Financial Times
May 9, 2011
Why is Greece suddenly worrying eurozone policymakers again?
A year after a €110bn international bail-out was agreed for Greece, European Union and International Monetary Fund officials are back in Athens reviewing progress.
Their conclusions – due next week – could make worrying reading. Economic reforms have stalled, the economy is in a tailspin and progress towards a modern tax collection system has been slow.
Failure to bring Greece’s public finances back under control soon and to turn around its economy could spell disaster for the country, and perhaps the eurozone.
It would be hard for eurozone leaders to justify the extensive support already in place for Greece – let alone fresh help.
So what are the options?
A priority will be to intensify pressure on Athens to rejuvenate its reform plans. EU officials are particularly scathing at the time it took to launch a large privatisation programme. In February, Athens promised sales worth €50bn – the list of disposals is still being discussed. At a meeting with senior eurozone colleagues in Luxembourg late on Friday, George Papaconstantinou, Greece’s finance minister, would have received an earful of criticism over Greece’s failings.
But Jean-Claude Juncker, Luxembourg’s prime minister who hosted Friday’s meeting, told journalists later that Greece needed “a further adjustment programme”, without giving details. The country could be given more time to implement reforms, easier bail-out terms or more funds. Another option might be to extend the maturities of its debt – but it is unclear whether a voluntary arrangement would be possible or have much impact.
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