Experts react to Europe’s bailout package for Greece

Policymakers and investors seem to have taken some solace from the announcement that European financial ministers have agreed to a bulked-up rescue package to stave off Greek default. No doubt, the deal enhances the probability that Greece will be able to squeak past its major debt refunding on March 20. This is good news regarding the prospect for immediate financial strains. However, near-term challenges abound, including convincing investors to share enough losses to make the fiscal arithmetic square, bank depositors in Europe that there funds remain safe, and politicians in the richer countries that directing more resources to keep the euro project afloat is still a wise decision.

Even after navigating the near-term shoals, the long-term outlook for Hellenic fiscal sustainability remains doubtful.

Recognize that “success” requires the government work down its debt relative to nominal income from the current lofty level of around 160 percent to 120.5 percent by 2020. (By the way, the false precision in that goal, forecasting a concept that has proved so slippery as the Greek debt burden to the 1/2 percentage point nine years out, shows that there is an unreality about the exercise.) The consolidation of the government sector, the reduction in benefits, and toughened tax collection efforts will almost surely extend the ongoing Greek contraction. Such declines in income will create serious headwinds in making meaningful progress in deficit reduction, a point we made about two years ago in the Washington Post. Moreover, if the Greek government ever gets to that long-run goal, work by Carmen and Ken Rogoff has shown that debt loads even lower than that have been associated with markedly slower growth in income. Thus, the rescue offers Greece the opportunity for an extended struggle to settle for slow economic growth for an extended period. This debt crisis is not over...

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Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

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