BERKELEY – It should now be clear to even the most blinkered observer that the Greek economy is in desperate need of help. Unemployment is 16% and rising. Even after a year of excruciating spending cuts, the budget deficit still exceeds 10% of GDP. Residents don’t pay taxes. The system of property registration is a mess. There is little confidence in the banks, and even less in the government and its policies.
Since the economy needs help, here’s a novel idea: provide some. Now is the time for the European Union to come forward with a Marshall Plan for Greece.
Rather than piling more loans onto the country’s already unsustainable debt burden, the EU should offer a multi-year program of foreign aid. The Greek government and donors would decide together the projects that it financed. These could range from building new solar and wind power-generating facilities, in order to turn Greece into a major energy exporter, to updating its ports to help make it a commercial hub for the eastern Mediterranean.
Foreign aid and expertise could be used to modernize the property-registration and tax-collection systems. Funds could be used for recapitalizing the banks and retiring some debt. They could help finance government support for the unemployed, indigent, and elderly, who are among the principal victims of the financial crisis.