The right model
Given what has happened, any delay will be the equivalent of a deadly hemorrhage. If the excessive interest rates do not drop, the fiscal crisis will become a banking crisis with disastrous consequences. The government must put an end to the ambiguity that is fueling pressure from the financial markets. Greece wants protection from its EU peers but it takes two to tango. Of course the other eurozone members will not back a fellow member without setting some conditions. But they must set conditions that will ensure a streamlining of finances and boost economic growth. After all, that is in everybody’s interest. Athens and the European Commission should have negotiated a commonly accepted Stability Program that would be strictly monitored from the start. The government has submitted a program that has been accepted by the Commission. But, instead of protection, the program drew more pressure for extra measures. Comments by European officials have prolonged the uncertainty and fueled speculative attacks. These attacks are also aimed at masking the eurozone’s failure to act properly in the case of Greece. This game has to end. The only people who have something to gain are those speculating on Greek bonds. The prime minister must clear the air with negotiation at a senior political level. There is no point in negotiating new measures unless Brussels has some bailout mechanism in place. In fact, Greece should only strike such a deal after assessing alternative options. This is not just about economics. It’s also about geopolitics. Any measures must serve three goals: First, tidying up the fiscal mess should not bring the real economy to a halt; second, fair burden-sharing; third, the crisis must be used as an opportunity to change, not support, the cracking model which is essentially a kleptocratic, wasteful model. Europeans may be pushing for immediate results, but the real wager is introducing the structural reforms that will usher in a healthy and productive growth model.
