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Eleni Panagiotarea: Squaring the Circle? Understanding the Legitimacy of Conditionality

Avoiding moral hazard and making sure that tax payers of creditor countries get their money back have brought the concept of conditionality-setting conditions in exchange of financial aid- to the fore. Can it ever be legitimated on the ground, when citizens of bailout countries have to accept austerity programmes in which their governments, let alone parliaments, have had limited input and when they appear to defeat their own purpose by generating recession and high levels of unemployment rather than growth- critical for debt sustainability. Conditionality, this paper argues, needs to be effectively fine-tuned to national needs- to avoid political instability and social havoc-, while its implementation must, at a minimum, guarantee a fair sharing of burdens among the population.

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