Published on The Economist, February 13, 2012.
… If things run to form, the risk of imminent, disorderly default will be deferred this week. Most private-sector creditors will agree to swallow a big loss on their holdings of Greek bonds; and Greece will legislate to ensure that hold-out creditors are forced to accept the same terms. Official creditors will nod through a €130 billion ($172 billion) bail-out, enabling Greece to meet a big bond payment due in March.
Greece’s agonies are by no means over, however. Although the country’s debt burden will be cut as a result of the private-sector losses, the relentless rhythm of regular troika assessments and poisonous rows over disbursements will continue. The weekend’s events do nothing to instil confidence that Greece will suddenly start fulfilling its promises. Forty-three deputies were expelled from their parties for voting against the caretaker government of Lucas Papademos. A requirement that the leaders of the main parties have to follow through with cuts regardless of the results of coming elections will be tested to destruction when campaigning actually begins.
So the rest of the euro zone will probably keep confronting the same old question: whether they are prepared to keep handing over cash to Greece. The evidence of recent days is that the patience of euro-zone leaders is running out. They took a tougher line in last week’s negotiations than many had expected. The focus on Germany’s willingness to pay up risks distracting attention from other creditor states, like Finland and the Netherlands, which are equally fed up with handing out money and have fewer hang-ups than Germany about playing the part of good Europeans. And if Italy and Spain are able to make decent progress in dealing with their own public finances, the rest of the euro zone will feel more confident about limiting the fallout from a decision to turn off the Greek tap. Greece has delayed a messy default, but it will happen eventually. (full text).
Link: The visible hand, The crisis of Western liberal capitalism has coincided with the rise of a powerful new form of state capitalism in emerging markets, says Adrian Wooldridge, on The Economist, January 21, 2012.