Expect a harder default for Greeks... and less democracy for the rest of us
With a whirlwind of deadlines, summits and presentations this week, the years-long saga of the Greek crisis has moved from one non-solution to another. Its latest iteration is the Athens-proposed Bailout 3.0 unveiled on Thursday night. For all the rhetoric surrounding its specifics, as well as the uncertainty of its adoption, two things are clear. One: for Europe and Greece, the cost of addressing the Greek insolvency is not going away. Two: the process of restructuring of the euro area institutions, launched in recent months in response to the latest flaring up of the Greek crisis, is here to stay as well.
The immediate problem with the latest set of proposals from the Greek government is the German-led, majority of the EU-supported, insistence on not allowing any upfront writedowns of debt.
Contrary to what we hear from Irish and other European leaders, the arithmetic of Greek debt is brutally simple. Athens's liabilities cannot be repaid, no matter what reforms are put in place. The Bailout 3.0 package simply means there will be more of the unrepayable debt to manage than before.