Sunday, June 24, 2012

Greece Needs to Chart a Different Course

by Mohamed A. El-Erian

Huffington Post

June 24, 2012

Greece's political leaders still don't seem to get it, and neither do its official creditors. The longer this problem persists, the greater the challenge of turning around a country already beset by recession, insolvency, distressingly high unemployment and rising poverty.

Over the weekend, the country's new governing coalition led by Prime Minister Antonis Samaras signaled that it would request an extension of at least two years in the implementation of the austerity program agreed with the Troika (European Central Bank, European Union, and International Monetary Fund).

This is to be tabled in the coming days. The hope is to get European heads of government to sign off in the context of their upcoming Summit at the end of the week which will be focused yet again on steps to overcome the region's ever-deepening debt crisis.

The Greek government believes that it can diminish the detrimental impact on the population of austerity -- by stretching out the implementation of budgetary spending cuts, layoffs, wage and salary reductions, and tax increases; and, concurrently, by mobilizing additional external support from the Troika in the form of larger new loans and better terms on prior loans (principally lower contractual interest rates).


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