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20 Feb, 2012 17:13

‘Greece needs rescue package worth its entire economy’

Greece needs a greater rescue package than the one being negotiated in Brussels, says economist Johan van Overtveldt. In fact, the new bailout should be worth at least as much as the entire Greek economy.

As eurozone finance ministers meet in Brussels to decide if Greece has done enough to get an additional 130-billion euro financial aid package, Overtveldt told RT that Greece actually needs around 170 billion euros to make it through the next few years.On top of that, he says, Greece needs an additional 35 billion euros to recapitalize its banks.“So we are talking now about a package that in reality is about 200 billion euros, which happens to be exactly the amount equal to Greek gross domestic product,” he explained.But even a bigger aid package will not pull the Greek economy out of a deep recession, Overtveldt believes.“The negative spiral in which the Greek economy and Greek society have been imprisoned for almost two years will only get worse,” he explained. “The austerity program that is imposed on the country will worsen the recession, which in its turn will worsen the budget outlook.”Overtveldt says what Greece really needs at the moment is a growth perspective for its economy – which can be achieved only by exiting the eurozone. “It will lead, of course, to a devaluation of the new drachma but that is exactly what is needed to get the economy growing again through international trade,” he concluded.Over the last two years, Greece has seen a number of rallies and demonstrations that often escalate into clashes of angry and desperate people with the police. Last Saturday, the approval of a new austerity package was followed by a major clash with tear gas being used against some demonstrators. One person was injured and about 60 detained over the violence.

‘Greece sliding towards third-world status’

What Greece really needs right now is a redevelopment plan – and the IMF is the best pick for for the job, economist Harlan Green told RT.“Greece is sliding very quickly into being a third world country, and the IMF knows how to deal with third world countries,” the editor of PopularEconomics.com said. “In Greece’s case, they’ve lost productivity, they’ve lost what economists call aggregate demand, by just demanding austerity without a plan for recovery.”Green says that productivity has fallen dramatically not only in Greece, but in Europe as a whole when compared with the US.“Greeks themselves are very hard workers,” he added. “But it is very inefficient.”