Do not expect miracles

The issuance yesterday of a seven-year bond by the Greek government – a key test of its ability to borrow after last week’s announcement of the rescue plan to help the country cope with its acute debt crisis – was a clear indication of two things: First, Greece does not face serious problems in raising money on the market, even if that takes place at a high rate of borrowing. And the second, and more important, conclusion is that interest rates will not drop as if by magic or because we are going to be financed by our European Union peers. It will take time and hard effort before the country will be in any position to borrow at relatively normal rates. We should not expect miracles. Greece’s credibility has suffered a heavy blow internationally – and this naturally fuels skepticism over whether Greece can really put its fiscal chaos back into some kind of order. Greece’s politicians should be more laconic in their public statements and work harder at cutting back state spending.

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