A new article by Center Director Lester Salamon, published today in the May-June edition of The World Financial Review, takes a look at a novel solution to the on-going Greek debt crisis. Rooted in his work exploring a phenomenon he calls “Philanthropication thru Privatization,” this solution looks at a way that at least a portion of the staggering Greek debt might be transformed into an engine of economic development, and in turn, might help make it possible for Greece to eventually payoff the remaining portion of its debt – a possible win-win solution for both sides of the divide. Below is a brief excerpt from the article. Please click here to download the full article.
Excerpted from the May-June 2015 issue of The World Financial Review:
Two things have become clear in the Greek debt crisis. First, Greece’s creditors cannot afford to allow Greece to default on its debt and withdraw from the Euro. But second, Greece cannot afford to fulfill its existing debt obligations. Yet, defaulting on the debt or requiring Greece to fulfill all the terms of its existing debt obligations appear to be the only two options Greece and its creditors, respectively, so far seem to have come up with. So the deadlock persists.
Fortunately, however, a win-win route out of this impasse exists. It is a route that has been used multiple times in similar situations for more than 30 years all over the world and with generally quite positive results. It is a route that Germany, the European nation most insistent on holding Greece to the full terms of its debt obligations, used to good advantage in relieving Poland’s first post-Communist government from the terms of a jumbo loan its predecessor regime had secured from Germany five years earlier and promptly found itself unable to repay. In the process, Germany won the new Polish government’s agreement not to contest the re-unification of Germany and to finance the Foundation for Polish-German Cooperation that has pacified the once-fractious German-Polish border region.
And it is a route that Germany has used on at least 19 other occasions since 1993 to relieve such nations as Indonesia, Jordan, the Philippines, Peru, and Madagascar of crushing debt burdens through the multi-lateral Highly Indebted Poor Country (HIPC) initiative and other bilateral actions managed by the German Federal Ministry for Economic Cooperation and Development (‘BMZ’).
Nor is Germany alone in taking this compromise route…