The new plan\u2019s biggest shortcoming, however, is its attitude to Greece\u2019s debt. The original rescue plan assumed that, starting in 2012, Greece would issue new bonds to pay off maturing ones. With such market access now out of the question, the new bail-out envisages more loans from the EU and IMF, along with some \u201cvoluntary\u201d\u009d participation by private bondholders. Germany would like the maturities of all Greek bonds to be stretched by seven years. The European Central Bank has long resisted any such debt \u201creprofiling\u201d\u009d, though it seems to be warming towards an informal promise by some creditors, such as Greek banks, to buy more government bonds when their existing ones mature.<\/p>\n
The practicality of such an informal promise is doubtful. And it won\u2019t solve the debt problem. When the new plan ends Greece will still owe more than it can possibly pay. More of that debt will be to official creditors, especially if the private bondholders play only a token role now. Restructuring at that point will be more costly for other governments and the IMF.<\/p>\n
The rescuers think buying time reduces the risk of contagion from a Greek debt restructuring to other euro-zone countries. But the pall of an unsolved Greek mess will continue to hang over the euro zone, just as it has done for the past year…<\/p>\n