Everyone is expressing optimism. But while this sort of belt-tightening is necessary for Greece to stay in the EU, it's going to come at a huge cost. Greece is already in recession--that's why its budget problems loom so large--and the fiscal contraction will only make them deeper. Meanwhile, the EU will be setting its interest rates to meet the needs of larger, healthier members (and inflation-hawk bondholders). Tight fiscal and monetary policy means a long, painful period ahead for the Greeks.
This is the dilemma that faced Argentina with its monetary peg to the dollar; ultimately, it led to devaluation and default. We will see if Greece can whether it better.
This article available online at:
http://www.theatlantic.com/business/archive/2010/02/greeces-monetary-trap/35235/
