Here’s a great collection of charts from Société Générale on Greece, Ireland, Portugal, and the short-term treadmill that binds them all (click to enlarge):
No sooner had the Greek parliament said yes to the Medium-Term Fiscal Strategy (MTFS), than the question was raised; “where next?” The weaker member states are still battling to attain public debt sustainability and address structural growth issues. Even in the best case scenario, this will take years. And with weak growth and unemployment set to climb higher, this is likely to prove an uphill battle. Looking ahead, we see opportunity for a period of calm in the debt crisis, but this will in all likelihood prove short-lived. Each quarterly EU/IMF loan tranche comes with a new review for Greece, Portugal and Ireland, and markets will remain concerned that targets could be missed…
And that’s a lot of reviews. Some nuance here — you can see that Portugal’s disbursement need is quite heavy to March 2012, and SocGen observe (as we have before) that the Portuguese need to secure their own rollover deal with bondholders at the same time. Greece will influence if that process will work, much as it’s going to influence what investors think of the chances of fiscal adjustment.
Anyway, SocGen make a bold call for a “circuit-breaker,” picking either EFSF purchases of peripheral debt or eurobonds. Maybe, although we’d question whether this breaks the circuit, or simply expands it to include the states guaranteeing the EFSF.
But then again — anything is preferable to how the bailouts are currently constructed. Weren’t they supposed to “firewall” the eurozone from Greece? Instead it’s all feeling very reflexive.
Related link:
Syntagma Square and the price of sovereign equity – FT Alphaville
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