From blind panic to shortsighted complacency: This is how author Philippe Legrain describes in an article of the Financial Times the way eurozone investors and policy makers are reacting to the economic crisis.

As he stresses in his article in Financial Times, the bonds of the South are reaching “bubble” proportions, as the eurozone crisis is not over and the markets are pinning too much hope on European Central Bank embarking on “quantitative easing”. The author believes that the investors are ignoring the risks that remain, as the banking crisis is not yet resolved, the public debt continues to rise and recovery remains feeble.

Specifically for Greece, the author underlines the following:
“Even an insolvent Greece, which restructured its privately held debt only two years ago, owes… a mountain more to the EU and the IMF and remains reliant on their funding, recently tapped markets for five years at a mere 4,95 %. Since Greece’s debt – 175% of GDP and rising – remains unsustainably large, investors are essentially gambling that the government will prioritize repaying them and eurozone authorities will be willing to grant Greece some form of debt relief”.

The author goes on to add that sentiment can change very quickly and concludes that while the sun still shines, governments must rush to pre-fund their borrowing needs. However, investors need to be warier of the storm clouds on the horizon. The same applies to eurozone policy makers who have yet again prematurely celebrated victory.