There’s still much to learn about re the (heart-) breaking news re what looks like a terribly harsh and austere deal to keep Greece in the eurozone, but this ‘graf from the NYT story is, if not unexpected, really unfortunate:
But any easing of Greece’s debt repayment obligations would not include something Greece had previously made a condition of any deal: a so-called haircut, or reduction of the overall debt, which is more than €300 billion. The document issued on Monday made its resistance to that demand clear in one sentence: “The Euro Summit stresses that nominal haircuts on the debt cannot be overtaken.’’
For those who don’t read German, that’s saying screw the evidence, including recent research from one of the three main creditors–the IMF–that some amount of debt forgiveness must be an essential part of any plan to keep Greece in the zone. Otherwise, their ability to begin to grow their way out of this mess will be severely hamstrung.
Over the past few days, there were some noises that a viable deal should involve debt haircuts–at least a trim around the edges–in exchange for new austerity measures (measures which should be backloaded, again, in the interest of restarting growth). Even uber-austerian German Finance Minister Wolfgang Schaeuble hinted in that direction.
Though I’m well-versed in the wrath of the creditors, well aware that they’ve tossed balanced economics out the window months ago, this development and path to a possible compromise gave me an inkling of hope.
Because of such short-sightedness, this isn’t over. The arithmetic does not become any less forgiving just because creditors ignore it. Until Greek insolvency and the counterproductivity of such deep austerity is recognized, this drama will continue to haunt us.