How This Greek Tragedy Will End

by Rosemary Righter

Newsweek
September 18, 2011

It’s time to stop kidding ourselves about Greece. On the third anniversary of the Lehman Brothers collapse, the heavy brigade—the Federal Reserve, European Central Bank, Bank of England, and Japanese and Swiss central banks—moved decisively on Sept. 15 to avert a liquidity crisis in European banks that, as Greece heads for Hades, has found American investors understandably leery about lending greenbacks to banks with hefty portfolios of Greece’s worthless bonds. Between now and Christmas, the big five will hold joint auctions, providing unlimited quantities of dollars.

Coming in the wake of collapsing E.U. bank stocks and a Moody’s downgrade of two of France’s biggest banks, this display of firepower was a stout, badly needed riposte to the feckless Micawberism in eurozone capitals. The central banks are arming the financial world against the Greek default that everyone—other than (if you credit what they said as late as last Wednesday) Angela Merkel, Nicolas Sarkozy, and George Papandreou—now expects.

In Wonderland, the White Queen told Alice that believing “six impossible things before breakfast” is quite in order; but in Europe it is not. Over the past 18 months, the fiction that chronically dysfunctional, spendthrift Greece could, even with massive handouts, reform its way back to economic health has cost Europe’s taxpayers billions that would have been better spent on offsetting the costs of an early and orderly write-down of the unpayable debts of a country of little importance. Worse still, the political pussyfooting over Greece has cost governments vital credibility at home and abroad and magnified the risks to the euro that they sought to avoid.

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