“Greece’s private creditors are the lucky ones” – those were the words of economist Nouriel Roubini writing in the Financial Times in 2012 after the country's second bail out. Describing the process by which private sector claims were mostly turned into official ones, Mr Roubini went on to declare: “Official creditors will be left to suffer most of the huge additional losses that remain likely on Greece’s still unsustainable debt in future.”
This goes to the heart of the problem with Greece and the eurozone. The bail-out was more about stopping contagion in the markets and protecting the sanctity of the eurozone than it ever was about finding a viable solution for Greece. Even though Greek governments may have dragged their feet on reforms it is difficult to argue that a restructuring that causes the economy to contract by 25% was ever on the right path. This has made the national debt even larger in relation to gross domestic product – now at 175% – and more unsustainable.
