Since Greece wants a bailout, maybe it’s time to think about what the terms of that bailout should include. They should be onerous enough that other nations won’t be tempted to imitate the accounting tricks practiced by Greece’s former government.
One simple idea would be to make any bailout contingent upon Greece putting its former leaders on trial. In a searing opinion piece in the Wall Street Journal, Takis Michas, a prominent Greek journalist, argues that the deliberate deception practiced by former prime minister Costas Karamanlis amounts to securities fraud. Only by charging Karamanlis and his entourage will Greece send a sign that such corruption won’t be tolerated in future.
If Greece isn’t willing to confront its former leaders, it’s difficult to see how a bailout can proceed without creating huge problems of moral hazard. A penalty-free bailout would signal to Europe’s struggling nations that it’s fine to fiddle with your accounts, because the EU’s rich nations will always come to your aid in crisis.
Freelance business journalist Ian McGugan blogs for the Financial Post