Greek Debt Crisis Continues As Politicians Play Games
After days of largely contrived drama, the nearly dysfunctional emergency coalition government in Athens announced a deal among ruling political parties for another austerity package, in the expectation that this will lead to the Eurozone going forward with the second bailout of Greece, involving another 130 billion euros. As everyone knows by now, this is a game. The political actors in Greece continue to come up with new, punishing austerity measures, while the politicos in Brussels assure the world, and especially the bond markets, that this time at last the Greek debt crisis has been permanently resolved.
It is unlikely that investors in sovereign debt will be impressed with the latest deal being offered by the government in Greece. They are aware that even Eurozone politicians, especially in Germany, are voicing skepticism over the sufficiency of the Greek measures to address their debt crisis. They are even more cognizant of the fact that the austerity measures create a fiscal drag on the Greek economy, leading to even further deficit problems despite cuts in government spending. The political turmoil in Greece, with another general strike being planned by the nation’s labor unions, is likely not to reassure the bond vigilantes.
Meanwhile, as the Greek debt and economic crisis boils over, the other PIIGS nations (Portugal, Italy, Ireland and Spain) are waiting in the wings with their own acute crises.