New York Times
Editorial
June 6, 2011
Greece has made it through its latest near-meltdown. But the solution patched together last week — more European bailout money for more Greek austerity — only buys some time without offering any realistic hope of recovery.
Athens agreed to impose a new $9 billion round of tax increases and spending cuts and speed up nearly $75 billion in promised privatizations. Europe and the International Monetary Fund, which had threatened to cut off financing after the government missed its deficit-reduction targets, will continue paying a $160 billion bailout package and likely provide as much as $86 billion more when that runs out.
Greece needs to reform its sputtering economy and bring discipline to its fiscal accounting. But a new round of tightening just now could deepen the recession and further shrink the tax base, making it even harder for the government to cut its deficit. Greece has no chance of reviving its economy — or paying off its bills — if it has to keep paying full interest and principal on a debt burden that is now more than 140 percent of gross domestic product and rising. Debt relief, or, to use the bankers’ euphemism, restructuring, will be needed. Debts must be written down, payments deferred and interest rates reduced.
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