by Richard Barley
Wall Street Journal
October 4, 2011
The Greek crisis is threatening to boil over. Euro-zone finance ministers are holding out on both the first and second bailout deals, delaying the release of €8 billion of cash and threatening to revisit the deal under which private-sector bondholders take losses. The market panicked Tuesday about the first problem, but the second problem is more ominous.
The cancelation of the Oct. 13 meeting that was due to release the latest loan tranche to Greece has raised fears the country may run out of cash, leading to a messy, imminent default. That looks overdone. Greece and the euro zone say the money is needed by the second week of November; the next major bond redemptions of around €6 billion are in December. Greece has access to the T-bill market and it is not in Europe's interests to allow a disorderly, accidental default to occur. Instead, the delay seems more about ensuring that Greece actually implements measures to save on public-sector wage expenditure, such as a plan to transfer 30,000 workers into a labor reserve at reduced pay.
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