To save Greece (and the Western World) we must call the Basel Accord a major historic mistake, and proceed accordingly.

Sir I refer to Willem Buiter’s “There is a way past the insanity over Greece” June 22.

Buiter’s proposal contains two elements that I have been arguing as essential for quite some time. First, making sure no more money is lent to the Greek government: “The ECB would bar Greek banks from making ne loans to the state”; and second, to recapitalize Greek banks so they can attend to the needs of the real Greek economy.

And that means throwing overboard all those Basel Committee’s portfolio-invariant-credit-risk-weighted capital requirements that have so distorted the allocation of bank credit. Not a second too soon for Greece… and not a second too soon for the Western World at large.

The Basel Accord principle of zero risk weight for the sovereign and 100 percent risk weight for the citizens and for instance their SMEs, pompously and odiously implied that government bureaucrats could use bank credit more efficiently than SMEs and entrepreneurs. Have you ever heard more self-serving communistic nonsense than that?

@PerKurowski