The eurozone members have in theory decided to back Greece so long as strict conditions are met. These conditions would have to be similarly harsh as those of the IMF and thus can create a sense of security for investors. However, late last week the markets did not show confidence and bond yields continued to rise. What are needed are details.
Given the poor statistical record of Greece in their in-house fiscal accounting, simply saying they will cut this deficit does not persuade investors to risk capital. A eurozone call for these measures to be strong, swift and deep will show how Europe is committed but only in language. Sadly the devil is in the detail and neither seems to be showing their face.
Up-step Angela Merkel, German Chancellor, for her call to restrict and remove Greece’s voting privileges within the EU if the 27-nation bloc decides that a bailout is to be implemented. This seems to hark to a domestic political agenda of Merkel as there would be national unrest if Greece were to be bailed out.
So what will give? A bailout could be needed but would create unrest and opposition in domestic countries; strong signals and commitment needs to be shown by eurozone et al members to sure up markets but then words are not enough as investors will not believe and; fiscal austerity will lead to a decrease in government debt of Greece but can lead to further domestic issues within Greece.
Maybe the devil is not in the detail but is hiding within the politics.