Greek Euro Disease

Originally published by the Carnegie Endowment for International Peace
Greece is now facing a sovereign debt crisis that is calling into question the viability of the euro. Uri Dadush argues that, while there are no easy solutions to this crisis, Greece must receive support from both Germany and the IMF. Although some have argued that such support would create an issue of moral hazard in the Euro area, wherein countries would be more willing to take risks because they know they would have support from other EU members and the IMF if they fail, Dadush notes that the problem is often overstated. No country “will look forward, in any conceivable way, to having a massive financial crisis,” he pointed out, regardless of the support that may follow.