It's time to end the pretence: Greece will never fully repay its bailout loans

Creditors face two unpalatable scenarios: Greece leaves the euro and defaults on its euro-denominated debt, or it stays with the help of further write-downs

It is surely clear to all sides by now - if rarely admitted - that Greece will never fully repay its bailout loans. The current approach requires Greece to run a large and protracted budget surplus to satisfy its creditors' demands. This will force it to drain itself of demand for a generation or more to transfer to other countries huge amounts of what the Greek people produce.

History and economic principles teach us that trying to enforce such reparations-style logic on a heavily damaged economy will only serve to destroy it and harm the intended recipients too. It is time to end the pretence, and for Greek sovereign debt write-downs to become the central carrot for motivating growth-enhancing reforms in Greece.

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