No time to rest on our laurels

Greece’s first bond issue of the year yesterday provided some respite as it showed that the country is still capable of borrowing on international markets, albeit at a high price. The handling of the bond auction by the government’s economic team was a success, perhaps because it was the first time that they turned for advice to and worked so closely with people who are active in the market and have an intimate knowledge of its workings and the main players involved. Nevertheless, the fact that the bond issue was able to raise funds does not mean that we should be resting on our laurels. The hefty premium offered suggests that banks will be compelled to borrow and lend at high rates of interest, creating even more problems for the economy. Meanwhile, the government must immediately implement the fiscal discipline measures it has already announced, because the markets will continue to be aggressive and perpetually borrowing under such onerous terms is most certainly not a feasible option. To put things simply, if the country does not soon put its fiscal matters in order, the combination of the deficit and the massive debt will continue to keep a stranglehold on the real economy.

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