Having just been interviewed on BBC Radio 4 on the anniversary of Greece’ request for the 110 billion euro loan from the EU-IMF, I thought I should look at what I had said last year this time when asked, by the same station, to comment on that loan request. Believe me when I say that I take no pleasure for having been proved accurate. Here it is:
The loan agreement that our government has requested will by no means be a bailout for Greece. The whole package that is being presented as a bail out is erroneous in its design and will prove catastrophic in its consequence. It is erroneous because Greece is facing an insolvency crisis that cannot and should not be dealt with by throwing an expensive huge loan on an already insolvent country. And it will prove catastrophic in its consequence because it will set in train a series of similarly flawed, so called, bail outs for other eurozone countries which will deepen the euro crisis and boost inordinately the cost of resolving it. If it is a bail out, it is a bail out of German, French and Greek banks that will prove a textbook case of how not to save a currency union (the eurozone) from collapsing. The combination of (a) throwing good money after bad and (b) imposing austerity in the midst of a ghastly recession will prove nothing short of negative engineering of the eurozone. The result will be an escalation of the crisis in Greece and in the eurozone at large. (BBC Radio 4 interview, 23rd April 2010)
