ARE THE CONDITIONS BEING IMPOSED ON GREECE TOO SEVERE?

.............PROBABLY NOT, BUT GREECE NEEDS HELP WITH THE RECEPTION OF SYRIAN REFUGEES.

If Greeks themselves do not trust their own government and their own banks with their money, it is difficult to expect the taxpayers of other countries to do so. Yet that is what the critics of the severity of the conditions imposed for the third Greek bailout seem to expect.

The euro was not imposed on Greece. It was something that Greece joined of its own accord.

The fact that the possibility of Greece leaving the euro was raised by Germany, has been greeted by some as dealing a blow to the euro because it supposedly ended the notion of the euro being “irreversible”.

But nothing in political life is irreversible, even though some things, like the Byzantine and Ottoman Empires, did last a very long time indeed. “Irreversibility” was always a legal fiction, and fiction is not a sound basis for an economic policy. 

The euro is a contingent compromise, where members trade some short term losses for greater long term gains. A euro, where rules were easily broken, would not endure.

I agree with those who say that, eventually, some of the Greek debt will have to written off. That is both financially necessary and morally just.

But that can only be contemplated when the Greek political and administrative system has reformed itself, and is capable of benefitting from a write off, and not looking at it as a precedent for a further write offs later on. We are not there yet.

The crucial difficulty seems to be that the Greek state does not work. The fact that Tsipras’ offer of reforms had to be crafted, not by Greek civil servants on their own, but with the help of French officials, tells its own story.

Some complain that elements of the package involve intrusion on Greek “sovereignty”. But a state is only sovereign to the extent that it is capable of performing the functions of a state and of fulfilling the internal and international responsibilities of a state.  I believe Greece needs help in this regard, and it would be good if the World Bank, as well as the IMF, were involved in helping Greece reform its public administration.

Recapitalising the Greek banks will be a major task. Interestingly the biggest exposure to the Greek banks is held by UK banks. The UK is not in the euro, and is not contributing to the Greek bailout, which could be regarded as unfair.

Some argue that the austerity, that Greece is going through to meet its international obligations, is damaging its economic growth prospects. In the short run, this is true. But fuelling temporary growth, by taking on even MORE debts, would not be  an answer. That would weaken longer term growth prospects, because of the additional debt service it  would entail.

The important way of  improving growth prospects is by  generating confidence. If people believe the future will be better, and can borrow money to invest in it, the economy will grow. With renewed confidence, some of the money that Greeks themselves have moved abroad will then come back to Greece. If the bailout terms are fully and quickly implemented, by both Greece and its creditors, that will restore confidence, especially if it is rewarded  by a prospect of some conditional and staged debt write offs.

Meanwhile Greece is in close proximity to the biggest refugee crisis in world history, caused by the Syrian and Iraqi civil wars. More migrants are now arriving in Greece from the Middle East, than are arriving in Italy from North Africa. 65% of the arrivals in Greece are Syrian.

Greece’s neighbour, Turkey, is already providing shelter for 1.8 million Syrian refugees. Meanwhile most Western countries are reluctant to take in any refugees. Greece, because of its geographic position, does not have that luxury.

The European Union should reorientate its Development Aid programmes to help middle income countries, like Greece, Turkey, Lebanon and Jordan, which are facing major refugee inflows, to cope with that huge burden. 

Some EU countries, like Germany and Sweden, are hosting many refugees. But most are keeping their heads down and doing little or nothing.

There should be burden sharing, based on relative income and population. Countries that are receiving the largest proportionate number of refugees , should be getting direct ongoing cash help from those that are receiving the least.