Europe Delays Greece Reckoning

Wall Street Journal
July 5, 2011

Europe can run from a Greek default, but it can't hide.

Greece has evaded bankruptcy this summer by enacting additional austerity measures to earn a second international bailout. But sooner or later, many economists say, Greece will succumb to its rising debt burden and default on its bonds.

With public debt set to reach 155% of gross domestic product this year, the country looks close to its limits as it imposes fresh spending cuts and tax increases on an economy in free-fall.

Short of a full-blown default, a debt rollover by banks—like that being proposed by French banks as part of the new bailout—could lead Greece into a less serious "selective default," Standard & Poor's warned on Monday. In a selective default, which tends to be short-lived, some of a borrower's debt is still serviced on time.

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