emerge from this bailout any healthier -- economically or politically -- than it is now. How can the economy grow in the face of such steep cuts? And will they even be able, as a political matter, to implement the austerity measures?