Issue of the week: Greece inflames the debt crisis

Leave it to Greece to inject more drama into Europe’s debt crisis, said The Washington Post in an editorial. Just days after European Union leaders agreed on a hard-fought deal to stave off Greece’s default and shore up the continent’s defenses against a broader breakdown, Greek Prime Minister George Papandreou announced he would put the country’s bailout to a popular referendum. “Not since the night when soldiers emerged from the belly of a giant wooden horse in ancient Troy has Greece engineered a more stunning surprise.” It’s a “terrible blunder” that “puts at risk not only the bailout deal but also the world’s economic future.” The deal is far from perfect, but it is Europe’s “best hope.”

Don’t be so sure, said The Economist. Even before this Greek surprise, the rescue plan’s holes were “plain to see.” Its “confused and unconvincing” scheme to increase the European bailout fund probably won’t work, leaving indebted countries like Spain and Italy at the mercy of international debt markets. The plan to recapitalize banks could starve Europe’s economies of much-needed credit and “worsen the downturn.” And the insistence on making Greece’s creditors agree to voluntary debt write-downs will only “make eurozone debt harder to insure” in the future. After repeated chances, European leaders “have once again failed.” See you at the next crisis summit.

Maybe Papandreou’s referendum is just what Europe needs, said The Wall Street Journal. At least the Greeks, who came up with democracy in the first place, will have a choice: years of imposed austerity or immediate default and an exit from the euro. There was bound to be “a reckoning sooner or later,” and a default would at least show Italy what “happens to countries that can’t live within their means.”

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Why do I feel like I’m “watching a remake of the Bill Murray classic Groundhog Day, with the screenplay written by Financial Times correspondents”? asked Michael Schuman in Time.com. We see a never-ending cycle of looming Greek defaults and so-called historic agreements, only to “get up the next day to find we’re in exactly the same place we were before.” Perhaps that’s because Europe’s leaders “simply misunderstand” the root of the crisis. Investors aren’t really worried about unsustainable debt; they’re worried about the euro’s flawed governance. As we’re seeing now, “any one of the 17 countries can upend any eurozone policy.” Until Europe’s leaders embrace a more integrated fiscal union, this crisis won’t end, “no matter what pacts are signed.”