Colm McCarthy: EU's reluctant rescue package will prevent a Greek tragedy – for now
Kicking the can down the road is no good; only a full deal on debt relief will end the nightmare in Greece
Tuesday night in Brussels saw the latest instalment in the Great Greek Rescue drama which commenced two-and-a-half years ago.
Greece was patently insolvent in May 2010. European political leaders and the European Central Bank, against the advice of IMF officials, resisted the necessary decisions on debt restructuring. Greece had already accumulated unsustainable debts, since the economy had tanked, the deficit had soared and the banks were vulnerable.
Greece needed an immediate debt restructuring and the clear prospect of a successful exit from the mess created by Greek fiscal mismanagement. Instead, there was no debt relief: the funds lent to Greece went straight back out again to creditors of the Greek state and of the Greek banking system. This policy predictably ran out of road, resulting in a massive default of €100bn, the largest in history, on private holders of Greek sovereign bonds. But this second attempt at a resolution of the Greek crisis also failed, since the debt writedown was not enough.