Reining in Europe’s Debtor Nations

The eurozone countries have now agreed to provide some €80 billion in cheap loans to Greece over the next three years, and hope that the International Monetary Fund will provide another €15 billion at the least. But the interest rate that Greece must pay buyers of its government bonds has shot up to a record-high level of nearly 9% – 5.9 percentage points above the benchmark rate paid by Germany. That translates into an additional €16 billion per year in interest payments on Greece’s current debt of €273 billion. Obviously, markets still believe that Greece will default on its debt.