Blog 2023 Malcolm Blair-Robinson

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    Malcolm Blair-Robinson U.S        

    Malcolm Blair-Robinson U.K.

There are reliable reports from Athens that Greece as agreed terms for a further bailout. It is not possible to comment sensibly until the details are known. However three conditions have to be met in order that it will succeed. First there must be very substantial debt relief because everyone agrees the current debt level can never be repaid. Second there must be  recapitalizing of Greek banks. Third there must be a programme to kick-start the Greek economy so that growth becomes an embedded feature.

If those three conditions are met it is feasible for the lenders to impose some domestic reforms, so long as the majority in the Greek parliament backs them. These reforms have to be supported by consensus and not overturned at an upcoming election, so extreme demands are counter productive. If the debt haircut is merely cosmetic and reforms further shrink the Greek economy, then the bailout will only benefit the creditors by keeping alive the notion that they have not lost a large part of their money. That will signal that the Greek crisis remains with full potency, even if temporarily repressed by what amounts to fraudulent accounting. It will return again as it has before.