The approval of the austerity package is only one of several steps needed to convince the EU /IMF to release more aid. It has been reported that EU Finance ministers meeting on Wednesday February 15th, are expecting a “written” commitment from Greek political leaders that they will honor the commitments made in the austerity package even after the Greek elections in April. It is this last point that one has to stop at and point to the elephant in the room.

What guarantees does a “written” commitment offer from political leaders before an election?
Does the world really think that this “written” commitment will be any stronger than any written commitment on a Bond indenture agreement?

Given the level of rioting and the deep opposition to the austerity measures and spending cuts – even from within the ruling coalition – is it so out of line to expect that a Greek default is still in the cards if elections bring to office some of those opposed to the austerity plan?

I think it is foolish to think that the Greek issue is behind us. While markets have fully priced in and discounted deep haircuts on Greek sovereign debt, I do not think a full blown default or an exit from the EU are factored in. Prudent investing says that all eyes should be pointed at the Greek elections ahead with a Greek default and an exit from the EU slowly being priced in until proven otherwise.