Messing up the next Greek debt relief could endanger the Eurozone
Charles Wyplosz 23 September 2013
Greece is in dire straits; it will need more debt relief. This column argues that Greece is suffering because northern EZ countries kicked the can down the road by forcing crisis countries to borrow rather than restructure their debts early on. It is time for the ‘generous’ lenders to face the consequences of their short-sightedness. The bad news that Chancellor Merkel ought to break now to her people is that official debt restructuring is inevitable.
The situation in Greece is so disastrous that some form of debt relief is likely. The timing is right as Germany’s electoral ‘purdah’ period has ended.
The most likely solution, however, will make it impossible to deal with other countries. Since the beginning, policymakers have invented “unique and exceptional” solutions to deal with Greece. But these went on to become the blueprint for subsequent programmes applied to other countries.
EU institutions Macroeconomic policy
Greek debt, debt rescheduling