Austerity vs Default
Anybody wanting to debate what Europe should do with specifically Greece and possibly Italy and Spain should look no further than the results from Iceland (default) and Ireland (austerity). Iceland just exited the IMF program as a success and though Ireland is muddling along it has at least returned to solid growth. The Bond Vigilantes blog has a good post on the two options. Clearly the best path is to decisively pick an option and move forward. Both countries are moving forward while Greece continues to flounder. The problem with Greece is that austerity plans and the lack of growth initiatives are killing the country. Less government spending leads to a smaller economy and in the end it makes no progress on the debt plans. Have to agree with Jim that a quick haircut by the bondholders would've helped move the Greece situation forward a lot quicker. The market continues to fret over default or no default, but the real question is the size of the default. Honestly, most peo...