Guardian
June 15, 2011
Greeks rioted , the country's prime minister offered to resign and the yield on Greek two-year sovereign bonds hit 28%. Meanwhile, the Dow Jones industrial average fell 190 points at one stage. Markets are carrying a simple message: we fear politicians and policymakers are losing control of the plot. The long-feared "Lehman moment" – an uncontrolled debt default by Greece, with the impact being felt across the eurozone banking system – suddenly seems a horrible possibility.
Investors' worries are understandable. The past month has seen the European Central Bank and eurozone politicians squabble over the design of the next bailout package for Athens. Private sector investors must share some pain, says German finance minister Wolfgang Schäuble, if German taxpayers' money is to be dispatched. Unacceptable, says the ECB, we cannot allow anything that looks like a debt default, it would be too dangerous.
That squabble over the design of a bailout that wasn't meant to be necessary (Greece was supposed to be borrowing in the market by now, according to last year's plan A) suddenly looks a sideshow. If Greece doesn't have an effective government capable of imposing the austerity measures demanded by its lenders, the game is close to up.
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