For Greece (and other) to have a chance, it must free itself from the distortions of Basel bank regulations

Sir, Martin Wolf writes: “If the eurozone made it possible for Greece to borrow on triple-A terms forever, the debt would be sustainable. Otherwise, it probably would not be.” “Hope and fear in the endless Greek crisis”, December 23.

That entirely ignores that the origin of the Greek crisis was precisely that regulators allowed Greece to borrow on almost triple-A terms, something that proved to be irresistibly tempting for Greek governments.

What does Greece (and Europe, and America, and most of the rest of the world) need more than anything? As I have explained in thousands of previous letters to you, that would be the total annihilation of regulations that make the lending to SMEs and entrepreneurs less attractive for banks than the lending to what is supposed to be safer from a credit point of view.

In November 2004 in a letter published by FT I wrote: “We wonder how many Basel propositions it will take before they start realizing the damage they are doing by favoring so much bank lending to the public sector. In some developing countries, access to credit for the private sector is all but gone, and the banks are up to the hilt in public credits. Please, help us get some diversity of thinking to Basel urgently; at the moment it is just a mutual admiration club of firefighters trying to avoid bank crisis at any cost - even at the cost of growth.”

When Wolf refers a reform package that does not include freeing the economy from Basel regulation distortions, and is capable of mentioning the possibility of it being able to generate a virtuous circle of reform and growth, I can only conclude Wolf is also a member of that mutual admiration club of technocratic statists.

@PerKurowski ©