David Blackburn

Greek vote leaves questions unanswered

The Greek parliament has passed a vital bill to approve Prime Minister Papandreou’s austerity package, which was imposed by the European Union. The bill passed by 158 votes to 138, which suggests that some of those on the opposition benches abstained.
The markets rose this morning in anticipation of the bill’s safe passage; the FTSE, for example, climbed by nearly 100 points before lunch. The markets fell back after the vote, but have since recovered. The FTSE closed at 5855.95, a rise of 89.07 points on the day.
That’s not to be scoffed at, but the situation remains grave and the markets’ apparent caution reflects that. As Martin Wolf pointed out on the Today programme yesterday, no creditor will touch Greece without there being a dramatic restructuring of its debts of the sort discussed by Piotr Brzezinski on these pages yesterday. Even then, respite may prove elusive: Greece can buy only so much time. Already, Greek hospitals have defaulted on their bills; which has led some foreign pharmaceuticals to withdraw their non-essential products from the Greek public sector. As basic services are collapsing, it is little surprise that violent riots continue on the streets of Athens, where the air is thick with smoke and tear gas.

Salvation seems to be a hope rather than an expectation. The consensus says that Greece will default; perhaps as early as 15 July, when it has to start repaying €13 billion euros in government bonds. What happens then is anyone’s guess: Germany may intervene, or it may not. Today’s vote has not solved that equation.

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