Greece must cut private consumption

Greece must urgently raise interest rates to encourage savings and discourage deposit flight, writes Daniel Gros

Greek people clamber to buy cheap sacks of potatoes: Gros says the Greek public is accustomed to consuming above its means. Picture: Getty Images

THE first de facto default of a country classified as developed has now taken place, with private international creditors “voluntarily” accepting a haircut of over 50% on their claims on the Greek government. As a result, Greece owes very little to private foreign creditors.