Euro Zone finance ministers agree that Greece must reduce its debt burden in order for its debt to be sustainable. In fact they calculate that it must be reduced by half. But the Euro Zone ministers haven’t agreed on what exactly to do. They have proposed three solutions. All risk default except the first one:

1)The Euro Zone countries could reduce the interest on their bailout loans to Greece.

2)Germany’s option: Bond holders get less. In other words, they get a haircut. This is a short term solution and won’t solve Greece’s problem in the long run.

3)The most radical solution: A bond buyback or a bond exchange has been proposed. They might even use the Euro Zone Bailout Fund to buy back the bonds.

The core problem is that Greece’s public sector is too large, and its private sector is too small. The Germans can take credit for inventing socialism. It works well in that country. The Germans seem to confine the government to certain, well-defined activities, and at the same time they promote private industry. They have their own unique mix which other countries find it difficult to imitate. Greece hasn’t mastered it yet. But this would be the real final solution, no pun intended — the good final solution. Confine Greece’s public sector to health care, the military, social security, etc. But make sure that most Greeks are employed by private industry. Then we might avoid the next Euro Zone crisis.