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Euro zone debt crisis: focus returns to Greece

Negotiators head to Athens to try and nail down agreement on bail-out
Greek troikaEnlarge
The rioting has calmed down in Athens but negotiations on the Greek bail-out aren't going so well. This week is crunch time and depnding on what's decided the streets may catch fire again. (LOUISA GOULIAMAKI/AFP/Getty Images)

You may have thought the Greek crisis was pretty much over. After all the headlines from last November were: Greek bondholders agree to take a haircut and the country's Prime Minister George Papandreou resigns to be replaced by a technocrat named Lucas Papademos, who is more congenial to the needs of the EU's leadership in Brussels, and more important, to German Chancellor Angela Merkel.

But as focus shifted to Italy and now to France, the Greek situation has remained bogged down in details. This week Greece's creditors in banks and hedge funds (not necessarily interested in the same outcome) plus representatives of the "Troika" (EU, IMF and European Central Bank) descend on Athens for an intensive round of negotiations with the Greek government.

Larry Elliott at The Guardian has the best line of the day on the event. "It is international finance's version of Sartre's Huis Clos, a vision of hell where three people who loathe each other are stuck in a room for eternity."

The sticking point is that some bondholders seem to be edging away from their commitment to accept a 50 percent haircut. Those who took out insurance against a Greek default in the form of credit default swaps may actually make more money if Greece defaults and leaves the euro.

Anyway, the German government is doing its best to encourage everyone to give Greece a chance. Greek newspaper eKathimerini reports Angela Merkel has been making encouraging sounds about the country's future, even if it has to pass through the ordeal by fire of austerity.

"She said there were many examples," according to the paper, “where the IMF has arranged similar programs where, after a certain phase of recession, come very strong phases of growth.” Merkel added, “Progress has been made in Greece.”

http://www.globalpost.com/dispatches/globalpost-blogs/europa/euro-zone-debt-crisis-focus-returns-greece

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