Friday, July 01, 2011

The Greek economy tragedy: A Plan is necessary
Latin America learned thirty years ago, how hard is to cope with external debt when it goes beyond what it is available. It meant a “lost decade” and incredible enough ,made the whole continent a capital exporter .It had to pay back U$$ 100.000 millions(Dollars of 1980) .Those resources, could not be used to finance roads, schools, educations and so forth.
Does that experience has some value for the current Greek economy debt problem?.Not necessarily so. There are some elements of it, which might be helpful. Others, like the economic setting are not alike, therefore each experience has an uniqueness characteristic .The same applied for the post WW II situation, of USA and Great Britain debt, which kept low interest rate to reduce the interest payment burden on its debt .
What it is helpful is the way different actors(Government, Banks and multilateral Organisms) worked together to confront the problem. Some basic premises at that time (eighties decade) were:
a.- The main source to pay the debt back, was to support the economic growth.
b.- The economies needed to implement structural economic reforms.
c.- Multilateral organism (World Bank ,and the IMF), were the lenders of last resort for economic reforms implementation.-
d.- Private Banks were willing to negotiate loses and debt payment both on short and long run basis,
With these premises it was presented first the Plan Baker(1985) and four years later, the Plan Brady (1989)which was designed to complete the program. This one included three axis: Trade, investment, and reprogramming debt programs. The first two aimed at supporting economic growth, throughout the structural adjustment loans programs (SAL) implementation). The last one, aimed to support a restructure of foreign debt throughout debt swap operations, and the Brady´s Bonds.
Whether this plan was the best way or not to cope with the external debt burden , it is still a matter of analysis, but the fact is that it allowed an opportunity , creating some room for economic growth.
Thus, a plan including a comprehensive strategy to support economic growth for the Greek economy, will give some expectations beyond the current debt rollover programs, other than the need of more debt .-