The Greek bailout was designed to mislead

Allen, Eichengreen and Evans confirming what we observed in our analysis of the second Greek bailout of last month: it's the banks who profit from the deal, not Greece. In fact, this bailout will only further add to Greece's debt problems:

It may be hard to believe that the experts could be so ill- informed. The only other explanation is that the sole purpose of the exercise was to mislead. The banks can claim that they are taking a hit when in reality they can exchange bonds currently trading at hefty discounts for debt whose market value will be half in the form of AAA collateral. German parliamentarians can be told that the private sector was forced to "participate" in the Greek rescue when in fact, even after rescheduling maturities, those lenders will still receive a large fraction of their original interest payments.

This deal should be thrown out. In its place, the EU should create a real debt exchange with real haircuts for the banks and a significant reduction in Greece's debt stock.

The good news is that there will be an opportunity to change course. Greece's debt is still unsustainable, and it will have to be restructured again.