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The Greece default

Europe has taken a calculated risk that is worth emulating. The decision to force Greece to default, however, won’t be free from some serious consequences.

The draft, agreed by Eurozone leaders after a debatable brainstorming session in Brussels, will restructure its massive debts. It also has for the first time in history mandated the private sector to funnel in resources for ensuring growth and productivity. Nonetheless, the issue of accumulated debt will remain very much round the corner, as the continental leaders have given the nod for it to be repaid in the next three decades. It is one of the greatest concessions with the added incentive of a refreshing loan of $155 billion. The Greek crisis would certainly not have been addressed in a such an eloquent manner had the member states not shared the common denominator of euro, thereby securing the future of savings, pensions and jobs all over Europe.

This is why it is argued that the monetary mess in Athens is the headache of all the 27-member states of the union. The back-to-back bailout for Ireland, Portugal and now Greece, however, has more to do with the hidden interest of saving the bigger economies of the region. The fear that Italy, Spain and many other economies of Scandinavia are in the woods is an alarming proposition. This poses a major concern for France, Britain and Germany – the growth engines of Europe. The EU has no other recourse but to go back on the restructuring and regulations doctrine that the member states crafted last year in the wake of the Wall Street collapse. The onus is on Greece to prove the fact that the second tranche of bailout loan will be religiously used for unpopular austerity measures and privatisation, and at the same time shrink the size of the government.

As the European leaders fly out of Brussels after administering an unavoidable tranquiliser to Greece, and writing down a prescription of belt-tightening for other economies, they have to retain close coordination to ensure to get it going. Though technical default may go in the books as fudging of figures, it can’t be reenacted elsewhere. This is the time to recast priorities.