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OPINION

T

he Greek political landscape is ingrained with vested interests, endemic kleptocracy and bribery. Since the days of Andreas Papandreou, an economist and father of the current prime minister, our politics has been predicated on the expansion of the public sector, patronage and borrowing. But while he failed Greece as an economist, as a politician the elder Mr Papandreou succeeded in turning his party into the most potent political player, with the unconditional support of trade unions in return for perks. As a result it became nearly impossible to reverse Greece’s system of populist support and entitlements. Public debt as a percentage of gross domestic product tripled from 28 per cent in 1980 to 89 per cent in 1990. The conservatives applied the same policies predicated on vested interests and corruption, and so are currently also suffering from their history of Greek PM, George Papandreou covering up deficits and perpetuating a culture of cronyism and mismanagement. The result is a dearth of leaders with integrity and expertise. growth averaged just 3.9 per cent (of which 90 per cent was The wider left, communists, and extreme right are intellectually consumption, plus the multiplier of the 2004 Olympics). bankrupt. Greece’s prospects of arising from the crisis with its A haircut and restructuring of the debt is therefore unavoidpresent political elite are slim, despite international calls for a able, as Germany’s move suggested. This would have been new political consensus. Meanwhile, the media, traditionally in- made easier had restructuring of older debts been carried tertwined with the politicians, fail to hold this elite to account. out before the recent bail-outs. But in the meantime further This lack of leadership partly explains Greece’s economic tra- changes are needed. vails. We have become a net importer, and lost international Further privatisation is inevitable – it too should have happened competitiveness. In the decade from 2000 Greece ran a trade at the outset of the crisis. Privatisation proceeds will not reach the deficit of 10 per cent of GDP, while exports fell by 12 per expected amount in a recession-prone economy today. Greece cent. From being a net exporter of agricultural products in needs a smaller public sector, with fewer employees. Measures 1981, we became a food importer. Industry also shrank, due to improve hourly productivity, 44 per cent below the eurozone to poor competitiveness and direction. average in 2009, must also be a priority. Even tourism grew less than it ought Elsewhere, the Greek state – the counto have done, while unit labour costs Greece needs a smaller public try’s largest land owner – should properly rose by 40 per cent during the 2000s. sector, with fewer employees. utilise and privatise its holdings. Greece’s accession to the eurozone, for Measures to improve hourly Greece has wasted two years. It could which its government fought long and productivity, 44 per cent below now face a bank crisis as household hard, led to unreasonable price increases, the Eurozone average in 2009, confidence in its banks dwindles, while with consumer prices rising more than unemployment will hover above 20 per must also be a priority. 15 per cent over the average of the eurocent this year. But the biggest problem zone between 2000 and 2010. is that Europe will gradually lose paAt the same time, higher taxes led to lower output, as small tience. When French and German banks are out of the woods businesses shut down at the highest pace in modern histo- and Spain, Portugal and Ireland become less crisis prone, the ry. Revenue policy, supposedly based on battling tax fraud, neo-Hellenes could well be left to their own tragedy. So to largely failed. And instead of lowering the highest pensions, avoid this, and to begin an economic rebirth, we Greeks must all were reduced across the board, leading to social discontent rediscover and discipline ourselves. And this must start with a and widening income inequality. generational change – morally, ethically, and politically. Take all this together, and we can be sure that debts amassed by the Greeks will never be paid in their entirety. For that to happen Greece would need to grow by 12 per cent a year * The writer is chief economist of Banque Saudi Fransi. in real terms, for more than three decades. Yet in 2001-08, EUROPEANBUSINESSREVIEW

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Profile for European Business Review (EBR)

EBR May-August 2011  

European Business Review (EBR) magazine, issue May - August 2011

EBR May-August 2011  

European Business Review (EBR) magazine, issue May - August 2011

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