CGD in the News

Europe's Economic Measures Too Little Too Late (U.S. News & World Report)

November 08, 2011

Senior fellow William Cline's op-ed piece on the European economic crisis was featured in U.S. News & World Report.

From the Article

The euro area has a real-time debt crisis already; the United States has a slow-fuse possible future debt crisis. The euro zone has unnecessarily provoked contagion from Greece to first Ireland and Portugal and now Italy and Spain. The July 21, 2011 Greek support package, with its large euro area loans at low interest rates and its 30-year extension of government debt held by banks and other private holders, would have been sufficient to deal with Greece if adopted in early 2010. Instead the May 2010 package imposed penalty interest rates and made the unrealistic assumption that private lending would return already by 2013. German proclamations about forcing the private sector to share losses triggered unnecessary contagion. Now Prime Minister Papandreou has followed the October 26 package—with its additional relief through a 50 percent haircut for private holders—with a call for a referendum. If his gamble succeeds it could galvanize public commitment to the hard measures ahead; if it fails, so will his government, the new package, and perhaps Greek membership in the euro.

Read it here.