Source: Bloomberg News
European leaders recently announced that they will support Greece during its debt crisis, but Greek bonds spreads over the German bund have reached their highest level since the euro’s inception, indicating that markets remain skeptical.
Uri Dadush explains that unless Greece receives the aid that it needs from other European countries and the IMF, a Greek default is unavoidable. The support package announced recently has done little to reassure markets because it lacks specific details and many questions remain. Dadush lists some of the pressing questions: “What is the size of the package? What are the conditions associated with the package? What is the specific role of the IMF? What kind of monetary and fiscal policies will other parts of Europe have to follow?” In order to prevent Greek default and the crisis from spreading to other vulnerable European countries, Dadush concludes, more decisive action is needed.