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.
Related
Posts:
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