How to get Greece back on its feet
Marshall Plan-style growth initiative needs international support
by Plutarchos Sakellaris in Athens
Tue 21 Jul 2015
Greece needs the combined forces of three large international financial institutions in an action programme to get back on its feet and restore the economy after the devastating downturn of the past five years. I hope that agreement will be reached in the next few weeks on Greece’s third bail-out package. My country will need much more support under a Marshall Plan-style growth contract between Greece, its official creditors and the international community.
This requires the involvement of the European Investment Bank, the International Finance Corporation and the European Bank for Reconstruction and Development. These IFIs should send staff to Greece to put ‘boots on the ground’. I recommend that they work closely with a coordination and facilitation office in the Athens prime minister’s office to facilitate interaction with the Greek administration.
The aim should be to go beyond stabilising and consolidating the Greek economy. The country needs to return to reasonable levels of growth. The essential pillars of a new economic contract are deep and multifaceted structural reform, less fiscal austerity coupled with restructuring of the public debt, fixing the Greek banking system to restore lending, and promoting investment.
The institutions should commit to Greek programmes extending beyond the usual menu available to developed economies. The EIB would concentrate on advice on preparing infrastructure and large investment projects as well as on policy reforms to allow these projects to become sustainable and bankable. The IFC, from the World Bank Group, is needed to help resolve the difficulties from non-performing loans. The EBRD would help with privatisations and bank recapitalisation.
Greece has a lot of assets for harnessing growth. But it has to recover from a loss of income comparable to the 1929-33 US depression. In the last few days, some positive steps have been taken to end this freefall. The good news is that, with the right programmes, Greece can prosper. The country has a large pool of highly educated young people, many of whom are now idle, who can be employed in ventures such as in high technology and life sciences.
A second asset is its geographical position. Greece is the entry point in Europe for China’s New Silk Road. Further Chinese involvement in Greece is natural. Greece is part of the ‘southern gas corridor’, an essential component of the EU’s energy strategy. Greece’s cultural heritage, biodiversity and climate create opportunities in high value-added tourism, natural cosmetics, specialised agriculture and agribusiness.
There is a place, too, for energy and environment infrastructure. Privatisations may play a significant role in generating new investment and economic activity. The investment plan launched by Jean-Claude Juncker, the European Commission president, administered by the EIB, will help fund strategic investment across Europe. Nowhere is it needed more than in Greece, as a pool of investment funding designed to attract other sources of funding from sovereign funds, pension funds and private equity.
Once Greece stabilises its sovereign finances, attention will switch to the country’s investment challenges and opportunities. The IFIs will play a crucial role in helping increase the availability of bankable projects and in working with the Greek government to create a better environment for business to flourish
Plutarchos Sakellaris is a professor at Athens University of Economics and Business and a former vice president of the European Investment Bank.
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