‘Greece’s strong action to reduce its budget deficit should pave the way for the payment of a second tranche of €9 billion in euro-zone financial aid.

The country’s deficit has fallen by 46% over the first half of 2010, a reduction that is faster than planned. Spending by the state has dropped 17% compared with the first half of 2009, and the government has undertaken public-sector wage cuts and pension reforms.

“Greece has managed impressive budgetary consolidation during the first half of 2010 and has achieved swift progress with major structural reforms,” said Economic and Monetary Affairs Commissioner Olli Rehn’

THE TRUTH

The frontpage of Handelsblatt reports that fear has returned in Athens, Brussels, Berlin and Washington as tax receipts for the Greek government have failed to match the expectations. In the first seven months of 2010, only 4.1 percent extra tax income for the government was created, while the EU and the IMF had been promised 13.7 percent for the whole year – a goal which will be hard to achieve as the tax burden has already been increased.

Another article in the newspaper suggests that new protests could take place in the autumn, while investors are already asking for a 10.6% interest on Greek 10-year sovereign bonds, whose spread with German bunds is currently 8.3%. The article notes that the Greeks will not be able to carry such a high level of interest in the longer term.

An article in Der Spiegel looks at the progress of structural reforms in Greece and notes, ‘The problem is that the austerity measures have in the meantime affected every aspect of the country’s economy. Purchasing power is dropping, consumption is taking a nosedive, and the number of bankruptcies and unemployed are on the rise. The country’s gross domestic product shrank by 1.5% in the second quarter of 2010′.

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The Greek experience continues to offer a blindingly obvious lesson for the UK in general, and its Left-leaning economists in particular: if you leave deficit management too late, no matter how hard you cut, the trust is gone.

Had Greece accepted its problems in early 2009 and come clean with Brussels (as opposed to listening to the criminal advice of Goldman Sachs) its economy would be in an even worse state….but it would still have the trust of sovereign lenders – and that’s all-important. As it is, the shrinkage in gdp only exacerbates the distrust of the markets.

I don’t like the power that barmy markets have any more than the Left does; but the British Left was more than happy to live with them for 13 years, and did rock-all to reform them. Damning the buggers now at five past midnight won’t make them go away.

I don’t know how many different ways I can say this before Labour in general and Will Hutton in particular grow up a little, and finally work out how many beans make five.