Asiatic Greek tragedy with European characteristics

Bunn Nagara
The Star
Publication Date : 17-03-2010

The Greek financial crisis looks very much like getting worse, and not just for the Greeks. Nobody yet knows when or how things might get better for anyone.

Two general strikes have been called in Greece within a week, amid other forms of social, economic and political tension and misery already in play.

And the Greek tragedy looks set to spread: Ireland, Portugal, Spain and even Britain are said to be heading in a similar direction.

What a difference a few centuries can make. The afflicted countries include the cradle of Western civilisation and several European former colonial powers, where economic strength was their forte.

This week Moody’s Investors Service said “triple-A-rated” countries for debt rating such as Britain and the US have very stretched debt affordability, compared to Scandinavian countries and even Spain. Britain may have to borrow 12.8% of its GDP, more than twice the European average.

But Greece remains the icon for European financial disaster. Yet before anyone can even think of Greece having to resort to the IMF for a bailout package, the European naysayers would have their say.

France, Germany and the European Central Bank are among leading voices on the continent rejecting any thought of IMF aid for Greece. How could any proud European nation be seen to trade its sovereignty to an institution that had come to specialise in compromising Third World sovereignty?

It no longer seems to matter that Europeans had long dominated IMF policymaking. How could a neo-colonial institution be even thought to exercise its presumptuous prerogatives on (former) colonial powers?

Yet no policymaker in Europe could deny that Greece’s problem is serious, worsening and likely to spread across the continent. The result: get IMF-type benefits without the costs.

And so the idea of a European Monetary Fund (EMF) came to be advocated strongly by Europe’s heavyweights including the European Commission. Already, the standard pledges and assurances were on hand.

To allay fears in the international financial establishment, it was said that the proposed EMF would not rival the IMF.

Tough conditionalities were said to be certain and essential for any country in the eurozone seeking assistance.

The Greek finance minister himself said his country was talking to IMF officials, but only to seek “technical advice,” not financial assistance. And everyone else on the continent watches intently.

How typically East Asian things have become. What began as the 1997-98 (East) Asian financial crisis also saw a set of regional meltdowns, the work of scheming currency speculators and governments frantically searching for solutions.

East Asian nations then accelerated closer cooperation, even to the extent of floating the idea of an Asian Monetary Fund (AMF). But some of the European detractors who sneered at the idea now want a similar financial institution for Europe.

As a region, East Asia had surpassed Europe in growth rates and continues to do so. Since Europe already has an overarching European Union to serve regional needs and cushion “bubble shocks” on the continent that East Asia still does not have, the latter’s need for an AMF is even more acute.

Among the arguments against an AMF at the time were that Asians could not be trusted because they were too corrupt or spendthrift. Then after major cases of graft, financial mismanagement and budget deficits were exposed in the West, clearly no region or continent is immune from these scourges.

There is another reason for a regional monetary authority like the AMF or the EMF: more local accountability and democratic control. The supposed impartiality of the IMF has only meant an aloof manner and alienating policies often at odds with the interests of those in need.

The greater regional cooperation that comes from regional monetary funds is a bonus. If that also helps trade, growth and rising living standards, who can seriously object?

In time, there may be several regional monetary funds, each working more productively and efficiently to serve its founding purposes. By then, the future of the IMF might just come into question.

It would then beg the larger question of priorities: which is more important, the survival and prosperity of nations, or the continued existence of the IMF?