Europe and the euro are at a crossroads. Dealing with Greece’s debt and lack of competitiveness is crucial for containing the risks of contagion to the rest of the eurozone. The recent summit approved a road map for Greece to find its way back to sustainable growth and debt levels.

Given the Greek government’s commitment to stabilise its finances and strengthen its competitiveness, eurozone countries, together with the International Monetary Fund, will offer new financing, in view of Greece’s difficulty regaining market access. The private sector will bear its responsibilities, assuming a large part of Greece’s financing needs and easing its debt burden. The European financial stability facility, and later the European stability mechanism, will be strengthened too, including allowing them to act preventively where contagion threatens eurozone countries.

Greece can succeed in making its debt sustainable in the long term if it succeeds in both increasing growth and reducing its debt ratio. Greece has committed itself to additional drastic consolidation measures, with the goal of bringing its budget deficit below 3 per cent of gross domestic product by 2014. It has also committed itself to profound structural reforms to strengthen growth and competitiveness, as well as extensive privatisation. European Union structural funds for Greece will also be more closely targeted at increasing growth and competitiveness. On this basis, Greece will be able to overcome its debt problems and return to growth.