by William Alden
July 22, 2011
A deal struck by European leaders providing debt relief to Greece has soothed fears of a fresh crisis, but the nation's ailing troubles -- and by extension those of the rest of the continent -- seem far from over.
The fundamental problems remain, experts say. Namely, the Greek economy is in a recession, and a program of deep spending cuts enforced by outside powers hinders its prospects for growth. "The problem with Greece and a lot of the periphery is they're not growing," said Win Thin, global head of emerging markets strategy at Brown Brothers Harriman in New York.
The plan handed down Thursday by leaders of the nations that share the euro provides a framework for allowing Greece to enter a so-called restrictive default -- a move that, though risky, is seen as a way to usher the nation along a path to recovery. Stocks rallied on news of the plan, which pledges a second bailout for Greece. It also aims to calm fears by expanding the powers of a European rescue fund and by outlining an orderly way for Greek debt holders to accept lower payments in exchange for a solid guarantee of their investment.