BCS Consulting

Search

At BCS Consulting, we are focused on delivering complex business change projects in banking and the financial markets that exceed client objectives and deliver impressive results.

At BCS Consulting, we use our deep domain knowledge and experience to help clients define and deliver large scale business and technology change initiatives.

At BCS Consulting, we build on firm foundations and ensure a broad range of core management consulting skills are at the heart of our business.

At BCS Consulting, we support and encourage our people to make the most of every opportunity that comes their way.

Case Studies

At BCS Consulting, we work in partnership with clients to deliver solutions that work in practice.

Thinking

At BCS Consulting, we like to share our informed thoughts and opinions on the latest developments in the financial services marketplace.

    There are two sides to every story

    James Smith
    James Smith

    • The Greek saga, Eurozone-IMF infighting aside, appears to be momentarily over. Greece’s creditors have extended the necessary third bailout required to keep Greece solvent, and Greece, reluctantly, has accepted.

    All sides acknowledge the now unavoidable consequence, almost regardless of the bailouts stipulations, of economic hardship for Greece and her people. However, the debate apportioning blame for that hardship, and the bailout negotiation’s length and complexity, is ongoing. What’s more, it is increasingly and disproportionately one-sided, with the media peddling virtually uniform indignant disbelief that, as they would have it, supranational tyranny trumped national democracy. That predatory international capitalism has profited at the expense of a downtrodden people.

    But there are two sides to every story.

    So let’s remember that Greece took an autonomous national decision to join the Euro, willingly accepting strictures of a single currency which, amongst other things, prevents a devaluation to aid international competitiveness. It’s often forgotten that Greece, in their willingness to adopt the Euro, cheated Eurozone admission criteria (albeit some other countries did the same), confessing post-adoption that its deficit had not been below 3% since 1999, as EU rules demanded. Greece used its Eurozone status to accumulate extra national debt and, consequently, was unable to simultaneously support national spending and meet its debt obligations. International creditors offered conditional assistance. Greece accepted.

    You can make the argument, as the press are wont to do, that the conditions accompanying bailouts one and two were too harsh. That austerity and structural reform suffocated rather than liberated. Whilst there may be some merit to that argument in terms of scale and pace, the fact remains that by 2010, Greece was running a deficit of approximately 10% of GDP per annum, and carrying a national debt of 148.3% of GDP. For the Troika (the ECB, Eurozone, and IMF) to have not required the Greeks to cut spending then would have been downright irresponsible, merely funding the further accumulation of more debt, more interest, and thus exacerbating the problem.

    Another popular argument pursued is that the Troika should have written down Greece’s debt to ease her pain. They did. As part of the second bailout in 2012, private holders of Greek Government bonds accepted devaluations, lower interest rates and longer maturities, whilst extending yet further assistance. A commercial lender would never have lent to a customer with Greece’s credit-worthiness, let alone be so generous, but the Troika recognised that, with the potential permanence of the European settlement at stake, abandoning Greece to its fate was not a viable option.

    However, creditor’s pockets are not limitless. Nor are their creditors in turn endlessly forgiving, particularly the electors and taxpayers amongst them. This is why the IMF, a body not directly elected by its financiers, can argue vehemently for debt write-off and restructuring, whilst democratically elected governments are unwilling to countenance them. Consequently, extensive write-off and restructuring were always unlikely solutions, particularly when other EU member states (Portugal, Ireland etc.) might take umbrage at having not been extended the same courtesy. So when Syriza swept to election victory on the promise of liberation from austerity, a promise that was not theirs to give, creditor’s problems were compounded further.

    All this forgotten, bailout extended, sections of the press now blithely and singularly attack Greece’s “cold-hearted” and “ruthless” creditors, particularly the Eurozone governments. Apparently they “demanded and expected” the “complete capitulation” of the “embattled” Mr Tsipras to the “draconian” demands. Furthermore, their unwillingness to compromise prolonged a critical negotiation which brought Greece to its proverbial knees.

    There is undoubtedly some truth there, but Greece’s creditors did not originate this crisis, nor can blame be laid squarely at their feet. The path to this settlement was laid with premature Euro adoption; it was compounded by overspending; its pain amplified by false hope.

    So we must ensure that prior Greek governments, Syriza, and to an extent, those who elected them, accept their fair share of the blame. Not to demand that of them would be to irresponsibly absolve them of bringing Greece to the bailout table in the first place, and creating the illusion of a pain free solution that was never attainable.

    To exclusively blame Greece’s creditors for this crisis, and to paint them as tyrannical, is disingenuous. There are two sides to every story.

    Back to top