Greece teeters on the brink. With the country already declared in selective default by Standard & Poor’s, the big question now is whether its creditors can agree on the Private Sector Initiative that will see them take a haircut of about 74%.
But even if Greece escapes without collapsing into disorderly default, this bailout smacks of desperation — not least because it’s still being repeatedly touted as A Good Thing even though it is looking increasingly likely that it won’t work.
Would not the enormous amount of time taken to assemble the package (and revise it, several times) have been better spent underpinning the wider sovereign market — and perhaps doing something about generating growth in peripheral economies into the bargain?
Greece’s economy is expected to shrink by 4.3% this year. Unemployment stands at more than 17% and is set to rise. Is more austerity going to help? If not, then wouldn’t it have been better to come up with something that will actually work? Or else go for the doomsday option of letting the country default and deal with the consequences — after all, for all the smoke and mirrors that come with the latest bail-out package, the ratings agencies are already half way there.
To arrest this economic decline, the Greeks are being strong-armed into implementing a vast range of reforms (38 and counting) imposed upon them by creditors more concerned about getting their cash back than anything else. International creditors meddling in the framework of a nation’s civil functions is a recipe for political discord.
The whole exercise smacks of short-termism. And those short-term interests that it serves are German and French, not Greek. Purely on the basis that it is the richer European states that are paying for the bail-out, it is not entirely unreasonable that they demand something for their money.
But it does not chime with the rhetoric about keeping Europe and the Eurozone bound together. And it certainly does not chime with the long-term needs of the Greek economy.