Magazine article African Business

Greece and Niger a Sorry Tale of Unfairness: The Severe Economic Crisis Currently Gripping Greece and Some Other European Countries Is Not Dissimilar to the Situation in Africa in the 1980s. but the Global Response Has Been Vastly Different. 'What Is the Basis of This Blatant Unfairness?' Asks Our Guest Columnist (Inset)

Magazine article African Business

Greece and Niger a Sorry Tale of Unfairness: The Severe Economic Crisis Currently Gripping Greece and Some Other European Countries Is Not Dissimilar to the Situation in Africa in the 1980s. but the Global Response Has Been Vastly Different. 'What Is the Basis of This Blatant Unfairness?' Asks Our Guest Columnist (Inset)

Article excerpt

Christine Lagarde, the IMF Managing Director, received one of the fiercest attacks of her relatively short stint at the helm of the Fund when she contrasted the plight of children in Niger with the stance taken by Greece over the EU/IMF-crafted package of reforms accompanying the economic bailout conditions.

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For months, Greeks, who had been living well beyond their means, vociferously and at times violently opposed the implementation of reforms and austerity measures underpinning the proposed EU-IMF bailout. Three different governments were sacked over the last two years, before the centre-right New Democracy party won with a very narrow margin last month (June) and agreed to the bailout package.

This resistance from the people of Greece has caused considerable uneasiness among European leaders, fearing the risk of contagion and the possible break-up of the EU and policy makers across the Atlantic concerned with implications for global growth.

Reflecting that mood, the IMF chief made the following remarks in an interview to the London-based newspaper, the Guardian: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens."

This contrast between Greece's conundrum of the last few months and the plight of Niger, one of the poorest countries in the world, which went through years of austerity measures, drew a barrage of criticisms from the Greeks and other European officials, even though the government of Greece has received one of the largest-ever rescue loans in the history of the IMF.

In effect, the $16ibn, second IMF-EU bailout approved in 2011 is by far the largest package ever put together for any single country, especially given that the disbursement profile spans a relatively short period of time, less than three years. The first bailout estimated at si45bn was agreed between EU and IMF in 2010, raising the total package to $306bn. And there is no guarantee that more resources will not be needed.

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To put things in perspective, it is more than six times the total amount contributed by donor countries for development assistance to low-income countries (81 countries with a combined population of about 2.7bn), in the context of the IDA-16 replenishment over the next three years (about $49.3bn). The proposed bailout is over 13 times the total amount of external assistance allocated to sub-Saharan Africa under IDA-16, for a total population approaching a billion.

And since Niger has been used as the benchmark, the Greek bailout is approximately 567 times the amount of foreign assistance allocated to Niger under IDA-16, even though at over 16.5m, the total population of Niger largely exceeds that of Greece (10.7m).

In per capita terms, while each person in Niger is expected to receive about $33 under IDA-16 allocation, each Greek is projected to receive $28,598, approximately 866 times more under the proposed bailout.

Even accounting for additional assistance from bilateral donors, the level of resources going to Niger is incommensurate with its myriad of development needs, including information and communication technology, infrastructures, education and health and particularly high under-five mortality rate.

Downsizing government

The critics have called Greece's bailout a trade-off between growth and austerity, arguing that the reduction of fiscal deficits will be achieved at the expense of growth. Sure enough, successful implementation of the bailout hinges on the capacity of the Greek government to slash expenditures and raise more revenues to pay interests on foreign debt. Still, the contours of the proposed Greek bailout are not markedly different from the plethora of structural adjustment programmes which were indiscriminately implemented across sub-Saharan Africa throughout the 198os and most of the 19905. …

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