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Thursday, June 13, 2024

Government urged to forgive Greece

The head of Norway’s Socialist Left party (SV) is usually keen on imposing taxes to raise money for social welfare programs, but now its leader is urging the Norwegian government to forgive Greece for not having done the same. SV is a sister party of Greece’s ruling Syriza, and SV’s leader thinks Greece’s debt should be wiped off the books.

Bård Vegar Solhjell, Norway's minister of the environment, has a tough time getting other politicians at home to go along with major climate cuts. Now he has to get politicians from all over the world to do the same. PHOTO: Miljøverndepartement/Erik Aasheim
SV leader Bård Vegar Solhjell, a former government minister in Norway, wants the current Norwegian government to take a more active role in helping Greece through its current debt crisis. SV is a sister party of the Syriza party in Greece that’s now responsible for dealing with the crisis. PHOTO: Miljøverndepartement/Erik Aasheim

“I think Norway should encourage the euro-countries to think twice (about demanding payments that Greece didn’t make this week),” SV leader Bård Vegar Solhjell told newspaper Dagens Næringsliv (DN) on Thursday. “It seems that there’s more prestige than rationality now steering the negotiations with Greece.”

Norway is not directly involved in the negotiations but sends billions to the EU every year to secure market access and contributes to the International Monetary Fund (IMF), both of which are demanding ways for Greece to meet its debt obligations. Solhjell, a former minister in Norway’s earlier left-center government, wants the current conservative Norwegian government coalition to engage itself in the campaign to ensure Greece’s economic future.

‘Tolerate the loss’
Norway is estimated to have contributed around NOK 1.8 billion (USD 230 million) in loans to Greece through its contribution to the IMF. Solhjell thinks Norway should also be willing to forgive that debt.

“If Greece is forced to accept all the demands (to qualify for new emergency loans), the interest rate burden will become such a large part of its state budget that it will be impossible to create any economic growth,” Solhjell told DN. “That will hurt Europe, also if Greece opts out of the euro.” The only “realistic” solution, as he sees it, is to eliminate Greece’s debt and let the country start over.

“To me, it’s clear that the EU and the IMF, including Norway, must contribute to this debt elimination,” he said. “At the same time, Greece must of course launch major reforms. The country has for much too long been plagued by big holes in its tax system, corruption and an under-the-table labour market. The entire system must go through major reform.”

Asked whether Norway should tolerate the loss of money owed by Greece, Solhjell said “yes, as part of a solution to which many will contribute. This is mostly a problem for the euro countries, but we must contribute, too.” He noted that earlier governments, not the one now holding power in Greece, were responsible for compiling the huge debt that the country can no longer pay off.

‘Moving towards chaos’
Erik Bruce, senior economist at Nordea Markets in Oslo, said he thinks the current Greek government under the leadership of Syriza is showing signs of desperation after Greek banks felt forced to close this week. “Without a functioning system of payments, the country is moving towards chaos,” Bruce told DN. Greek Prime Minister Aleksis Tsipras is reacting in a “desperate and confusing” manner by agreeing to go along with creditors’ terms while also asking voters to turn them down in a national referendum this weekend. “He seems to live in the faith that he can come back (to the creditors) with a ‘no’ from the Greek people and demand better terms. But it’s highly unclear that’s the case.”

Solhjell points out that Greece is already in a “deep social crisis,” with 60 percent unemployment among youth and a third of the population living under the poverty line.

“I think (Norwegian Finance Minister) Siv Jensen should become more engaged in how we can help Greece,” Solhjell said. “Norway should take the initiative to urge through the IMF adoption of a package where debt can be eliminated and reforms introduced.” That’s unlikely, with Jensen commenting recently that the Greek debt crisis only directly affects Norwegians spending their holidays in Greece. At the same time, the IMF chided Greek leaders on Thursday for not acting in a more mature manner and working to meet their obligations. Berglund



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