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Shocking News from Greece

Reuters has some truly shocking news from Greece. Via Meadia, too, is shocked, shocked to learn that Athens will fail to meet its debt targets for the umpteenth time in a row. A new IMF report released Thursday suggests that, even under the most optimistic scenario, Greece’s debt-to-GDP ratio will be well above the target level of 120 percent in 2020:

“It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136 percent, and this would be under a positive scenario of a primary budget surplus, a return to economic growth, and privatisation,” a euro zone official, who insisted on anonymity, said.

“New prior actions will be needed, on top of the existing 89,” the official said, referring to a list of already agreed reforms that need to be in place before any new tranches of euro zone and IMF emergency loans to Greece can be paid.

Via Meadia wonders why European officials bother with these targets at all, when no serious observers think Greece has any hope of achieving them. The more important problem is that Europe still doesn’t have a real policy for Greece. Otherwise, it would have targets that were real—and realistic.

It’s always hard to follow the twists and turns of the complex policy machines operating in the EU, but a look at the big picture is usually extremely helpful. Right now, the big picture is that Greece is the smallest and least consequential of all the sovereign debt problems that the Eurozone faces, and it should be the easiest to resolve. Yet after two plus years of constant effort, with whole rain forests worth of trees sacrificed to print memos and background reports and meeting notes, Europe still hasn’t come up with a workable policy on Greece.

And if Europe doesn’t have a policy for the relatively simple and containable problem of Greece, what are the chances that it knows what to do about bigger, more complicated cases like Italy, Spain and, the way things are going, France?

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