Wall Street Journal
June 20, 2011
By the time you read this a crisis will have been avoided for this week —the time period that most concerns the eurocracy. The International Monetary Fund, the European Central Bank, German chancellor Angela Merkel, French president Nicolas Sarkozy and others who delude themselves into believing they have a role in these matters will have released or be about to release the €12 billion ($17.16 billion) second tranche of the previously agreed €110 billion Greek bailout.
Never mind that Greece has not upheld its end of the bargain—spending is up over last year, and tax receipts are down, the opposite of what was promised. Rioting in the streets of Athens makes it uncertain that the reshuffled government will survive a confidence vote and, if it does, be able to implement the new, tougher €28 billion austerity program. There is as yet no sign that the privatization program aimed at raising €50 billion is on the launching pad.
But this week's solution gets the euro zone safely all the way to—June 23-24, when the European Council meets to sign off on any deal that has been negotiated by finance ministers. That allows about two weeks to concoct some way of involving private-sector lenders in the inevitable haircuts without triggering a default—now called a "credit event"—that would wipe out several banks and force the ECB to seek a capital infusion. Finding the right formula won't be easy, for two reasons.
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