Greece may have to play hardball

by Dimitris Kontogiannis

Kathimerini
April 17, 2011

The negative reaction of the markets to the announcement of the government’s new package of measures spanning the period 2012-2015 makes it almost impossible for the country to borrow some 27 billion euros by selling bonds to international investors in 2012. This means the country will have to prepare for the next phase of the debt crisis and be determined to play hardball.

Hope dies last, we say in Greece, but in this case the country’s fate has been sealed by previous events both under and out of its control.

To start with, the economic policy program agreed with the European Union, the European Central Bank (ECB) and the IMF (International Monetary Fund) in May 2010 failed to grasp the importance of debt reduction in the form of state asset sales and various forms of financial engineering.

This was very important for changing market expectations for a highly indebted country like Greece. By making it a priority early on, it would also have given the traditionally slow moving Greek authorities more time to make the necessary preparations.

Instead, the program was based on the idea the markets will lend Greece the complementary funding of 27 billion euros via bond issuance in 2012 because the credibility of the country would have been restored by adhering to the program, known locally as the memorandum.

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