Friday, November 21, 2014
Give Greece a Chance
November 21, 2014
Greece's creditors are testing the country's endurance -- again. If they keep pressing, they could split the euro area apart, which would be a disaster for them as much as for Greece. They need to stop insisting on the impossible, and find a way to relieve the country's debts.
The European Commission, the European Central Bank and the International Monetary Fund have told the government of Prime Minister Antonis Samaras to cut the country's debt burden, the biggest in the euro area, by reducing public spending even further. In return, they propose a last injection of bailout money and an emergency credit line.
The offer is toxic because further efforts to reduce debt through fiscal tightening are almost certain to fail. And that's assuming they don't plunge the country into political instability, as they well might. Polls suggest that the radical left-wing Syriza party, led by Alexis Tsipras, is in a strong position to replace Samaras's moderates in elections next year. (A few months back, Syriza rode a wave of anti-Europe sentiment to victory in elections to the European Parliament.)