Since the EU (and Germany in particular) established that the “obsolete” structures of the Greek economy (and society) are not compatible with those of the EU, it ought to intervene to gradually bring them in-line with the current system. This obligation is not an economic one but rather a political and certainly a social one. The opportunity was present with the introduction of the first Memorandum of Understanding (MoU), since the “Partners” found the “resistance” of the Greek state in the reforms.
The policies of austerity, which in practice only brought recession and social upheavals to Greece are continually being followed today. Surely we would have had a different situation altogether if, from the outset, installment payments were linked to the progress of institutional changes and the creation of the ‘correct’ structures in the society. Their substitution with the pressing tax enforcement measures are the sources of depression that have been accumulated in recent years. This mistake is of strategic importance, something that is already clearly evident.
I believe that the Troika, knowing in depth the fundamental problems of the Greek political system should have ‘taken’ ownership of the program so as Greece could reach at a European level, mainly in terms of correct public structures with the imposed reforms. There is now a belief entrenched in the 18 that the Greek crisis can coexist harmlessly in the Eurozone. Today, the country is collapsing since it’s not making substantial reforms.
It is widely accepted by almost all stakeholders (including the IMF) that Greece’s debt is not sustainable, and can only be reduced and lengthened so that the government can ‘gradually’ repay it. To this end, it needs to establish the confidence that the country can produce fiscal surpluses.
Unfortunately, it will be proven in practice of how easy it is to ask from an economically and socially distraught nation to implement the toughest austerity and adjustment measures. Let’s not forget the millions of unemployed (about 75% unemployment in young people under 30 years) and the huge percentage of population who are dependent on their families (the economically active population does not exceed 2.5 million). The only excuse of the Troika as to their stance is that they cannot find credible reformist proponents in the country, on which they can rely on for the implementation of these reforms. All the parties and the vast majority of people have been trapped in their interests and obey (in part) the “law of inertia”.
If there is a silver lining and if everything develops more favorably (mainly to restore confidence in the banking system) there will likely be a few billion of euros injected into the Greek economy for growth. A prerequisite to this is for these funds to be diverted into the private and real economy. The country’s political class, amongst the ruins of the national economy, must finally make decisions that promote growth through the small and medium sized businesses of Greece. The current situation is a bet with little chance of success as the same political entities will be required to manage development packages (funds from the EU/IMF). People with a strong political bias / preconception towards entrepreneurship and with the entrenched perception that the state should overshadow the private sector.
Finally, the EU forces should understand that the European experiment has to be flexible and adaptable to new circumstances of the economies and societies that compose instead of being left at the mercy of the richest countries’ taxpayers. Greece has forever changed the way in which small European countries see the Eurozone and the “European” Union.
PS: The ‘lesson’ from Greece should be studied in depth by Cypriot politicians. As was the case in March 2013, the insignificant Eurozone economies will be in serious trouble if they ever need help (again). Europe’s Schäuble removes the ‘democratic control’ of the countries not only in terms of monetary policy, as hitherto, but also with fiscal policy. This “de-democratisation” will cause reactions, the initial effects of which are already evident in Greece.
Mr Dr. George Mountis is the Managing Partner of Delfi Partners & Co.