Financial Times
Editorial
June 27, 2011
Europe’s sovereign debt emergency is as much a crisis of political leadership as of fiscal indiscipline, economic mismanagement and recklessness in the banking sector. Nothing demonstrates this better than the unease with which governments and financial markets are awaiting events this week in Greece.
Against a backdrop of rising social unrest and labour movement militancy, the socialist government of George Papandreou, prime minister, wants parliament to approve a €28bn, five-year plan of austerity measures and structural reforms. Should legislators reject it, Greece will not receive the fifth tranche of a €110bn European Union-International Monetary Fund loan put together last year to avert a debt default.
In plain language, Greece would go bust within weeks if parliament defied Mr Papandreou. Europe would have the mother of battles on its hands to prevent panic from spreading through debt markets to Ireland, Portugal, Spain and Italy. The dangers of a disorderly default would even extend beyond Europe into the US financial system.
Such a catastrophic scenario provides a compelling argument for legislators in Athens, especially those in the premier’s Pasok party, to approve the reforms. But if in these narrow-minded European times it is too much for Pasok politicians to put the eurozone’s interest above their own, they may wish to recall that a default would wipe out Greece’s banking system and probably destroy their cosy, favours-driven political system.
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