Wall Street Journal
May 24, 2011
As so often in the European-debt crisis, it is one step forward, two steps back.
Greece is making big strides toward securing International Monetary Fund endorsement for fresh bailout funds needed to avoid an imminent default. But a heavy defeat for the Spanish governing party in regional elections and negative ratings outlooks for Italy and Belgium knocked the euro and sent Spanish and Italian bond yields higher. They were a reminder that the euro zone still faces substantial political risks as it tries to extricate itself from its troubles.
The Greek government's renewed commitment to meeting the terms of its bailout program should help remove the immediate threat to euro-zone stability. It is to take further fiscal measures worth 2.8% of gross domestic product in 2011 and start immediately the privatization of some assets, including telecom group OTE and the Athens and Thessaloniki ports. That will help reassure the IMF that Athens is serious about reducing its deficit.
Without IMF endorsement, Greece's chances of securing fresh funds and avoiding a default are precarious. After weeks of high-stakes poker, Athens appears to have recognized the hopelessness of its hand and rightly folded.
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