Playing with Greek fire

Economist
June 17, 2011

Until recently the European Union was content to kick the can of the euro-zone debt crisis down the road by three years. It is a sign of how bad things have become that it is now trying to push back the reckoning by three months. In fact, just three weeks would do.

In the official fantasy world of the euro zone, 2013 was to be the decisive year: that is when the Greek bail-out approved last year would expire. And that is when, under the terms of a new rescue mechanism, members would start issuing new bonds that could more easily be restructured if a country got into financial trouble again.

But Greece has returned to haunt the EU. The failure of the original rescue plan means that Athens now stands on the edge of default. The government of George Papandreou is in a state of semi-collapse and global markets are in a panic about the risk of contagion across the euro zone and beyond.

Hence today' hurried can-kicking exercise by the European Commission: it expressed confidence that the EU would soon come up with a deal that would, in turn, allow the IMF to release the next tranche of money for Greece in July, so averting a default this summer.

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