Wall Street Journal
September 19, 2011
Perhaps the only thing holding the euro together is the near-impossibility of breaking it up—and the cataclysm that its collapse could unleash. Even so, the political obstacles confronting euro-zone leaders as they battle to save the single currency are formidable.
The first is the decision over whether Greece should receive the next €8 billion installment of its bailout package, now postponed until mid-October in an attempt to ramp up pressure on Athens to meet bailout targets. The clear threat is that failure would result in Greek bankruptcy. This pressure appears to have yielded results: Following a four-hour cabinet meeting Sunday, finance minister Evangelos Venizelos said Athens would speed up promised reforms and introduce new measures to ensure it meets its 2011 budget target.
But even if Greece gets its money in October, it may only postpone the reckoning: Its budget deficit this year is likely to be 10% compared with a target of 7.5%, says Citigroup. And Athens has barely started on a promised privatization program. The market is convinced the Troika—the name given the team of officials from the International Monetary Fund, European Central Bank and European Commission—will ultimately have to admit that Greece won't meet its targets. That would pave the way for a default and coercive, rather than voluntary, debt restructuring.
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