Creditors face two unpalatable choices: Greece leaves the euro and defaults on its euro-denominated debt, or it stays with the help of further write-downs It is surely clear to all sides by now – if rarely admitted – that Greece will never fully repay its bailout loans. The current approach requires Greece to run a large and protracted budget surplus to satisfy its creditors’ demands. This will force it to drain itself of demand for a generation or more, in order to transfer to other countries huge amounts of what the Greek people produce.History and economic principles teach us that trying to enforce such reparations-style logic on a heavily damaged economy will only serve to destroy it and harm the intended recipients too. It is time to end the pretence, and for Greek sovereign debt write-downs to become the central carrot for motivating growth-enhancing reforms in Greece. Related: Greek exit would trigger eurozone collapse, says Alexis Tsipras Related: Young Greek radicals don’t just want power – they want to remake the world | Paul Mason Continue reading...
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