European Union finance ministers signed off this week on a $172 billion bailout package for Greece, allowing the country to dodge immediate default. But the tortured, 11th-hour negotiations in Brussels did not allay fears that the deal would condemn Greece to years of recession and do little to stem the euro zone’s ongoing debt crisis. The latest round of debt relief aims to reduce Greece’s debt level, currently 160 percent of GDP, to a still-crippling 120 percent by 2020. In exchange, Greek leaders have agreed to brutal public spending cuts and layoffs, tax reforms, and unprecedented EU oversight of the national budget. And private-sector holders of Greek debt face a 70 percent write-down of their bonds. Having avoided the “nightmare scenario,” said Greek Finance Minister Evangelos Venizelos, Greece should embrace this “new opportunity.”
Greece’s nightmare is far from over, said Christopher Dickey in TheDailyBeast.com. Its economy shrank 7 percent last year, and unemployment is at 21 percent. That dismal picture won’t improve unless the economy grows, a nearly impossible feat under the latest austerity reforms. An EU-IMF report leaked this week admits that Greece could well wind up with the same level of debt in 2020 that it has now. “There’s really no relief in sight.”
“Things didn’t have to be this bad,” said Paul Krugman in The New York Times. Greece’s crisis has been made far worse by the misguided measures imposed on it over the past two years. When high-debt governments slash spending in the face of high unemployment, they get deeply depressed economies. Perhaps Greece’s lot will now convince “people on both sides of the Atlantic” that we cannot cut our way to prosperity.
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Greece’s sovereignty may have suffered the greatest blow, said The Wall Street Journal in an editorial. “Europe’s solution for Greece has been to lurch even further in the direction of central control at the expense of local democracy.” Europe’s strongest countries are calling the shots, and “everything is worse for Greece.” That’s hardly what the euro’s founders imagined.
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