Economist
February 22, 2012
The fiscal and balance-of-payments deficits of the Greek economy leave it heavily dependent on transfers from the euro zone and the other troika members—the European Central Bank and the International Monetary Fund. This lifeline makes Greece understandably hesitant to leave the euro area, but it also entails a significant burden that restrains recovery—considerable new debt in the form of loans to be reimbursed at par and with preferred status over other creditors. Since the unsustainability of the current debt level is no secret, there can be no expectation of voluntary lending to the Greek public sector. In an analysis published in The Economist of February 18, 2012, Mario Blejer and Guillermo Ortiz have not sufficiently emphasised this and certain other elements of the Greek situation, which, when taken into consideration, could well alter their conclusions.
Greece faces few good options concerning its currency regime and other relevant matters, like rules for nominal price and wage formation, and will soon have to take tough decisions. Outsiders may help provide information about these possibilities, but, in the end, it is the decision of the Greek people and their representatives that counts.
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