Jeremy Warner: This latest deal only hastens the day when Greece will have to leave the euro
WELL there's a surprise. A "strictly confidential" 10-page debt sustainability report commissioned for yesterday's meeting of eurozone ministers concludes that the austerity measures being foisted on Greece as a quid pro quo for a second, €130bn bailout, are quite likely to prove self-defeating, in that the austerity, by further weakening the economy, may well cause the debt to GDP ratio to rise further.
Furthermore, the debt "haircut" being required of private investors may prevent Greece from ever returning to private markets for borrowing, making the country indefinitely reliant on official support. After the bailouts, so much of Greek's debt will be held by official repositories, all of who will have preferential treatment as creditors, that no private sector investor would go anywhere near it, knowing he'd be last in the queue of creditors.
These points may have been obvious to everyone else for a long time now, but I guess final acknowledgement of these inconvenient truths must be seen as progress amid the grand delusion of eurozone policy-making.