Los Angeles Times
April 15, 2011
The unthinkable has become the inevitable three times in Europe's debt crisis: First Greece, then Ireland and now Portugal have all appealed to their neighbors to bail them out after insisting they would never do so.
Now a growing number of economists are urging European finance officials to take a rare and drastic step: Let one or more of the countries go into default.
Euphemistically it's called restructuring their debt, a move that would involve easing the terms of the loans and possibly writing off a portion altogether. Despite the initial shock such a move would cause, advocates say it offers the best chance for the countries' economies to get up and running again rather than remain crippled by debt that becomes ever more of a burden, not less.
Calls for restructuring are coming from experts across the continent, and politicians have broken the taboo on talking about it. German Finance Minister Wolfgang Schaeuble, whose government has put up much of the bailout money, suggested this week that restructuring could be an option if the countries' debts were judged unsustainable.
The official European line is still "No way." Officials fear that even talking about a nation defaulting will frighten investors and spread the crisis to bigger Eurozone countries such as Spain.
"A lot of people who discuss this fail to do the analysis of the costs and put those up against the potential benefits," George Papaconstantinou, Greece's finance minister, said in an interview here this week.
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