The euro lives to fight another day, after Antonis Samaras’ narrow victory in Greece’s elections on Sunday. Yet before we drink too much celebratory retsina, we must recognise that Greece still has mountains to climb: its access to international capital markets is non-existent, the economy is set to shrink further, and its creditors expect to see far more reform than has so far been delivered. The eurozone has its own Mount Olympus to conquer. Austerity hasn’t worked, no one wants a wave of defaults and, as yet, the Germans are dead against fiscal transfers.
The good news is that there is no imminent Greek exit. The eurozone’s structural integrity remains intact for now. The fear of break-up will fade and the sell-off of peripheral debt should reverse. But most of the big questions remain unanswered. Continue reading »