New York Times
Editorial
October 6, 2011
Europe has been right to demand that, in exchange for bailout financing, Greece carry out painful structural reforms to make its economy more competitive and able to generate more revenue to pay down the country’s huge debts. Without that pressure, Athens would likely never be able to overcome fierce resistance from public-sector unions, professionals, the wealthy and all of the special interests determined to keep doing business as usual.
But Europe has been dead wrong to simultaneously demand that Greece impose steep new taxes and deep social spending cuts guaranteed to prolong and worsen an already severe recession. That will make it impossible for the country to earn its way out of debt.
With Greece’s diminished prospects threatening the balance sheets of banks across Europe, the European Central Bank announced Thursday that it will add new liquidity to the Continent’s banking system. But its plan to purchase $53.6 billion in special bonds issued by banks and other financial institutions will not be enough. Europe’s leaders need to turn away from the austerity policies that are stymieing growth, not only in Greece but in stronger economies like Germany’s as well.
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