Greece - Beyond the Parliament Vote

Greece is in a spot of bother. In fact, in terms of its debt-to-GDP ratio, it is in worse shape than Jamaica was back when we nearly imploded, two years ago. With creditors dumping its bonds and its credit rating being quickly downgraded, Greece remains solvent only because its partners in the European Union are keeping it afloat.

Heavy debt load
The euro had enabled Athens to borrow at German rates, yet spend with Greek enthusiasm, in a nation which takes what might be called a rather sceptical attitude to tax collectors. So when the boom days ended, Greece's heavy debt load made it especially vulnerable to a downgrade of its debt. Greece was another Jamaica, with slower sprinters but better (well, for a while, at least) footballers.

When the masters of the eurozone in Brussels, Berlin and Paris came to the rescue, they demanded a pound of flesh, as the IMF did of Jamaica. This brought the protesters on to the streets, angered that with their attempts at economic micromanagement, the Germans were doing with the euro what they had failed to do with their armies - take control of foreign lands.

Lehman brothers sequel
If the Greek Parliament were to vote down the government's proposed austerity package this week, the country might be forced to default on its loans. If it defaults on its loans, French, German and American banks, exposed to Greek debt, would face losses. Some analysts fear that as they unloaded assets to cover those losses, they could create a tailspin similar to 2008's. Some, therefore, bill this moment, Lehman Brothers - The Sequel.

There is some debate as to whether or not this is a realistic scenario. Nonetheless, it is likely that neither the French nor the Germans want to find out. They will almost certainly continue to string the Greeks along, buying the government in Athens some breathing space, while giving their own banks time to gradually unload Greek bonds.

Sooner or later, Greece seems likely to implode. When it does, the euro will struggle not to go with it. And until it happens, a cloud will continue to hang over Europe's other peripheral economies, as well as the global financial system. A crisis may be postponed, but the economic recovery will continue to remain anaemic.