Greece: a lost cause

Financial Times
October 3, 2011

Greece is a lost cause. No amount of fiddling, massaging or austerity is going to get the country to meet its fiscal targets for 2011. It may be that the Greek government is ducking the most difficult challenges because it lacks political courage. But that hardly matters. Athens is in a vicious spiral that poses a grave threat to the eurozone. It is time for policymakers to get their priorities right. The task now is not to save Greece, but to save the eurozone.

It is true that Greece needs vast structural and social reforms to be able to stand on its own feet again at some point in the future. For now, though, asking it to slash and burn even further is counter-productive. Not only has the response worsened the country’s plight, it has raised doubts about the durability of the eurozone. These two issues must be separated. Allowing Greece to default within the eurozone – including as a prelude to its exit from the bloc – is the way to achieve that.

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