How Spain Can Avoid the Irish Error

In seeking solutions for the euro zone debt crisis, the more manageable Irish and Spanish cases should be distinguished from the much less tractable Greek case of egregious budget profligacy. Years of fiscal irresponsibility make it almost certain that Greece will default on its sovereign debt and exit from the euro zone, absent a massive fiscal transfer from the EU. Greece?s public debt (already approaching an unsustainable 150% of GDP and still rising) simply cannot be repaid. By providing ample liquidity, the EU-IMF assistance to Greece thus far has postponed the collapse of Greece?s public finances, but it will not avoid its eventual need for restructuring. Indeed, by plunging the Greek economy into the deepest of economic recessions, the austerity program is worsening Greece?s debt service ability.