June 16, 2011
Europe’s year-long attempt to grapple with the sovereign-debt crisis is becoming more nailbiting by the day. For weeks European leaders have been feuding over what to do about Greece, which clearly needs more help with its precarious public finances. But a second rescue, adding even more funding to the original bail-out in May 2010, cannot work unless the Greeks push through more painful reforms. These are now in doubt, sending tremors through financial markets and causing stockmarkets to fall around the world.
From the nation that coined the word drama, there was plenty of it on June 15th. As a general strike took hold across the country, there were violent protests in central Athens, where tens of thousands of people had rallied. After failing to form a government of national unity, George Papandreou, the prime minister, announced that he would reshuffle his cabinet and later call a vote of confidence in parliament. The indignation of the protesters is widely shared. A recent poll published by Kathimerini, a newspaper, found that 87% of the public thought the country was heading in the wrong direction.
The same could be said for Europe’s approach to the sovereign-debt crisis, as it has spread relentlessly round the southern and western periphery of the euro area. The single-currency zone as a whole is doing well, outgrowing both America and Britain in the first three months of this year. The euro-wide budget deficit also compares favourably with that of other big advanced countries. But the debt crisis is proving intractable, partly because leading policymakers disagree about the way forward and at times seem lost themselves. Time is short. There is a summit of European leaders next week, and Greece must soon pass an austerity budget.
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