22.6.2011
By Simon Miller
Think tank Open Europe has called on Europe to stop the second Greek bailout.
In a report, Abandon Ship: Time to stop bailing out Greece?, the think tank warned that the bailout would only increase the political and economic cost of the crisis, “without providing any real solutions”.
The report noted that the cost of a default would only increase in time and the think tank estimated that each household in the Eurozone underwrites €35 (£31) in Greek debt. Within two years, this burden would increase to €1,450 per household according to Open Europe.
Open Europe economic analyst Raoul Ruparel commented: “A second Greek bail-out is almost certain to result in outright losses for taxpayers further down the road because, even with the help of additional money, Greece remains likely to default within the next few years. Another bailout will also increase the cost of a Greek default, transferring a far bigger chunk of the burden from private investors to taxpayers.”
Open Europe argued that with Greece likely to default within the next few years, European leaders should look at how to manage a smooth restructuring instead of pumping more debt into the system.
Ruparel added that EU leaders were “playing with fire” by putting yet another bailout package on the table.
“Far from uniting Europe, a second Greek bailout will simply spur on the growing divisions between the EU’s north and south. Taxpayers in richer countries resent underwriting foreign governments’ debt, while citizens in the eurozone’s south are growing increasingly hostile to EU-mandated austerity measures. How this tension will play out in future is anyone’s guess,” he said.
Ruparel concluded: “Although the uncertainty associated with such an exercise shouldn’t be underestimated, EU leaders should plan for a full, orderly restructuring, which would deal with Greece’s massive debt burden, as soon as possible. However, an honest discussion also needs to be had about whether Greece can realistically remain within the eurozone.”
Last night the Greek government survived a vote of no-confidence but the austrity measures may yet fail to pass vote in the Greek parliament as protests continue at the cuts that the IMF and Europe insist be put in place before a second bailout is given.
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