To help end the Greek debt crisis, Europe and America must jointly step in to shore up global financial regulation.
Greece may be doing all the right things to revive our economy. But not everyone may want us to succeed. To succeed, the international community needs to address the threat of speculation and ill-regulated financial markets – a threat that imperils not only Greece, but the entire global economy.
I see that threat every day as we manage this crisis, for the immediate problem we face is not dealing with the recession, but in servicing our debt. Despite the deep reforms we are making, traders and speculators have forced interest rates on Greek bonds to record highs.
Many believe there have been malicious rumors, endlessly repeated and tactically amplified, that have been used to manipulate normal market terms for our bonds. Partly as a result, Greece currently has to borrow at rates almost twice as high as other European Union countries. So when we borrow 5 billion euros for five years, we must pay about 725 million euros more in interest than Germany does. We will have a very hard time implementing our reform program if the gains from our austerity measures are swallowed up by prohibitive interest rates.
This whole affair has a horrible sense of déjà vu. The same financial institutions that were bailed out with taxpayers’ money are now making a fortune from Greece’s misfortune – while those same taxpayers are paying the price in deep cuts to their salaries and social services. Unprincipled speculators are making billions every day by betting on a Greek default. All this may sound a bit familiar, especially to Americans who recently massively bailed out their troubled banks.
Yet unlike the bankers, Greece isn’t asking for a bailout – let alone a bonus. Indeed, we have slashed the salaries of every single government official. I myself have taken a significant pay cut. And we have slashed bonuses in Greek banks by up to 90 percent.
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