Deflation Could Stall Efforts to Revive Greece

by Steven Erlanger

New York Times
May 2, 2010

Greece, effectively bankrupt and with a European gun to its head, committed itself to years of austerity on Sunday when it signed a financial bailout deal with the European Union and the International Monetary Fund.

But there are serious questions about whether the deep cuts in salaries and benefits the agreement calls for are politically sustainable over time, even as deflation will make it impossible for Greece to grow its way out of debt.

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