Europe’s Debt-Relief Calculus

SANTIAGO – Europe has long been menaced by the threat of two crises. The first would erupt with a successful speculative attack on a large eurozone country’s bonds, immediately jeopardizing the single currency’s survival. European Central Bank President Mario Draghi’s vow to do “whatever it takes” to prevent a sovereign default in the eurozone seems to have diminished that danger – at least for now.

The other looming danger is a growth crisis – a threat that has become increasingly serious. The ECB’s most recent macroeconomic forecast, which cut expected GDP growth for both 2012 and 2013, makes the threat all too clear: The eurozone will certainly contract this year, and grow by just 0.3%, at best, next year.