ATHENS, Greece — Is there any way out of Europe’s debt morass? Greece’s efforts to restore confidence in its finances have only called attention to its woes, and now investors are fretting that debt contagion could spread to other countries, starting with similarly troubled Portugal.
Some experts say a bailout may be needed to prevent a continental conflagration, but European Union leaders are resisting the idea. Going cap in hand to the International Monetary Fund would be a humiliating step they’re unlikely to take.
A growing chorus of voices is predicting a less dramatic outcome but potentially a more corrosive one: a years-long grind of fiscal pain that neither plunges Greece into default nor restores its finances to health.
As it denies the possibility of a bailout, the EU has been desperately voicing its confidence in Greece’s ability to contain spending and pay down debt in the hopes that investors will give the country a break and stop betting on its fiscal demise.
A number of investors now appear inclined to think the EU will go to any length to avoid the humiliation of a member state going bust or being bailed out, by the EU itself or the IMF.
The result may leave Greece and other debt-plagued countries in the 16-member euro zone in limbo — without the boost of a bailout or the catastrophe of a default but stuck for years in an uphill struggle to gets its finances straight, which will mean lower salaries for many workers, especially those in public jobs, plus higher interest rates and less chance that governments can spend to stimulate their economies.
