01 July 2015

EurActiv / Yves Bertoncini: The EU and Greece - Exiting the IMF era, not the euro

The end of the EU aid programme to Greece on 30 June, and the organisation of a Greek referendum on 5 July, raise the prospect of ending the “IMF - Europe” era, opened under the pressure of the crisis.

Yves Bertoncini is director of the Jacques Delors Institute.

It is necessary for Greece to exit the “IMF-Europe” era on top, for three reasons:

1. To adopt national and European measures that enable Greece to return to the financial markets.

[...]

The EU was not designed to act like the IMF by financing rescue packages for the four countries in the programme, after the modification of its treaties. This was a temporary move, requesting in return that these counties make painful adjustments with a view to recovering their financial solvency and strengthening their economic competitiveness, social cohesion and state efficiency.

Regardless of the outcome of the referendum, the Greeks cannot escape the financial reality requiring them to record a moderate primary budgetary surplus[...]

All these efforts will not bring immediate results, particularly if they are restricted to structural adjustments. It is therefore up to the EU to bolster them with a support strategy for Greek growth that includes massive public investments. [...]

2. To cease relations based on accounting conditionality and revive political cooperation.

[...]

The issue is not that these stakeholders have an accounting vision and economic zeal specific to their functions, but that higher authorities are not sufficiently involved in the talks and decisions that have a resolutely political dimension. Continued aid for Greece and/or its possible exit from the euro area are, much more than a case of moral hazard, difficult decisions with geo-political risks: the EU’s leaders must act accordingly, with a clear vision of the situation!

In contrast, the referendum held by Alexis Tsipras seems to be part of a highly political tactical approach, [...] the heads of state or government of the other euro area countries also have an indisputable legitimacy, speaking for their people who are as deserving of respect as the Greeks, and with whom an agreement must be found.

As it happens, the majority of all EU peoples wish to leave the “IMF – Europe” era: Those who, like the Greeks, have had to endure very painful social and budgetary adjustments, but also those who have had to provide them financial assistance, while wondering if one day they would be repaid. It is up to the heads of state and of government to act upon such democratic convergence by adopting the compromise that will allow for a recovery from the current crisis as well as an exit from the “IMF – Europe” era.

3. To clear the accounts of the “IMF – Europe” era on the basis of shared responsibilities.

If four EU member states requested aid from the “IMF – Europe”, this is mainly due to the bad decisions made by their leaders that left them in a state of virtual bankruptcy, for various reasons (the wayward banking sector, the property bubble, a defaulting state, etc.).

For Greece, it should be easy for Alexis Tsipras and his counterparts to agree to stress the overwhelming responsibility of the people and parties who have governed the country over the last forty years. [...]

The responsibilities of private creditors, who financed Greece poorly between 2002 and 2010, have already been identified and undertaken. They have partly paid the price, as in 2012 they had to give up on half of their debts (to the tune of slightly more than €100 billion).

The responsibilities of the EU authorities can be addressed with regard to Greece over the last forty years, as they long tolerated shortcomings of which they were aware. [...]

It is therefore logical that Greece’s public creditors should also accept their responsibilities by “paying the price” for their mistakes. [...]

Full article on EurActiv

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