Austerity backing prompts currency boost

No country in modern times has staved off a default with a debt-to-GDP ratio of 150%. Could Greece service its debts over a long-term timeframe, or are we just deluding ourselves, asks Kyran Fitzgerald

BACKING from the Greek parliament for the country’s austerity package has prompted a so-called “relief rally” in the markets pushing the euro to over $1.45, that is, to a level around 10 cents higher than that prevailing when Lehman Brothers collapsed in September 2008 triggering a global financial meltdown.

But many economists remain convinced that this relief will prove short-lived and that economic and social meltdown in Athens could spark an uncontrolled default on sovereign debts, provoking an international banking crisis and a possible break up of the eurozone.