There is a well-known joke about a hunter who pursues a bear so many times without catching him that at last the bear asks: Are you sure that you have come out here to hunt? Yesterday European leaders began a new series of meetings in order to deal with the Greek recovery yet again. And I would ask them: are you sure you have come to rescue Greece?
Chancellor Merkel keeps reminding us that she will not give one more euro to Greece unless they take some drastic measures. She and Sarkozy have put Papandreu up against a wall such that he is obliged to commit to reforms. Yesterday the prime minister of Slovakia expressed enough doubt about Greece to warrant their non-support of Greek bonds.
Further, in Greece the opposing party and general population is resuming protests against some adjustments that they consider excessive. That there will be general elections in 2013 and the second Greek recovery plan will be in effect until 2014 are a pair of extra issues to deal with. If the opposition wins at the ballot box, surely they might want to reopen discussions about bailout and credit negotiations. Despite all the pressure that the Europeans put on Greece´s New Democracy party, this would keep the country far from any call of duty.
This uncertainty created market anxiety once again. Fear exists because the situation in Greece could spread to other peripheral countries and reach levels that the Eurozone cannot sustain. This could make all the risk premiums (including Spain´s) shoot to annual highs. Zapatero?s pacemaker is beating hard as he asks for another round of recovery measures that would once again separate us from countries who are also in trouble.
Not only should it be assured that the cajas and regional governments won?t give us any more accounting surprises, but that our reforms should be enacted. And this is going to suppose, in good measure, that part of the State of Wellbeing´s burden would shrink. All this results from a competition crisis in which the peripheral countries, Spain and the United States are trying to face and stay in the game with emerging markets.
Lastly, events like this coincide with general preoccupations about the way the global economy is operating, especially with regards to the United States and the already-clear consequences that the Japanes earthquake had on global supply chains. After the Fed withdrew its QE2 stimulus package, the markets had already demanded a third wave.
The markets are supporting the Fed?s beliefs that the United States economy could rally and that the US government?s fiscal policy does not have much more room to move. Employment is not up and the real estate market has not seen the light at the end of the tunnel.
Americans used to traveling by car during summer vacations are paying close attention to the rising price of oil, and their government has pressured the International Energy Agency to release oil reserves. This organization has proclaimed that expensive oil would threaten an already feeble recovery.
Announcements like this threaten the recovery and could cause black gold to collapse suddenly and brutally. Confidence in the recovery is waning. Authorities in Europe and the United States have faced problems, which has bought some time, but many background issues persists. Propelled by the markets, they have come running back to some fundamental recovery practices that bring about greater liquidity, but not for the reforms.
Now we are left to ask ourselves: are leaders willing to do what?s necessary but difficult? Because it seems evident that the crisis is going to rear its head several more times. Perhaps we will enjoy it?.
Edited in English by Brandon Dyches and Jose L. De Haro (joseluisdeharo@eleconomista.es)
