Greek Debt Is Continuing Its Incredible Run — But Now Greece Faces One Gigantic Challenge

It continues: Yields on Greek bonds continue to drop, as investors are optimistic that the recent bailout deal helped turn a corner, and put the country on the path to debt sustainability and continued existence in the Eurozone.

Yields today are down to 11.649% on the 10-year, which is a new post-restructuring low. Here’s a chart.


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The huge challenge facing Greece, however: Politics and the real economy.

Yes, on paper, Greece has done some good moves, but nothing that has translated into employment, or therefore political stability.

In an interview with the FT, Greece’s finance minister said:

“We can make it next year if we can stick to the programme agreed with the EU and IMF,” Yannis Stournaras said in an interview with the Financial Times.

However, “the break would be if the political system finds the situation too difficult to handle”, he added, referring to the danger of social unrest about austerity that could force the two left-of-centre parties to bring down the governing coalition.

He went on to say that if Greece can deal with the pain in 2013, and accomplish some big structural goals (privatizations, other reforms, etc.) 2014 should be easier. But we’re now talking about years and years of economic conditions that are some of the worst anywhere for a modern state. Without growth, this is going to be a tough year.