There was a certain inevitability about the Greek bail-out deal struck in the early hours of Tuesday morning in Brussels. The negotiators clearly decided to stick to coffee for themselves, and bread and water for the Greeks, rather than reaching for bottles of Mort Subite [Sudden Death], a Belgian beer worthy of its name. When the brinkmen get so close to the edge, as they did last week, they rarely jump.
There were some surprises, though. The unfortunate banks were asked to undergo yet another short back and sides. The central banks have agreed to disgorge some profits, to support lower rates for Greece. And some other creative accounting measures have brought the projected level of debt to GDP down to within a whisker of the magic 120 per cent number.
The odds on a happy end to this story? One would have to say that they remain quite long. The scale of internal devaluation required will impose severe strains on the social capital of a country whose stock is already low. But they are perhaps a little shorter than they were last weekend. Continue reading »