Greece will be the center of finance universe over the coming weekend and well into next week, as the comedy/farce/tragedy of this nearly failed state’s debt negotiations with the European bailout institutions and the IMF continue.
Having finally seen the “details” of further austerity measures, Greece’s political leadership has signed up to it. At the 11th hour, it outlines the related bond restructuring “volunteered” by the country’s private-sector creditors. Europe’s council of Finance Ministers has added three new pre-conditions to the release of bailout funds in time to stave off a Greek bond default around the Ides of March. Let’s call these conditions the Ides of February, as they must be fulfilled by Wednesday the 15th:
1. The Greek Parliament must approve the austerity measures in a vote scheduled for this weekend – the leaders signed promises are obviously not enough to take to the bank, as it were;
2. The Greek Government must also come up with specific savings in the budget for the current year to take the place of the cuts in pensions that the political leaders refused to agree to – mere promises to “cut defense spending” are clearly insufficient;
3. The Greek political leaders must also agree not to scuttle the deal after the election in April installs one or the other of them, or some combination, as the new Greek Government.
None of these conditions is either surprising or unduly onerous, but will no doubt be interpreted by some in the markets as another frustrating delay in a solution to the crisis. Americans like results. But in this case, patience not only should be rewarded but also respected — this is the only path to avoid the chancy “solution” of disorderly default, which will occur otherwise.
We should have learned by now that in terms of Greece, everything goes down to the wire, and then some. But it remains better than the quick trigger we pulled on Lehman, sparing us about $30 billion in moral hazard in exchange for trillions in real hazard, three years of recession, a couple or three banks, and eight million jobs.