Greece’s “NO!”, to be useful, must foremost be a “NO!” to the Basel Committee’s pro-government biased bank regulations.

Sir, Nick Malkoutzis writes: “Greeks…need to hear something more hopeful than talk of more spending cuts and tax rises.” “Greeks deserve more than threats of further hardship” July 6.

Spending cuts and tax rises can indeed strengthen the finances of a government, but, if it does not go hand in hand with the strengthening of its private sector economy, which is what supplies its sustainability, it all becomes a exercise in futility.

How did Greece get into the hole? By European bank regulators telling the banks they were required to hold much less capital when lending to the Greek government than when lending to the Greek private sector… and so the banks duly responded and, in relative terms, lent much too much to the Greek government and too little to the Greek SMEs and entrepreneurs.

And so now Greece must wake up to the fact that, no matter what dumb self-serving Euro/Basel technocrats believe, the private sector makes better use of bank credit than government bureaucrats. And so the “NO!”, if it is going to be useful, must foremost be a “NO!” to the Basel Committee’s pro-government biased bank regulations.

And if the ECB really wants to help, they should device a plan to recapitalize Greek banks… after all one of its super-technocrats, is Mario Draghi who, as former chair of the Financial Stability Board, is co-responsible for the mess Greek and other banks are in, after lending so much to governments against so little capital (equity).

@PerKurowski