Greece’s struggles

Financial Times
Editorial
February 27, 2011

The street clashes that erupted in Athens last week between police and demonstrators were the latest reminder of the formidable challenges facing Greece in implementing the terms of its €110bn rescue by the eurozone and the International Monetary Fund. Although the popular mood appears closer to anxiety and fear about the future than anger, it may darken as more Greeks lose their jobs in planned closures of inefficient state entities. Unemployment has already hit a seven-year high of almost 14 per cent; among young Greeks, it is 35 per cent. There is no doubt much tinder to stoke the smouldering flames of resentment among members of the ruling Pasok party at the extent of the austerity measures demanded under the European Union-IMF programme.

It is too soon, however, for financial markets to conclude that the government’s efforts are failing. The EU is right to plan an orderly sovereign restructuring process, but at this stage there should be no consideration of forcing holders of Greek sovereign debt to accept losses. The imperative to maintain the financial stability of the 17-nation eurozone is a strong reason to hold the line. So is Greece’s progress in rooting out the fiscal indiscipline, economic mismanagement, and grave weaknesses of public administration that contributed to the crisis in the first place.

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