Today, Greece owes 174 percent of its national output, a level of debt that simply can’t be repaid. As the IMF said last year, Greece’s debt, as a percentage of the economy, continues to rise, and “the extraordinary levels projected well into the next decade suggest that sustainability concerns”—that is, Greece’s ability to pay—“will remain an obstacle.” Greece has already tried cutting its budget and using the savings to pay down debt. In 2010, Greece raised its retirement age from 60 to 65 and reduced pension payments to retirees from 70 percent of their income to 60 percent. The formula for calculating pension payments was rejiggered to save the state money and “bonus” extra pension checks to retirees were eliminated. Because of these measures, Greece’s current budget is actually in surplus. “To have reached a surplus so swiftly is an extraordinary adjustment by any international comparison,” the IMF said last year. It wasn’t enough. Greece still can’t afford to pay its debt. Europe wants even more pension cuts as a condition of loaning to Greece. Without new loans, Greece won’t be able to pay off its old loans.

Greek citizens are suffering because their government promised them more than it could afford— and they may suffer more. But there’s no good reason why Greece’s creditors shouldn’t suffer more, too, because Greece’s government also promised them more than it could afford. If a sophisticated global creditor couldn’t grasp the debt problem before it was too late, how could a middle-class Greek retiree? Europe says it isn’t fair to ask German and French citizens to subsidize Greek retirements. By the same token, though, it’s not fair for Greece to shoulder a 27 percent unemployment rate—much higher among younger people—so that German and French investors, public or private, can avoid shouldering the loss they deserve for their own bad investment.