Greece’s botched rescue is frustrating to behold: Lipsky
Efforts to rescue Greece have failed to provide the basic structural reforms needed to help bring competitiveness to its economy, said John Lipsky, the International Monetary Fund’s former first deputy managing director.
“It has been frustrating because some of these have been clear from the outset in so many ways,” Lipsky said in an interview in Copenhagen yesterday. “I feel this process could have been handled so much better.”
Europe is pressuring Greece to step up efforts to rein in its deficit and deregulate the economy. The austerity measures are exacerbating the nation’s economic pain and won’t lay the foundation for a lasting recovery, Lipsky said. Greece is complying with the terms set by euro-zone leaders in the hope of getting a 31 billion-euro ($40 billion) aid payment this month to help recap- italize its ailing banks. “It has been so frustrating to see how little the discussion has centered around what are in fact the underlying issues, the truly seminal issues, for Greece, which have been its progressive loss of competitiveness in the euro zone,” Lipsky said. “If that can’t be remedied, there will be no successful solution for the Greek economy, one way or another.”
Greece, which faces a sixth year of recession, needs to remove trade barriers and become more export-oriented to have any hope of returning to growth, according to Lipsky.
“When you look at the very limited degree, the astonishingly limited amount of foreign trade in Greece’s gross domestic product, considering the tiny size of the country, you realize one way or another that special interests have been successful in keeping the Greek economy out of the single market,” he said.