Certain analysts have claimed that Greece does not deserve the new financial support provided by its European partners and the International Monetary Fund. Some say that the country has not done as much as it had to do in terms of reducing the deficit, putting its fiscal house in order and becoming more competitive. Others have argued that since Greece cannot meet its fiscal targets, it constitutes a very unique and different case compared to other European economies. Therefore, it should probably depart from the euro’s currency and, at least not receive any more money funded from a second huge bailout program. All these views could be reasonable and reliable if they had taken into account the reality of what is currently happening in Greece, which is very different from what these views describe.
Actually, I agree with the analysts who say that Greece does not not deserve a second bailout program from the EU, ECB and IMF.
I would add, though, that Greece doesn’t deserve it only if this program is to be created with the same failed recipe used before. A recipe that has proven ineffective and — to some extent — devastating for the country. For the past year and half, Greece has been plunged into a deeper and deeper unprecedented recession broadening the gap between the rich and poor people, boosting poverty in the society and shrinking the prospects of growth which is a precondition for the economy getting out of the crisis. Even as the Greek authorities are blamed for not running faster towards the implementation of the required structural reforms of the economy, the official lenders of Greece are blamed for their inability to envisage the consequences of their stubbornly insistence on a blind austerity policy. Even after the Greek authorities reached an agreement with its private lenders for the “restructuring” of the Greek debt with a haircut more that 60 percent on the net present value (NPV) in their holding bonds, it is still doubtful that Greece will actually get back onto a path of sustainable economic recovery.
So, what should be done now?
The European partners — especially the German Chancellor Merkel — and the IMF’s managing Director, Lagarde, should realize that the solution of the crisis in Greece and in the Eurozone overall is only in financing the countries that have lost access in the markets. Rescuing the eurozone can be done by financing not the deficit but the future growth. As long as these players are not determined to go forward with the designation of a detailed, clear, and strong plan for the whole eurozone emphasizing to the prospects of growth and job creation rather than austerity, the recession will gradually and unavoidably overshadow all the eurozone’s economies. As time passes, the euro area is getting closer to collapse. The question coming up at the table is not whether Greece is actually worth a new round of funding but whether the Greek example can make the European leaders and IMF realize that rescuing a country’s economy means rescuing a country’s people.
Greece needs not just to ensure that it will get a second bailout program fully paid by its lenders to avert a very possible uncontrolled default. First, it needs to convince its official lenders that this bailout should be accompanied with a fiscal and economic policy that will preserve the social stability inside the country and create the conditions to pull the economy out of its current isolation from the markets. Unfortunately, the economic policy imposed in Greece so far has created the opposite results.
Making a mistake is only a problem if it is not fixed. However, repeating the same mistake is stupidity that can sometimes have perilous consequences.
Originally posted on huffingtonpost.com