10 May 2010

Costs Of Rescuing Greece

Mr Stavros N. Yiannouka lamented that Europe's leaders such as Germany did not have the political will to come up with a multi-billion euro package to rescue Greece ("Greek crisis: Joke is on Europe's leaders", ST Forum 7 May 2010).

Greece did not suffer a natural disaster such as a devastating earthquake or tsunami.

Greece's problems, according to many accounts, seem to be the result of its own policies, practices, decisions and actions.

Why should anyone think that any other country should be obliged to save Greece for Greece's sake?

Why should Greece's creditors not have to suffer any pain from taking its credit risk in the first place?

That the remaining 15 members of the eurozone are going to Greece's rescue is a decision to protect the stability of the euro. Thus, the UK, which is a member of the European Union, but not part of the eurozone, is unwilling to support the euro, if it would expose the UK to liabilities.

Consider how the people of some other countries of the eurozone which are struggling under the weight of their own fiscal difficulties, feel when their governments have to borrow to shoulder their proportionate share of the eurozone's €80 billion rescue package.

Consider also how the people of the other member countries of the International Monetary Fund (including the less wealthy countries of the world) feel when they find their countries on the hook following the IMF's decision to grant Greece a €30 billion standby facility, inasmuch as most resources for the loans provided by the IMF come from its member countries via a quota-based mechanism.

Singapore's revised quota is 1.241 per cent, implying an exposure of €372 million from the IMF's €30 billion standby facility.

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