The Yomiuri Shimbun (Feb. 23, 2012)
2nd bailout for Greece not an end to debt crisis
A second bailout plan by the European Union and other concerned parties to deal with Greece's debts has finally been sealed by eurozone finance ministers.
Greece, which is suffering from an ever-worsening debt crisis, is scheduled to redeem a large amount of government bonds on March 20. Without further debt relief measures, it would have been difficult for the country to collect funds, resulting in a default that surely would have an adverse effect that will rock global markets.
We welcome this development. The Europeans were able to arrive at the bailout agreement in the 11th hour, a step forward in averting default for the time being.
The second bailout plan agreed on by the eurozone finance ministers has two main components. The first is a 130 billion euros (about 14 trillion yen) rescue package by the EU and the International Monetary Fund. Second, private financial institutions holding Greek debt in the form of government bonds will take further losses on their nominal value.
Distrust delayed agreement
An outline of the new program had been drawn up in autumn last year. But at the time, eurozone members' distrust of Greece, which by then had already broken several times its promise to rehabilitate its finances, was strong, resulting in a delay to the agreement.
Last week, the Greek parliament passed an austerity bill that was demanded by eurozone countries and the IMF as one of the conditions for extending the second bailout. It includes additional measures to cut its fiscal spending, and leaders of the country's ruling coalition parties have submitted written promises to European leaders, pledging the politicians' continued efforts at fiscal rehabilitation.
France, Germany and other countries have recognized these efforts by deciding in favor of the second bailout. We think the decision is not only brave, but also appropriate. It will no doubt contribute to the stabilization of the euro, too.
That said, worries about the future remain.
Greece is likely to hold a general election in April. Antonis Samaras, the leader of the second largest party in the ruling coalition, which leads in voter polls, pledged his party will remain committed to the austerity measures to be implemented by the current administration. However, he also hinted at a possibility they will be reviewed.
Demonstrations against the austerity measures have been ongoing in Greece. The EU and IMF must keep a watchful eye to ensure the country's administration does not go along with public opinion and loosen its firm stance on fiscal reform.
Walk the walk
Greece is now committed to cutting its debt to 120.5 percent of its gross domestic product in 2020 from the current rate of about 160 percent. However, there are fears the country's economy could further deteriorate, resulting in less progress in fiscal reform.
The path ahead for Greece is thus a thorny one: It must carry out biting fiscal rehabilitation measures, while at the same time making efforts to rejuvenate the economy. The Greek government will need strong determination to get things done.
If Greece were to stop short of reforming its state finances and asked again for further assistance, countries such as Germany and France would become incensed and refuse additional rescue packages.
In such a situation, the cooperative bond among eurozone countries would lose strength and the idea of a eurozone without Greece could become closer to reality.
Finance ministers and central bank chiefs from the Group of 20 nations, including Japan, the United States, European countries and newly emerging economies, are scheduled to hold a two-day meeting in Mexico this weekend.
The G-20 needs to urge Greece and other European nations afresh to continue doing all they can do toward overcoming the debt crisis. At the same time, the G-20 nations must reaffirm their ties and aim at stabilizing the global economy.
(From The Yomiuri Shimbun, Feb. 22, 2012)