The Greek debt drama would be better played sooner than later

by John Dizard

Financial Times
November 20, 2010

With the Irish “bail-out” moving to its sad denouement, the next sequence of events in the euro’s existential crisis is becoming clearer. Had the Irish banking sector’s ability to maintain funding not been resolved, the Spanish banking system would almost certainly have rapidly been seized by the same problems.

The Irish banks’ loss of wholesale deposits had precipitated the current crisis, and the same class of depositors had already begun to trickle out of Spain. The European Central Bank’s balance sheet was barely able to temporarily provide liquidity to the Irish; the effect of a Spanish deposit flight on the central bank does not bear contemplation.

This Monday, auditors from the International Monetary Fund, European Union, and ECB will have formally completed their review of Greece’s compliance with the terms of the May stabilisation programme. It is already understood that the spending and revenue targets for the Greek state will not have been met.
Nevertheless, the next tranche of €9bn ($12bn) of EU-IMF money will be released next month, since apparent sincerity and new, revised promises are taken to count for as much as actual compliance.

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