Analysis/”Financial crisis is not easy, but a solution is possible”

Analysis/”Financial crisis is not easy, but a solution is possible”

By Arben Malaj

Former Finance Minister of Albania

The management of a banking crisis is not an easy task, but it has been currently made possible.

Although since 2008 we have a global crisis, no country has failed due to the banking crisis. The crisis is not the cause, but the consequence of the failure in having low economic growth and lack of stability in public finances.

The temporary blocking of cash machines is a professional action which helps in reducing panic costs. Banks do not keep money in vaults. It’s their duty and mission to inject them in the economy.

Gordon Brown temporarily nationalized a bank in England in order to stop the domino effect of the banking crisis. Ireland secured 100% of deposits (in principle, there is no 100% insurance) in order to stop the flames of the banking crisis from burning all the financial system of the country.

The EU allocated emergency funds to surround the flames of a banking crisis in order not to spread all over Europe.

A few days ago, the five presidents of five European institutions published a roadmap to guide European integration in three main economic directions: economic union, banking union and fiscal union.

Eurozone and EU have expanded even during the global crisis.

Greek governments can burn from the fever of populism, but not Greece itself and even less United Europe.

Einstein has said that “we can never solve problems with the same mentality that we have created them”.

Populism doesn’t help Greece. Referendum is unnecessary.

Perhaps the prime minister could have demanded a vote of confidence in parliament. Greek political system is a delegated democracy. The government and the prime minister are elected by parliament. Of course, these systems have elements of democratic deficits and referendum is the most direct form of democracy.

But what threatens Greece today is not the democratic deficit, it’s the deficit of responsibility, the high deficit of impossible promises, which didn’t reduce, but increased the deficit of economic growth and budget debt, and also the deficit of standards between Greece and United Europe.

When Euro was threatened, bets were placed in capital markets. The president of the European Central Bank, Mario Draghi declared: “We will do everything to save Euro”.  Today this is considered the declaration that stopped the abuses and offered hope.

Perhaps, the Greek political leadership should have made the same declaration: “Altogether we will do everything to keep Greece within the EU”.

This would reduce panic costs for banks and panic in the capital markets which can benefit billions out of Greece’s uncertainties for its future.

Referendum must be now used not as an instrument of democracy which is abused with and which creates more costs than benefits for Greeks. /ibna/