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Greece: in need of a debt relief that actually works

It’s not too late to steer the Greek economy and the EU towards a sustainable development course for the twenty-first century. There are tools to deliver this. Policy-makers should use them.

lead The Ptolemaida lignite plant. Andrea Bonetti / WWF Greece. All rights reserved. The Greek government and its creditors are once more involved in behind-closed-doors negotiations, busily debating Greece’s fate after the end of the 3rd Adjustment Programme (August 20). Far from the spotlight and opaque Eurogroup negotiations, Greece’s economy, society and – least mentioned in international media – environment are hanging in the balance.  

Ten years into Greece’s Great Depression, the three successive Adjustment Programmes have not led to a new, sustainable, development model. Rather they have economically resulted in a huge debt overhang, dramatically undermined social development and jeopardized Greece’s natural wealth.

To take but three examples: environmental and employment regulations and legislation have been steadily undermined in the name of a putative “competitiveness”. Creditors’ conditionality is locking Greece into dirty energy production for decades to come. And the current dash-for-oil-and-gas is threatening regions of unique ecological wealth, whose economies heavily rely on healthy ecosystems. The current dash-for-oil-and-gas is threatening regions of unique ecological wealth, whose economies heavily rely on healthy ecosystems.

What we are witnessing, in short, is a social and environmental race-to-the-bottom, in the name of GDP growth for endless debt repayments. Even if GDP does eventually recover, can we seriously expect the current approach to deliver an economic model that works for Greece’s social economy and environment?  

Unless adhering to an antiquated worldview whereby GDP is the measure of all things – ignoring equity, social development, and the ecological foundations of our economies – the answer is a resounding “no”.  

Two years ago, we published a “Debt relief for a living economy” proposal, which entails a two-legged approach:

1) Greece needs a deep debt restructuring.

Greece’s large fiscal surpluses have been built on the back of an unprecedented decline of social development, and of ecological degradation. Expecting those surpluses to be maintained over the coming decades without wrecking Greece’s social economy is simply unrealistic.

As analyzed time and again in virtually all serious academic research, Greece needs a much deeper debt relief than the one currently proposed by the Eurogroup.

2) Any conditionality associated with debt relief should be fully aligned with achieving Sustainable Development Goals (SDGs).  

The United Nations General Assembly has formally adopted a transformative 2030 Agenda for Sustainable Development, whose objectives include: good governance, poverty, education, industry, climate change and nature conservation, along with 17 concrete Sustainable Development Goals (SDGs) and 169 specific targets. The EU has explicitly committed to implementing the SDGs both in its internal and external policies.

If the EU Institutions and EU creditor countries are in any way serious about this commitment, they should be seeking those reforms that can transform Greece into a truly sustainable living economy, rather than pursuing reforms that maximize fiscal surpluses to fully repay the national debt.

WWF’s report includes examples of a number of reforms covering the living economy, progressive public revenue enhancement, clean energy development, nature conservation and environmental protection.

The Ptolemaida lignite plant. Andrea Bonetti / WWF Greece. All rights reserved. As Greece’s 3rd Memorandum is nearing its end, it is not too late to change course by steering the Greek economy – and by extension the EU – towards a sustainable development course for the twenty-first century. There are tools to deliver this. Policy-makers should use them.

About the author

Olivier Vardakoulias is the Economic Policy Officer of WWF-Greece. WWF-Greece’s strategy as a national office of WWF’s global network, aims to conserve critical places and species, address the ecological footprint of human activity and safeguard the environment from the impacts of the economic crisis. Olivier is a former economic advisor in the UK civil service, and former senior economist at the New Economics Foundation.


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