European Institute

BY EUROPEAN AFFAIRS

Greece is the extreme basket case of the euro’s woes, so its apparent rescue from its creditors this week brought a sense of relief to people managing the crisis. The price of the breakthrough was costly both for private bondholders (in terms of their “haircut” in written-off bonds) and to the Greek people (who will have to bear even steeper cuts in payrolls and pensions).

After weeks of agonizing negotiations among Greek government officials, private lenders and other international creditors, the governing coalition in Athens has finally given approval to the latest round of austerity measures in order to receive a second bail-out – in time to meet its deadline for preventing a messy and potentially contagious default on its national debt in March.

Greece has had to bear the brunt of not only economic hardship but also relentless international criticism that the nation has a bloated public sector and an unsustainable social welfare system and is also beset by rampant systematic corruption and tax evasion.