Greece Slips Further

Wall Street Journal
Editorial
September 9, 2011

In Athens, it gets even worse. Yesterday, the Greek statistical office reported that the economy shrank 7.3% in the second quarter, down from an initial estimate of a 6.9% contraction last month. The Greek economy has now been contracting for three years.

Meanwhile, the Greek government is only weeks away from running out of money to pay its bills and avoid default. Yet talks with the European Union and the International Monetary Fund broke down last week over the next tranche of loans Athens needs to avoid collapse.

All of which shows that July's much-hyped second bailout has done nothing to reassure investors or help the Greek economy. The more the economy shrinks, the smaller the tax base becomes and the heavier the ever-expanding debt burden grows. The Greek government can't cut its way out of debt when the overall economy is shrinking faster than the state can pare spending.

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