Greece goes from bad to abominable

The Greek debt debacle increasingly looks like a game of Russian roulette between politicians and European leaders. Europe threatens no bailout without additional austerity, Greek politicians threaten default but sign off on austerity measures anyway and then signal their intent to renege almost immediately. And now Europe is contemplating delaying the second bailout package until after the next Greek general elections (while at the same time giving Greece enough money to avert a default). Meanwhile, Germany is still exploring the idea of placing any Greek bailout money into an escrow account (controlled by Europe), and northern Europe (Germany, the Netherlands and Finland) is, understandably, increasingly prepared to let Greece default altogether. Needless to say, it is very unlikely that Europe will sign off the second bailout any time soon, which raises the probability of at least a partial default come March 20th when Greece is due to repay a EUR 14.4bln bond that matures.

Unsurprisingly, the euro has taken fright at this latest suggestion that the bailout might be months away. Leader of the New Democracy party Antonis Samaras has sent a letter to European leaders pledging his whole-hearted commitment to austerity, but unfortunately his remarks of earlier this week have shredded his credibility. No European leader can be blamed for harbouring serious doubts concerning his real commitment to the Stabilisation Program, especially if he is elected to power.

Even if Europe did accept his assurances, such is the collapse of the Greek economy that another debt restructuring will probably be required before too long. Greece’s condition is terminal, and everyone knows it.