The coming face-off between Greece’s European creditors and the
country’s new left-wing government is painted as an epic struggle
between intractable foes, but it’s better to think of them as sharing a
common goal: Reducing Greece’s daunting debt without admitting it to the
rest of Europe.
Greece doesn’t want to be cut loose from the euro zone, but Germany and the rest of the EU will find it hard to keep it in without offering politically unpopular debt relief. As Greece’s new finance minister, Yanis Varoufakis of the Syriza party, put it, “we must offer Mrs. Merkel a way of packaging the new deal that she can then sell to her parliamentarians.”
The key thing to realize is that Greece’s problems date back far before Syriza came to spook the markets. The IMF’s most recent projection for Greece’s debt path is that it will decline from a horrendous 174% of GDP in 2013 to a hideous 128% by the end of the decade—but even that’s only if the country generates consistently high economic growth and runs a huge government surplus of around 4% of GDP for several years. Neither seems particularly likely, as private sector economists will tell you and even government ministers concede in private.
Read more: Yes, Europe will give in to Greece—but it won’t admit it – Quartz
Greece doesn’t want to be cut loose from the euro zone, but Germany and the rest of the EU will find it hard to keep it in without offering politically unpopular debt relief. As Greece’s new finance minister, Yanis Varoufakis of the Syriza party, put it, “we must offer Mrs. Merkel a way of packaging the new deal that she can then sell to her parliamentarians.”
The key thing to realize is that Greece’s problems date back far before Syriza came to spook the markets. The IMF’s most recent projection for Greece’s debt path is that it will decline from a horrendous 174% of GDP in 2013 to a hideous 128% by the end of the decade—but even that’s only if the country generates consistently high economic growth and runs a huge government surplus of around 4% of GDP for several years. Neither seems particularly likely, as private sector economists will tell you and even government ministers concede in private.
Read more: Yes, Europe will give in to Greece—but it won’t admit it – Quartz
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