Financial Times
May 9, 2011
It’s groundhog day in the eurozone. A year after the European Union and the International Monetary Fund unveiled a €110bn rescue package for Greece, that country is again at the top of the crisis agenda. The bail-out has exacerbated Greece’s indebtedness problem; its re-entry to the debt markets as a sovereign borrower early next year, envisaged in the bail-out plan, looks impossible. The eurozone had a choice – expand the bail-out, or allow Athens to restructure. It chose the first option. The second cannot be avoided for much longer.
A Greek restructuring is by now not only inevitable; it is essential. To avoid having to restructure, Athens would have to implement even more comprehensive structural and social reforms than those that have already caused civil unrest, as well as a frankly unrealistic pledge to privatise €50bn of state assets by 2015. Greece needs to execute these measures if it is to exit its crippling crisis eventually; but they should not be done in fire-sale circumstances.
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