Greece debt crisis: Get in depth coverage of the Syriza-led goverment’s debt-relief demands , from FT.com (subscription required).
One rule for ‘us’ and another, entirely different rule for ‘them’. In this case, it’s not just another rule, it’s an entirely different game. I am, of course, referring to the complete fiasco that is the Greek debt crisis.
Now clearly, the rules for personal and national debt management (and recovery) are going to be very different, but it would seem reasonable to expect countries to follow similar principals that we, as citizens and business people are often reminded of: live within your means, pay your bills, honour your debts.
What the Greek issue is clearly demonstrating is that these principles do not hold when there is a political dimension to the financial scenario, and even more so when the crisis threatens, not just a political issue but an issue of ideology.
Some say that the European Union (EU) has changed from its original aims of creating a ‘common market’ for nations of Europe to trade peacefully with a shared aim of close cooperation and a means to prevent the kind of global conflict that twice started in Europe before spilling over to engulf the World. Others contend that the EU has always had an ambition of creating ever-closer political ties leading inevitably to a United States of Europe.
What is clear is that the Eurozone model, with countries tied to a single currency but without a political union, would seem to be undone when political and economic factors are so completely misaligned. Economists and political analysts point to the disparities between the relatively economically stable countries of northern Europe and some of the countries of southern Europe that have fundamental economic problems. This is encapsulated in Greece that has little in the form of manufacturing industry and not much to sell on the international markets except a rich history and a lively tourist industry.
How then were they allowed to anchor themselves to the Euro (which supposedly demands a strict monetary policy and economic discipline) when they have little resilience in the event of economic hardship? They simply do not have the means to drag themselves out of the hole and unfortunately, their profligacy in easier times has led directly to the problems they are now facing.
The facts seem absurd and do not give any confidence that the Greek Government has any real chance of reversing the decline of this wonderful country and the birthplace of democracy. For example Greece, with a population of 11 million, spends 30% more on pensions than Britain, which has a population of 60 million.
When the Greek debt crisis started, the Greek government pledged to raise around €50bn from the privatisation of state assets. Not long after, the target was progressively reduced to €30bn and then €20bn. So far, the government has raised less than €3bn. Let’s not forget this is 5 years on from the start of their recovery plan.
This before you even look at the chaos and corruption in their tax system which seems almost too broke to fix. Just their VAT system opens up a huge opportunity for fraud and tax dodging. They have 6 different VAT rates and the Greek Islands enjoy a reduced rate of VAT to encourage people to live there and to help their vital tourist industry. How then can a recent surge of tourism to Mykonos result in lower payments of VAT to the Government?
Perhaps it’s time for Greece to be allowed to fail; to default on its loans and obligations. Maybe, an exit from the Euro and the rebirth of the drachma, traumatic though that would be would allow Greece to restructure on its own terms, to put its own house in order even though this freedom would almost certainly lead to incredible hardship for the poor, suffering population of this beautiful, proud country. Just don’t tell Vladimir Putin.