How to help Greece

ForexNewsNow | Published on July 11, 2011 at 4:14 am

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Despite a very restrictive fiscal policy and the implementation of several structural economic reforms, Greece’s deficit cannot be further reduced because of the economy’s current extreme weakness.

In order to give Greece a chance to stabilize its finances and avoid defaulting on its debt, French economist Patrick Arthus explains that several amendments to the plan being developed should be changed:

  1.  The interest rate on Greek loans should be reduced, maybe even to 0%, to create a primary fiscal surplus that could stabilize the public debt ratio.
  2. Greece should be allowed much more time than is expected today to bring its public deficit below 3% of its GDP in order to both allow growth to recover in the long-run and to avoid the brutality of the austerity plan which could plunge the economy into a downward spiral.
  3. Greece should be allowed to set up a more attractive tax system (low corporate tax, free trade zones, etc.) which would encourage companies to relocate to Greece and hopefully kickstart commerce and industrial production, as seen today in Ireland.

As the English novelist George Eliot once wrote: “It is never to late to be what you might have been.”

 

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