Article written

  • on 17.07.2015
  • at 03:46 PM
  • by Naomi Cohen

Greece & Nigeria: A tale of two bailouts 0

As it so often happens, the best hope for answers to thorny issues is by relying on history. To that effect, I would like to turn to the Greece financial quagmire, her negotiation for a bailout by the Eurozone authorities which has been very intense, if not controversial,and incidentally has a parallel to the recent situation where some financially insolvent states in Nigeria have requested for and received approval by president Buhari for a similar financial bailout.

The Greece experience, to some extent differs from the situation in Nigeria because, while it’s the states that are requesting for bailout from the the Federal Government from the financial mess in which they are embroiled and reflected in their inability to pay workers salaries, (up to 16 months backlog in some states) it is unlike the Greeks that are seeking bailout to avoid being declared bankrupt by the World Bank and Eurozone authority which is a regional supra government of sorts.

Technically, both debt situations are similar because they are cases of insolvency to be resolved through fresh injection of cash into the economy. Greece banks have now been shut down with only a window of equivalent of maximum $60 per day allowable for withdrawal via ATM just as approximately 26 Nigerian states which have been unable to meet salary obligations to civil and public servants require fresh funds. For Greece to remain part of the 19 nations Eurozone, there are basic economic standards that it must exhibit and conform with. One of the requirements entails yielding of sovereignty over how she manages her financial affairs to the zone’s authorities comprising European Commission Bank, ECB and European Com[m]ission Group, etc.

Greece, which is the cradle of democracy, if you recall the historical antecedents of Athens, the capital of Greece in the evolution of democracy and centre of civilization, has twice sought for bailouts in the past hence it’s having a tough time convincing the major creditors led by Germany and France for a third bailout. With a whooping debt profile of some $96 billion dollars, Greece needs to first of all, cough out between $7 to $10 billion to the ECB to get her economy cranking again. To qualify for the loan, Eurozone leaders are demanding that Greece meets up with some severe conditions which include far reaching reforms in the economy such as privatization of public assets, Value Added Tax, VAT and Pension tax amongst others to be enacted into law by Greece parliament before drawing down on the funds to be escrowed and co-managed by the ECB.

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by Magnus Onyibe

Photo Credit: World Bank Photo Collection

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Direttore Responsabile Giuseppe Frangi