October 19, 2011
In the nearly two years European leaders have spent trying to tackle the eurozone debt crisis, the summits foreshadowed as those that will finally pull off the grand bargain that puts the single currency back on a firm footing are almost too numerous to count.
What sets Sunday’s summit in Brussels apart is that policymakers’ greatest fear at the start of the crisis – that the fiscal troubles of a small country on Europe’s periphery would infect the global economy – has come true.
Greek debts, even at €350bn ($483bn), could be absorbed easily by a continent as prosperous as Europe. Even if the European Union were forced to take over all Athens’ debts, the cost would be a fraction of that incurred by west Germany’s difficult absorption of the weaker east.
What has always made Greece dangerous is the precedent it set. For investors and critical analysts, ever changing policies towards the country have raised questions about whether European leaders can be trusted to protect and rescue less troubled economies. Once lost, that confidence has proved almost impossible to regain.
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