Lax and inept, Greece is on a slippery slope

Markets are implying that Greece, with its chronic fiscal problems and rocketing public debt, is now a bigger financial risk than Colombia.

"Markets have been patient with Greece in the past," says David Schnautz of Commerzbank. But their patience with Greece's chronic fiscal problems and rocketing public debt is running out. "Neither the Greek government nor the Greek population seem prepared to do much" about the problem, says Michael Riddell on Bondvigilantes.co.uk.

Credit-default-swaps prices, which reflect the cost of insurance against a sovereign default over the next five years, imply that Greece is now a bigger risk than Colombia. The government's cost of borrowing is rising. Since the beginning of the month, the difference in yield between the Greek ten-year government bond and its safe German counterpart has jumped from 1.4% to 1.8% as Greek bonds have been sold off.

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