SA on way to Greek scenario

GREECE has been making headlines for a long while now. What is called “the question how to save Greece” has been debated for more than five years. Are we any closer to finding an answer to that question? Earlier this week Greeks voted 61.3% to 38.7% rejecting “bailout” terms which the country’s creditors had put on the table.

How close does that bring us to finding an answer to the question on how to save Greece? The views are divergent.

The New York Times does not think the outcome of the referendum will affect the question one way or the other, since at the time of the referendum “the creditors’ offer was technically no longer on the table”. Italian Foreign Minister Paolo Gentiloni opined: “Now it is right to start trying for an agreement again.”

But there is also a view that the outcome of the referendum might lead to Greece being kicked out of the Eurozone.

What is the Greece crisis about? Analysts trace it to the Wall Street implosion which occurred in 2008 and which set global finances reeling.

In 2009 Greece announced that it had been understating its deficit for many years. This sent out shockwaves and made it difficult for the country to borrow money in financial markets.

One of the consequences was that the banking system of Greece started falling apart. This phenomenon had a ripple effect and flung the country into further difficulty.

It became, for instance, more and more difficult to attract tourists to Greece – tourists felt they could neither use nor trust Greek banks. It also became difficult to do business with Greece, since it became difficult to see her as a dependable business partner.

Therefore it appeared as if the economy of Greece was on an irretrievable downward spiral. To arrest this, the International Monetary Fund (IMF), the European Central Bank and the European Commission issued the first international bailouts.

As usual, the bailouts did not come without strings: Greece was told to implement budget cuts, raise taxes, put in place laws that would curb tax evasion, streamline government and create a business-friendly environment. The problems did not go away and more money needed to be pumped into the endeavour to save the country’s economy.

As things stand today, indications are that Greece owes Germany ß68.2- billion (R930.30billion), France ß43.8- billion (R597.5-billion), Italy ß38.4- billion (R523.8-billion), Spain ß25billion (R341-billion), the IMF ß21.4- billion (R291.9-billion), the European Central Bank ß18.1- billion (R246.9-billion), the Netherlands ß13.4- billion (R182.8-billion), the US ß11.4- billion (R155.5-billion), the UK ß10.8- billion (R147.3-billion); Belgium ß7.5- billion (R102.3billion), Austria ß5.9- billion (R80.5-billion) and Finland ß3.7- billion (R50.5-billion).

The total is ß267.6- billion (R3.6-trillion) as against the original bailout amount of ß240- billion (R3.2-trillion) five years ago.

The New York Times raises the question: why is Greece’s problem not going away despite such huge amounts of funds being injected into the country? The answer is fairly simple: a huge part of these funds go towards servicing the debt, rather than developing the country’s economy!

The New York Times states, for instance, that amid these vast amounts of money being pumped into Greece, the country’s economy has shrunk by 25% in five years and that its unemployment rate has soared to more than 25%.

The meaning of the whole thing will inevitably be understood differently by different people depending largely on their ideological leanings. What cannot be understood differently, however, is the simple fact that all the funds pumped into Greece have not alleviated the problem for Greeks.

What cannot be understood differently is the simple fact that Greeks are not now better off than five years ago when the first bailout amount was advanced. The situation in Greece affords us yet another opportunity to ask first order questions about the end to which we call forth forms of social organisation.

If we accept the proposition that huge chunks of money pumped into Greece have gone towards servicing the original debt, and that each bailout amount creates a debt which can only be serviced by creating a further debt, the inference becomes unescapable that the people of Greece were never the end envisioned in making those bailouts. The inference becomes unescapable that the end was always the survival of the financial systems which have given rise to the problem in the first place.

The terms accompanying the bailouts say as much. How, for instance, does anyone insist that Greece must raise taxes in the face of an economy which is already in decline?

How does anyone insist that Greece must cut down on state expenditure in the face of spiralling unemployment? How does anyone insist on Greece creating a business friendly environment and then in the same breath insist that the country should up taxes?

Up taxes, for whose benefit? Who must pay those taxes?

Some observers believe that we in South Africa will never find ourselves in a similar position. I wish I could share the optimism.

There’s already concern in South Africa that we run the risk of being degraded to “junk status” insofar as international borrowings are concerned. The concern can only arise if we are candidates for international borrowings.

Our obsession with being a “world class” African country makes us vulnerable. Add to that the now established looting of state resources and it is easy to see that we are well on our way to the Greeks know where.