June 8, 2011
In March, just as it was becoming clear that Greece might have to ask Europe for more money to prop up its failing economy, Prime Minister George A. Papandreou seriously considered a radical plan intended to resolve his country’s debt crisis once and for all.
Under the proposal, Greece would transfer as much as 133 billion euros — or 40 percent of its government debt, equal to about $195 billion — to the European Central Bank, which would then pay off the obligation by issuing its own euro bond.
It would be a “restructuring without a haircut,” in the view of the plan’s proponents, who enthusiastically described it to Mr. Papandreou in a series of secret meetings this year. The result, ideally, would be to ease the weight of the Greek debt on the economy, clearing the way for renewed growth while keeping the bankers and credit-rating agencies on board.
In many ways, the plan was a dreamy alternative to the grim calculus of Europe’s demands for more austerity from Greece in return for more loans. And Mr. Papandreou went so far as to ask a political ally and the plan’s two proponents, a British and a Greek economist, to lobby Europeans in its favor.
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