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Escaping the Greek Debt Trap

A 1991 arrangement shows a possible way out of the crisis.
Why so glum? There's a way out.

Why so glum? There's a way out.

Photographer: Sean Gallup/Getty Images

Greece's debt is unsustainable. The International Monetary Fund has said so, and it's hard to find anyone who disagrees. The Greek government sees structural reform without debt reduction as politically and economically toxic. The main governing party, Syriza, has made debt reduction a central plank of its electoral platform and will find it hard to hold on to power -- much less implement painful structural measures -- absent this achievement.

Moreover, tax increases and spending cuts by themselves will only deepen the Greek slump. Other measures are needed to attract the investment required to jump-start growth. Reducing the debt and its implicit claim on future incomes is an obvious first step.