Merkel's day of reckoning as taxpayer haircut on Greece looms

They have lent money, at a theoretical profit. They have issued a fistful of guarantees to Europe’s twin bail-out funds, covering Greece, Ireland, Portugal, Spain, and soon Cyprus. They have taken on opaque and potentially huge liabilities through the European Central Bank.

Yet little has disturbed the illusion that the euro is a free lunch for the surplus powers. An assumption persists that the creditors will - and should - be spared the consequences of flooding Southern Europe with excess capital.

All the losses in Greece until now have been concentrated on those pension funds, insurers, and banks that stayed to the bitter end, rewarded with 75pc haircuts for their loyalty.

We are at last nearing the awful moment when the curtain is ripped away. Greece’s economy has contracted 7pc over the last year. Public debt will spiral to 190pc of GDP in 2013. Leaving aside the Gothic horror of youth unemployment at 58pc, Greece’s debt trajectory is simply out of control.

The International Monetary Fund says the country cannot claw its way back to viability unless EU governments and bodies take their punishment. The Fund’s Board and the powers behind it - the US, China, Japan, Brazil - will withdraw if the current farce goes on.

Read more: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9686251/Merkels-day-of-reckoning-as-taxpayer-haircut-on-Greece-looms.html