One Year and Many Billions Later

Greece is in deep trouble again. Yet European Union finance ministers meeting Monday are expected to plan for a further $86 billion dose of the same failed medicine. Something has to be done to keep paying Greece’s bills, which no private lender wants to finance. But the same sort of bailout is not the answer.

Over the next year, the European Union must put in place arrangements to reschedule Greece’s more than $400 billion in debt — extending payouts to both public and private lenders, the latter mainly German and French banks, or reducing the amount owed or possibly both.

Without debt restructuring, Athens will have to keep coming back to Europe for more cash to pay off the banks and the burden on European taxpayers will keep growing. The longer Europe’s leaders hide from this fact, the bigger the eventual bill will be, and the longer Greeks will have to wait for renewed growth.

Greece’s economy shrank 4.5 percent last year and is projected to fall an additional 3 percent this year. Average salaries are down roughly 10 percent. Those grim numbers have translated into shrinking tax revenues and bigger budget deficits. Greece’s national debt, now just over 140 percent of gross domestic product, is on track to rise to 160 percent next year, and keep rising.

Athens has failed to meet its own deficit-cutting targets. Prime Minister George Papandreou needs to deliver on better tax collection, privatization of public utilities and health care reform. These politically difficult measures won’t come close to balancing Greece’s books, but they will help improve the country’s long-term economic prospects. And they will make it politically easier for other European governments to agree to debt rescheduling.

A Greek rescheduling could set a worrisome precedent. But no serious banker any longer believes Greece can pay all that it owes on time. Greece got itself into this mess. But Europe will have to help it get out. It will become even harder the longer Europe waits and pretends.