Visiting Europe this week, President Obama urged leaders of the European Union to be more forgiving of Greece and its debts. No doubt reflecting on events back home, he said that economic stress and suspicion of unresponsive institutions were empowering populism. Addressing those worries needed to be a high priority, and supporting Greece’s flattened economy would help.

He’s right about one thing: Getting Greece’s economy back to sustainable growth requires debt relief. But this might be hard to arrange.

Greece’s public debt stands at roughly 180 percent of GDP. That’s insupportable, even with the more generous terms (low interest rates and more time to pay back the borrowing) now in place. The economic case for further debt relief isn’t really in doubt.

The International Monetary Fund, no bleeding heart in matters of fiscal rectitude, has for many months been urging EU governments to act. “It cannot be assumed that Greece can simply grow out of its debt problem,” officials noted in a recent appraisal. Further debt relief will be needed, “going well beyond what is currently under consideration.”

Obama has backed this message before, and he said it again this week. He praised the efforts Greece has already made to get its economy working more efficiently. For sure, there’s more to do in that respect, but Greece can’t get from here to a durable recovery without the help of the EU.

Unfortunately, Europe’s governments aren’t yet willing. With elections in France and Germany approaching, and patience with Greece’s endless difficulties running low, they’re reluctant to force explicit losses on to their taxpayers.


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: