Europe drawn back to its first problem: Greece

Luke Baker and Deepa Babington, Reuters, 27.08.2012

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The euro zone debt crisis was born in Greece. Nearly three years and two bailouts on, Europe must decide whether to give the country yet more help or cut it loose.

For all its complexities, Greece's problems essentially come down to three simple questions: Can the country return to growth? How big are its debts? And will the first ever be enough to pay off the second? […]

Logic might suggest Greece must go but this crisis has shown politics trumps maths and economics. That is why analysts say a "muddle through" is most likely to be found, for now at least.

"That's the lesson I've learned from the last three years. It's politics that's the dominant factor," said Janis Emmanouilidis, a senior analyst at the European Policy Centre, a Brussels think tank.

That could include meeting Samaras's call for two extra years, although German Finance Minister Wolfgang Schaeuble has rejected that, extending the maturities and/or cutting interest rates on its bailout loans, and getting the ECB and euro zone national central banks to take a write-down on the Greek bonds they hold, which they refused to under the second bailout. […]

Emmanouilidis, who is of German and Greek origin, said while it was a cliche, EU leaders were likely to try to kick the can down the road again. "I don't think that road is very long," he said. "So if you kick the can again now, there's not a lot further it can go."

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