The re­spon­si­bil­i­ties of the ‘part­ners’ and the pol­i­tics of aus­ter­ity

Financial Mirror (Cyprus) - - FRONT PAGE -

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 “In­sti­tu­tions” 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.

The Troika, know­ing in depth the fun­da­men­tal prob­lems of the Greek po­lit­i­cal sys­tem should have taken own­er­ship of the pro­gramme so that Greece could reach 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 within 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 favourably (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 or 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.

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 Wolf­gang 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.

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