Greece still under siege

Help is on the way for
debt-stricken Greece, but fears of an eventual financial disaster still haunt
the country and the rest of the 16-nation eurozone.

A $60 billion bailout package from
other eurozone countries and the International Monetary Fund should see Greece
through its borrowing needs for this year. But the bailout is complicated by
German grumbling about the burden of the bailout on its own finances.

More than that, bond markets are
still flashing warning lights that someday Greece might say it can’t pay — and
announce a restructuring or default.

Finance Minister George
Papaconstantinou said he expected the IMF board would approve its portion of
the loan support — around a quarter of the total — in the first 10 days of
May. If some European parliaments were delayed in approving their contributions,
the IMF support could be used to obtain bridge financing from other sources.

The government is already
implementing a harsh austerity programme that cuts civil servants’ wages,
increases taxes and freezes pensions. While the reforms have triggered strikes
and protests, they have been relatively muted so far by Greek standards,
although that situation could change if deeper cuts are introduced.

Market jitters have been fuelled by
the stance of Germany, which would be the largest contributor to the
eurozone-IMF rescue package with $11.2 billion but which has been reluctant to
bail out a country that has spent beyond its means for years.

The German government has committed
to putting the issue through parliament, but Chancellor Angela Merkel said that
Athens must be prepared to accept more tough measures “not just for one
year, but for many years” to bring its finances into order.

“It is important that Greece
now makes clear in a believable way that it is willing to go down a path of
sustainable development to gain back its financial and economic power,”
she said in Berlin. “We need a positive development in Greece, connected
with further austerity measures.”

“If that can be negotiated,
and when it is clear that there are no other alternatives … then Germany will
of course take the necessary parliamentary steps.”