Keeping Greece Afloat With More Debt That It Cannot Pay

If Greece Goes… -- The Economist

The opportunity for Europe’s leaders to avoid disaster is shrinking fast.

THE European Union seems to have adopted a new rule: if a plan is not working, stick to it. Despite the thousands protesting in Athens, despite the judders in the markets, Europe’s leaders have a neat timetable to solve the euro zone’s problems. Next week Greece is likely to pass a new austerity package. It will then get the next €12 billion ($17 billion) of its first €110 billion bail-out, which it needs by mid-July. Assuming the Europeans agree on a face-saving “voluntary” participation by private creditors to please the Germans, a second bail-out of some €100 billion will follow. This will keep the country afloat through 2013, when a permanent euro-zone bail-out fund, the European Stability Mechanism (ESM), will take effect. The euro will be saved and the world will applaud.

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My Comment: I always find it incredibly naive to believe that in order to solve a country's debt problem .... you must give it more debt. But the sad fact is that this is exactly what Europe is presently doing when it comes to solving Greece`s debt crisis. Why this is being done .... your guess is as good as mine .... but the sad fact is that Greece has a long history (and a culture) that will keep this environment of insolvency continuing for many more years to come, and until Europe realizes this, the next crisis will be only a year or two away.