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The European governments want more time to get their fiscal houses in order before a Greek default trashes the value of the Euro. European banks want more time to prepare for the economic losses from a default. Italy, Portugal, and Spain want more time to see reform measures lower their debt levels. And collectively, the Eurozone wants more time to insulate itself from a Greek collapse and find a way to eventually push Greece out of the Euro and into the darkness as an IMF protectorate.
Although the bailout deal is political posturing and wishful thinking for anyone who believes this is the end of the story, it does serve as a helpful warning to Italy, Spain, and Portugal. Such sharp cuts in minimum wage, forced austerity, and the sense of a loss of democracy are not welcome pills to swallow—which is why riots continue in Greece even though there are few other options.
The Greeks would be much better off rejecting this deal and defaulting now. Another bailout might postone the inevitable until 2014 or 2016, but eventually, Greece is going to be unable to make its debt payments and there will be no European safety net.
Anthony Randazzo is director of economic research for Reason Foundation.