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Can Greece Avoid the Lion?

Even as the EU and the IMF lay the groundwork for a giant first-round bailout, debate is swirling about whether Greece can avoid sovereign default. The problem is not only the numbers, but also credibility: thanks to decades of low investment in statistical capacity, no one trusts the Greek government’s figures, and Greece’s default history hardly inspires confidence.

ATHENS ­­– Even as the European Union and the International Monetary Fund lay the groundwork for a giant first-round bailout, debate is swirling about whether Greece can avoid sovereign default.

Some view Greece as Argentina revisited, noting the stunning parallels with the country that in 2001 set the record for the world’s largest default (in dollar terms). Others, such as Greek Prime Minister George Papandreou, see the country’s problems as difficult but manageable, and complain of interference from ill-intentioned foreign speculators.

Avoiding default may be possible, but it will not be easy. One has only to look at official data, including Greece’s external debt, which amounts to 170% of national income, or its gaping government budget deficit (almost 13% of GDP).

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