The use of overly intrusive conditionality in Greece is threatening the European project

A Greek default may be only a matter of weeks away unless an agreement on the reform programme between Greece and “the institutions” will be reached. But Greece demands to renegotiate the whole programme, while the institutions, fearing a precedent, insist on sticking to the obligations. Thus, a default could simply result from a fundamental disagreement on the institutions’ conditionality, finally triggered by a deliberate decision of the creditors.

Prominent economists like Barry Eichengreen, Paul Krugman, or those organised in the Eiffel Group have recently urged for a less intrusive conditionality and more self-responsibility of debtors, though with varying intensity and differing arguments. What is wrong in asking Greece to fulfil its obligations as articulated forcefully by German finance minister Wolfgang Schäuble? Or it should we agree with Yanis Varoufakis who blames austerity as the only deal-breaker?

Against this background, this piece for LSE EUROPE I argues that using deeply intrusive policy conditionality is a flawed approach in the context of European integration for at least three reasons: first and most evidently, the institutions’ conditionality has often proven dysfunctional and too painful for debtor countries; second, the use of extensive policy conditionality is an ad-hoc approach with unequal burden sharing between debtors and creditors; third, too intrusive conditionality is in conflict with democratic decisions in debtor countries, which can put the idea of a Europe in which nations participate as equals in jeopardy.

Read more here…

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