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Debt Management and Economic Sustainability (18)

By Ottoabasi Abasiekong on November 29, 2012

Last week European Union Leaders met to work out modalities for the regional budget and also discuss the Greek debacle and any prospect of what can be done to salvage the troubled nation even as Portugal, Spain and Italy reveal symptoms of the same debt sickness.

The meeting ended with a lesser resolve to tackle the debt crisis challenges as leaders like President Francois Hollande expressed concern about the concessions and commitment of the Richer nations in the group, at a time the French economy has been given a cut in its AAA ratings by International Financial rating groups.

Chancellor Angela Merkel was full of doubt as to whether the leaders have the conviction and necessary political will to take firm decisions on the way forward for the EU Budget.

Prime Minister David Cameron several weeks came under fire when he lost a vote on the way he handled the British interest in the EU budget proposal, since that experience Cameron has taken a firm stand to esteem his National interest above Regional interest, a decision Merkel did not find pleasant.

Greece is in a desperate situation as it is almost left to fight on its own to survive and despite attempts by the International Monetary Fund to wade into the situation and plead for more time for Greece to stabilize, the EU stance that it must continue to follow the prescription of austerity means more pain for the Hellenist nation.

Prime Minister Antoni Samaras reiterated in an interview monitored by Daily Telegraph that “It is not only the future of our country, but the stability of the eurozone that is at stake’’.

It is understandable by Germany that they are conceding a lot and bearing so much burden for the crisis in Greece, and their case is for how long will these continue. On the part of Greece devising strategies on how to achieve economic sustainability is becoming slimmer as anything called sovereignty for them is eroding gradually.

Several weeks ago there was a coordinated Rally and Strike action to commemorate the ‘European Day against Austerity’, from Madrid to Athens thousand trooped voicing out their displeasure over the handling of the ‘eurozone’ crisis issues.

Recently the Global economy watch magazine had to pose a serious question asking Are the EU Leaders summits and meetings necessary? This is on the backdrop that despite several meetings of the leaders, the inaction on Greece has caused the ‘eurozone’ situation to move from bad to worse.

But the 26^th of November brought positive news for Greece as the Euro Finance ministers finally reached a deal with the IMF to cut their debt by $40billion a great relief to the ‘Ancient home of democracy’.

It will be expected that the landmark deal which will open the channel for more development aid for the Greeks, will be utilized effectively by the Government to spur economic growth that will turn a bleak outlook to a bright future.

Apart from Europe another major economic power bloc that has to of necessity resolve its debt burden or experience a dire situation that could be likened to a dreaded Tsunami affecting the global economy is the United States.

After the euphoria of the Obama re-election and his concluded trip to South-East Asia, the Nation would now be faced with another tough moment of political economic decision when the white house and congress sit down to negotiate the 2013 budget plan and fiscal plan.

Global stocks and analysts are watching with a lot of enthusiasm what will be the outcome for the leading economy on the planet. The Democratic led Presidency wants increased taxation for the rich to manage and tackle the deficit, while the Republican led congress expects the administration to agree to ruthless budget cuts.

Both have had their battles last year and it took a dying minute approach in August to reach a deal that year or the economy would have gone into a terrible recession, so this time Americans are hopeful it will be positive.

The danger of a Fiscal cliff according to experts and analysts like Mr Ben Bernanke Federal Reserve Chairman, Proffessor Nouriel Roubini and Proffessor Joseph Stiglitz, would hurt the economy and invariable affect the globe.

It is expected therefore that both President Obama and House leader Mr John Boehner will show maturity and courage by confronting the issues squarely and esteem national interest above party interest.

In Nigeria it is a time for caution, as the recent request by the Federal Government for a 7.9 billion Naira loan that came under criticism from technocrats like Mr Femi Falana is expected because with the debt crisis rocking key Nations in the globe, our Government will have learn and avoid falling into the same pit.

Despite the statement credited Dr Kenneth Nwankwo the Director General of the Debt Management Office(DMO) that borrowing can aid and facilitate growth if used judiciously, the time has come for a proper review on how past loans acquired in this administration have been utilized.

If the Obasanjo Administration did well to clear Nigeria’s foreign debt, Federal Government must therefore show responsibility by setting the mechanism to track how the loans are allocated or our nation will pay dearly for any other default like Greece.

Ottoabasi Abasiekong a Public and International Affairs Analyst writes from Lagos.

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