The Greek debt saga continued Wednesday as Prime Minister Lucas
Papademos and his three coalition partners cloistered themselves in the
PM's residence to nail down a new budget by day's end. If they agree by
the deadline, say commentators, crisis is averted; otherwise, Greece defaults.
Serious stuff this may seem, but forgive us if we're not anxiously
awaiting a Vatican-style smoke signal announcing their agreement. Not to
diminish the urgency of Greece's situation, but to paraphrase David
Bowie, we've lived this 10 times or more. Here's the typical pattern:
Greece and the IMF/EU/ECB troika agree on a bailout, and Greece
announces austerity plans to meet the troika's terms. When it's time to
pay out, the troika debates whether Greece has tightened enough. Greece
claims it'll default without aid, EU officials demand more progress,
both sides bend a bit, kick some cans down the road, and Greece gets its
money.
Of course, all involved say the stakes are higher this time (as they do
every time). Greece must make a €14.5 billion bond repayment on March
20, and the government claims it's out of cash. Assuming Greek leaders
don't find some extra euros between the sofa cushions (something they're
rather adept at),
unless they get more external funding, they'll miss the
repayment—technically defaulting. The aid in question would be the first
tranche of Bailout 2.0, agreed to in principle last October. But that
agreement had conditions—namely, super-tough austerity and
private-sector debt haircuts. Neither is finalized.
Greece doesn't technically need the money till March 20, but the bonds
maturing were earmarked for the private-sector restructuring. That
process takes about five weeks of paperwork-pushing, so officials want
all agreements done this week. Hence, everyone's on tenterhooks, eyeing
Papademos' front door. In our view though, that anxiety's a tad
overwrought. Yes, it's a thorny situation, but don't discount the
pragmatism of all involved. No one wants a disorderly Greek default.
Officials have spent nearly three years making sure it doesn't happen,
and chances are they'll see this through. For example, leaders could
streamline the debt restructuring bureaucracy or start the process
before Greece finalizes austerity plans.