“A new period of growth” lies ahead for Greece, according to Finance Minister Evangelos Venizelos, after the Greek default, which, of course, is no default, it s a “successful PSI”. Mainstream media propagates the message: “The PSI is the first meaningful base from which to attack the county's economic problem” wrote editor-in-chief of ToVima newspaper, Antonis Karakousis. As for the banks, they are struggling to disguise their joy “The bond swap proves enormously successful, according to a Eurobank report. The successful outcome will be a positive catalyst for the business climate, at least short term” said a Eurobank press release.
How many people in Greece really believe this? How many people will give Venizelos their vote, hoping that the bond swap is really a new beginning? How many will keep on trusting the judgement of “respected” media outlets? And how many will be satisfied that the banks have now shouldered their fair share of the burden?
These are difficult questions. It s a lot easier to look across the borders and find out what analysts and media think of the “PSI triumph”i. Here s a small sample:
“We think there will have to be some form of more severe restructuring further down the line, that is likely to involve official creditors.That would be the only way to get Greece's debt substantially lower.”
Ben May, Capital Economics (reuters)
Even after the debt write-down, Greece's debts will remain cripplingly high. The brutal austerity programme that it has, reluctantly, accepted in order to secure financial help from Europe and the IMF, will lead to lower growth and higher debt levels. Even in the best case, Greece's debt is projected to come down to an unsustainable 120% of GDP and in reality it is likely to be higher than that.Finally, therefore, it may not be long before the understandable euphoria wears off. The issues of whether Greece will need further debt relief or will be forced to leave the single currency will resurface, if not perhaps for a while yet.
Larry Elliott (The Guardian)
No, the crisis is not over. The international community bought time for Greece, but if Greece continues to announce reforms whithout carrying them through, if deficits remain so high, at some point the international community will stop funding. Chances of this happening in the second half of the year are clearly rising.
Jörg Krämer, chief economist, Commerzbank (die Welt)
But the price is high, may be too high. Even after the debt write-down, Greece will only bring its debts to sustainable levels if economic activity in the country picks up in a completely unrealistic fashion and if the new coalition goverment thourougly applies the draconian reforms already imposed- both very improbable. The price of the new Greek bonds shows already what markets think. Another debt writedown is coming, possibly coupled by the country's exit from the eurozone.
Bettina Schulz (Frankfurter Allgemeine Zeitung)
You may ask what alternative countries like Greece and Ireland had, and the answer is that they had and have no good alternatives short of leaving the euro, an extreme step that, realistically, their leaders cannot take until all other options have failed — a state of affairs that, if you ask me, Greece is rapidly approaching.
Paul Krugman, (The New York Times)