by Paul Hannon
Wall Street Journal
April 12, 2011
The sick have been separated from the healthy, and the task now is one of healing and repair. That's the message coming from euro-zone governments, sustained in part by developments in government bond markets in recent weeks.
But how do we get to that blissful state where the governments of Greece, Ireland and Portugal can once again persuade investors to lend them money at an affordable interest rate, and no longer have to rely on help from the rest of Europe and the International Monetary Fund to bridge the gap between what they spend and the revenue they can raise?
To hear euro-zone politicians tell it, spending cuts are the key. Meeting Friday and Saturday near Budapest, euro-zone finance ministers emphasized that the Portuguese government will have to tighten its belt by a few more notches now it's dependent on the largesse of others.
But belt-tightening alone won't solve the Bailout Three's problems.
Even if a budget deficit is reduced, it's still a budget deficit, and that adds to government debt.
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