Could a Greek default seriously hurt other euro zone states? Countries like Spain, where the government suffered a major mauling at the polls at the weekend. Moody’s, the ratings agency, seems to think so, warning any restructuring of Greek debt could push Europe’s other crippled economies over the cliff.
Like Greece, Portugal and Ireland’s finances are in intensive care after recent multi-billion euro bailouts. Bondholders also remain very worried about Italy and Belgium’s future. Brussels says states are acting.
“These governments have understood the necessity to move forward in fiscal consolidation, boosting structural reforms, and putting an end to situations, like for instance, the situation in the banking sector in Ireland. When the governments’ of these nations decide to do so, they are not thinking of the next elections, they are thinking medium and long-term, and the future of their economies,” European Commission Spokeperson Amadeu Altafaj Tardio said.
That means indebted governments keeping their promises to slice deficits through tight austerity, with the possibility of even more cuts. Guaranteed to be deeply unpopular with voters without any guarantee, it seems, of reassuring the world’s financial markets.