Get set for yet another episode of Greece’s endless drama, says Nick Malkoutzis on Businessweek.com. By this Sunday evening, the Greek parliament is supposed to have voted through the latest package of austerity measures and structural reforms, as well the 2013 budget. This is the key to receiving a €31.5bn aid tranche from its official rescue package, without which Greece’s money will have run out by mid-November.
Whatever happens over the next few weeks, however, the basic problem hasn’t changed. For two years now the pattern has been that Greece falls behind on its deficit and debt-reduction targets and then needs further help.
“The extent to which Greece keeps missing its targets is starting to beggar belief,” say Lex in the FT. The budget projects that overall debt will be close to 190% of GDP next year, 10% higher than forecast a month ago. There is scant hope of reaching a target of 120% of GDP by 2020.
The economy has shrunk for five years and is 20% smaller than in 2008. Austerity has compounded the recession, making it hard to stick to deficit-reduction targets as tax revenues shrivel and social spending rises. That in turn has prompted more austerity to get back on track, further damaging growth in a vicious cycle.
It hardly helps that the government has dragged its feet on reforms such as radically improving tax collection infrastructure and clamping down on tax evasion, says Wirtschaftswoche. One study reckons that, in 2009 alone, Greeks evaded €28bn of taxes.
With Greece hopelessly off target, a second debt-restructuring deal is on the cards. There is already talk of giving it an extra two years to get its deficit down, which would cost creditors around €30bn. But creditors, including other governments, will be reluctant to take a loss on their holdings as they have promised their electorates that bail-outs will be paid back.
Germany is especially loath to take a loss before next autumn’s national elections. Until then, restructuring “looks politically impossible”, says Richard Barley in The Wall Street Journal.
But with leaders still afraid that a chaotic Greek exit could set off a chain reaction of bankruptcies across the periphery, says Wirtschaftswoche, expect talk of various measures to keep Greece above water for now. In short, more fudge and delay.