Greece still in crisis
An anniversary approaches. It sneaks up, but deserves recognition: 2 May 2010 was the day the European Union changed. In those drawn-out Sunday night hours the EU tore up its own rules. A single currency rule-book which excluded bail-outs was tossed to one side. Greece was rescued with a cool 110bn euros (£98bn).
Some of those European finance ministers have told me they feared they might lose the euro that night. They were still arguing when the skies were lightening in the Asian east with traders preparing to dump on the single currency. But like in the dying moments of a poker game there was one more hand to be played: Germany agreed to place a heavy stash on the table and Greece was bailed out.
So began a journey that has not ended. Greece was put on a life-support machine, sheltered from the markets. But the bankrollers were angry. Greece had faked its accounts. So there would be a penalty. Austerity. The Greek government accepted it would have to take the axe to a bloated public sector.
But as Europe stands on the threshold of this anniversary there is a growing belief that the bail-out has failed. It has bought time. Nothing more. Greece was heading for bankruptcy a year ago. It still is. It got a reprieve with a debt mountain that was about 300bn euros. It is higher now. The debt-to-GDP ratio is over 140% and heading towards 158%.
The Greek government, to be fair, embarked on a cultural revolution. The world of early retirement, holiday payments and tax evasion would be cleaned up. Over time the reforming zeal has faded. Austerity has reached its limits.
In a country that relies heavily on public spending the squeeze has dampened demand. Greece cannot escape the debt trap. The tighter the squeeze the more the economy contracts and the greater the debts pile up. GDP will shrink this year by 3%. Unemployment heads towards 14%.
Hans-Werner Sinn, the head of the IFO German think-tank, says "it is obvious Greece is insolvent". He and a significant number of economists believe that a restructuring of Greek debt is coming. It is the truth that dare not speak its name in Brussels. As Mr Sinn puts it, "we need to put the debt on the table and free this country a little bit from the overwhelming debt burden".
The Greek government has set its face against restructuring. It would be the first by a Western European state in about 60 years.The Prime Minister, George Papandreou, warns darkly that it would be catastrophic for banks and pension funds holding Greek debt.
Yet the mood in Athens is changing. The people are done with austerity. Even members of the governing Pasok party are beginning to contemplate the "r" word. The head of the parliament's economic affairs committee, Vasso Papandreou, said "it's better to have a restructuring now, not necessarily haircuts (for bondholders), but perhaps a repayment extension, since the situation is going nowhere". That is the dawning realisation that Greece is locked in a vicious cycle.
So why not go for a restructuring? Why shouldn't those banks in Germany and France take a hit? The fear is that those banks - particularly in Germany - remain fragile. A Greek default could usher in a wider banking crisis.
The President of the European Council, Herman Van Rompuy, is in Greece today. His mood appears surprisingly chipper. "The threat of the (eurozone) crisis spreading has been reduced significantly, or disappeared," he declared. Van Rompuy knows his economics, but he won't be surprised to know that others disagree with his prognosis. Like other European officials, he shuts the door to the idea of restructuring. He believes the reforms should be given time until they start to bring results.
"It can be done," he says. "I know it from first-hand experience as budget minister in Belgium, when we managed to cut public debt from 130% of GDP in 1995 to 114% in 1999."
Sure it can be done, but there is no evidence of it happening in Greece. Over the past year the central government deficit actually widened to 7.8%. The deficit is being revised upwards. Tax revenues are declining. Indeed in Budapest last week, at a meeting of European finance ministers, Greece was given a warning: don't back off reforms.
Yesterday the IMF said icily that the programmes of support (for countries like Greece, the Republic of Ireland and Portugal), were based on assumption that "they would honour their guarantees".
We are reaching a point when the Greek people may not take further austerity. The past year has been marked by strikes. Everyone - or so it often seems - from truckers to journalists has at some stage or other walked out. They don't want the medicine enforced from Brussels or the IMF. There is a low-level of disobedience against paying toll charges. The government, casting around for revenue, may be about to slap a tax on fizzy drinks.
But a year on the argument is shifting, and moving towards some kind of restructuring.