New Greek Bailout: Old Greek Crisis

News comes that the terms of a new Greek bailout have been agreed. Sadly this is once again kicking the can down the road. Because setting the terms of new loans which are mostly used to pay old loans, is the classic error which has been repeatedly made over the past five years by a split and confused currency union dominated by Germany. The key question which has to be settled first and upon which the viability, both economically and politically, of any new financing package depends, is the extent and effectiveness of the write down of Greece’s unsustainable debt mountain. All that has happened over the last five years is that new loans have merely kept afloat the idea that Greece is solvent when it is not and that big money has not been lost when it has.

There is a hint that the issue of debt relief will be discussed in the autumn. Let us hope so. At the moment we have the classic picture of the cart being put before the horse because the horse is too weak to pull the cart. But sooner or later the cart has to move forward and that will only happen when its weight is adjusted to the capability of the horse. If Euroland does not see this, the next Greek bailout crisis will not be about Greece surviving in the euro; it will be about the survival of the euro itself.