Even with the additional austerity measures announced this week in Athens, the financial markets are still betting that the chances of Greece defaulting on its debts remain high.
Europe’s policy options to avert that are fast disappearing after the European Central Bank and credit ratings agencies warned against any rescheduling of Greece’s debt – that is delaying or even reduced repayments.
The size of the problem is immense, Greece’s debt is set to hit 158 percent of the country’s annual output this year, the shortfall is 9.5 percent of GDP.
The cuts mean Greece cannot grow its way out of trouble with the economy forecast to shrink 3.5 percent and that weakness has pushed unemployment to record levels, at 15.9 percent of the workforce.
The European Central Bank continues its chorus of Greece should not restructure its debt and has to stick to its EU/IMF rescue programme.
ECB Governing Council member Ewald Nowotny said: “We have a very clear position; we want the programmes that have been discussed just now to stay on track and that is our priority.”
But the ‘programmes’ the ECB talks of mean real pain for ordinary Greeks, who are fed up.
One pensioner in Athens said: “They keep saying every month that the measures are not enough and we need more and more. With more and more measures how will it end?”
Not any time soon is the answer; under pressure from the EU and the IMF, the Greek government will keep asking for more as it tries to avert defaulting on its debts.