Discussions of how to bail out of Greece have turned rapidly to what kind of write-off investors may have to take on Greek debt as the International Monetary Fund and European Union prepare to make another set of loans to the southern European country. Germany says that investors should not be affected at all. But many opponents do not see how any new loans cannot be accompanied by a drop in the value of Greek paper. According to Reuters:
Source: Thinkstock
Without agreement on how to reduce the debt, euro zone ministers and the IMF do not want to resume payments of loan tranches to Athens — even though Greece has met all the conditions — because they have no guarantee on whether the need for emergency financing will ever end.
The key question is: Can Greek debt become sustainable without the euro zone writing off some of the loans to Athens?
Douglas A. McIntyre
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