Danger of Default Catastrophe Remains

EXTRACT: Even if the virtually impossible happens, and the Greek government over the next few days conjures up a cuts plan that entirely satisfies the EU leaders, the national parliaments in Germany, Finland and the Netherlands still have to vote on the second bailout package. Since these countries have been the most vocal critics of the bailouts - why should we subsidise these ‘lazy’ and ‘unproductive’ countries? - it is by no means an automatic certainty that they will vote in favour of the second bailout package. They will need a lot of convincing that the deal will actually make Greece’s debt sustainable again.
Then there are the long-running and torturous negotiations with Greece’s private creditors over debt restructuring, which must also be concluded before it is too late - March 20 is not that far away. Yes, Rehn may have told reporters that the “draft agreement” with the creditors is “practically finalised”, but in the new economic order nothing is guaranteed. And if the bailout deal is delayed to after the general election, then that could frighten the horses - causing the creditors to give up on Greece and backtrack on its 70% haircut. The threat of a disorderly default remains.

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