Courtesy of Daniel Sckolnik, ETF Periscope
“Public opinion is no more than this: what people think that other people think.” — Alfred Austin
For those of you who haven’t had a Playbill handy, the latest revival of the drama known as the Greek sovereign debt crisis played out into the wee hours of Tuesday morning, as euro-zone finance ministers and the related cadre of state officials crossed the T’s and dotted the I’s of an agreement that will once again provide bailout funds to the struggling Mediterranean country.
In exchange for the lofty sum of slightly over $170 billion to be provided by the euro-group, consisting of the euro-zone members’ financial leaders, Greece has pledged to yet another round of austerity measures that are targeted to create a steep reduction in its debt-to-GDP ratio. The ratio currently sits at around 160%, and the stated intention by both the Athens government and its once and future lenders is to lower it to 120%.
Never mind that there seems to be a dearth of actual investors, economists, and political leaders that believe Greece will be able to attain such a stunning turnaround in a mere seven years. To a large extent, that’s not really the point. What it does accomplish is to allow both Greece and the rest of the euro-zone to continue to stare across the card table and see who will call the bluff as to whether a default will actually occur.
Will it be the Greek government, who has, up until the moment the new agreement was signed, protested extremely loudly that its citizens would not tolerate being squeezed beyond the point they already have been? Perhaps it will be Germany, who has insisted that greater accountability in the form of increased belt-tightening is the necessary cost of remaining in the euro-zone, although the countries are so entangled that it would be hard to say who would suffer greater economic hardship should a default actually occur.
In any event, the latest bailout is simply a stopgap measure, in the sense that the new agreement is only the first of a series of steps that requires a quarterly review process, one put in place to assure that the terms of the loan are being followed. It is possible that, as soon as Greece holds its next elections in April, the conditions required in exchange for the current…
