The markets may be optimistic about reports of agreement between Greece and the EU, IMF and ECB inspectors but, as Arthur Beesley notes in the Irish Times, the cost will be “a humiliating erosion of sovereignty”.
And, as he also notes in a separate report, the future remains uncertain for Greece.
In view of Greece’s uncertain financing outlook over the next 12 months, the IMF is known to be threatening to refuse to release its €3 billion portion of the €12 billion due next month. However, European officials have some confidence that this money will eventually be released.
Uncertainty also surrounds the extent to which Germany, the Netherlands and Finland – which have been resisting the notion of a new loan package for Greece – would back an additional aid plan next year in which it might receive as much as €65 billion.
Informed sources said an imminent troika review is set to conclude that Greece is not meeting the conditions required to release some €12 billion due next month under its bailout, raising questions over the country’s immediate funding needs.
The troika wants the Greek government and opposition to agree on a fixed timetable for the execution of stringent policy measures in return for this aid, but consensus has proved elusive. This presents a difficulty for the troika because it needs to ensure the execution of the bailout programme if sceptical creditor governments are to give their blessing to the release of the next tranche of aid.
And those wider European and national, political and economic dynamics are still in play. From the earlier noted Irish Times report.
Although prime minister George Papandreou enjoys a solid parliamentary majority, an opinion poll at the weekend showed his party had lost its lead for the first time since his election victory in autumn 2009. It was only a single poll, but an apt illustration of the political price of austerity.
None of this augurs particularly well for the Kenny administration in Dublin. Despite a cascade of denial that Greek debt default is on the cards, the very whiff of the notion on markets at the moment is enough to keep Ireland’s notional borrowing costs at an all-time high.
That is hugely significant because the Government wants to make its return to private debt markets next year. At current bond yields, despite all the effort made thus far, Ireland remains shut out from markets.
This reflects doubt over the sustainability of the State’s abundant bank debt and anxiety that any Greek restructuring might have a knock-on impact for Ireland. Thus do events far from home herald further danger for Dublin.
As the European authorities prepare another loan package for Greece, their task is to convince the country’s many doubters that it can, eventually, pay down its debt and bring the economy under control. This time around, however, they want full command of the tiller. For all concerned, the stakes are rising rapidly.