Photo: AP / Petros Giannakouris
Markets have been relatively calm recently after some unprecedented actions by the European Central Bank and headlines appearing to confirm that Greece is likely to get its second bailout.However, that second point is still arguable—and will likely be decided on March 12.
That’s the deadline for private sector bondholders to register to take part in the bond swap deal, determining the level of participation and whether or not Greece will go through with the deal at all.
If Greece receives less than 75 per cent voluntary participation in the bond swap, it said it will not go through with the deal and will likely experience a disorderly default when €14.4 billion ($19.3 billion) in bonds come due on March 20 (although those debts have a seven day grace period, so effectively March 27). That would greatly aggravate the likelihood of a Greek exit from the eurozone.
On the other hand, the likely scenario—75 to 90 per cent participation—means Greece will continue to be the naughty child of Europe, increasing internal pressures as recession deepens and the conditions on the ground become untenable.
Analysts generally agree that the prognosis for Greece with continued austerity is pretty grim, and that it will cause the Greek government to continually miss its deficit targets and thus face more pressure from a German-led eurozone. Eventually, and as the violent protests we’ve already seen indicate, Greek citizens won’t be able to put up with poverty and despair. Greece’s continuing submission to EU whims means that angst is only likely to increase.
A Gallup poll released in December showed that 60 per cent of Greeks polled are struggling, 25 per cent are suffering, and only 16 per cent are thriving. That puts Greece among the ranks of Hungary, Romania, and Bulgaria—countries generally thought to be among the more volatile EU nations.
While we’re not saying that drastic political upheaval is in the works, Greeks’ quickly deteriorating standard of life might indicate that stronger action to reclaim economic stability could be. And if politicians remain too scared to do something about this, then it’s probable that the general populace will.