Greece worries

This week's policy forum of choice on Greece appears to be Il Sore 24... ECB's Stark on Wednesday and now Greek finance minister George Papaconstantinou. My sense is that both Papaconstantinou and his boss Papandreou get what needs to be done though there still appears to be a high-stakes game of chicken. A backroom deal should be reached but not without major drama and some serious budget changes from Greece - and little that has been proposed has generated so much fury already among public unions - covering 90% of the country's public employees. Is the population ready, and how much a Socialist government really push a Hungary-style major austerity program to a public that has grown quite comfortable over the past 20 years thanks to EU membership... all questions that will have to be answered not only for Greece but also for EU buddies Portugal, Ireland (which has actually done quite an impressive lot in fiscal austerity), Spain... and not to mention sooner or later G7 member Italy.

Back to Greece, the balance sheet offers little hope with liabilities well over 100% of GDP and double-digit deficit already questioned because of poor data reliability (in fact an EU mission led by Almunia in Athens now, to make sure the data is dependable). Any credible plan will require large-scale privatization and severe contraction of the swollen public sector, and even worse will have horrible consequences for the domestic economy: Credit is already on a sharp decline, only to be exacerbated by tax rises, such as in property. For now, banks are in good shape though an extended period of growth should take a toll at some point. Serious public unrest is possible, with the general population is getting worried only now.. press reports about safe box sales going up.