May 9, 2011
Exactly one year since the €750bn international rescue package was launched to save the eurozone, the currency union has found itself back at square one as Greece’s debt problems continue to undermine monetary union.
Yet, whereas the immediate danger 12 months ago was that Athens would run out of money, today’s concerns are about the more subtle, technical issues of whether Greece could be allowed to default and, if so, what shape a restructuring should take.
It is a problem that has hung over the markets for months, because there is no easy solution. As one European policymaker says: “Nobody [apart from Germany] wants restructuring. But neither can anyone see an alternative.”
The debate has reached a critical point in the past week as rising yields on Greek debt have cut the country’s options. Its bail-out package runs out of money next year, just as Greece was supposed to be making its return to the bond markets. This return looks extremely unlikely.
This realisation spurred European Union policymakers to finally admit they need to find more money for Athens. Greece needs an extra €30bn in 2012, on top of the existing €110bn loan programme, and a similar sum in 2013, according to Evolution Securities.
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