In one of his recent television appearances, Mr. Varoufakis, professor of Economic Theory at the University of Athens stated (I can not remember the exact words) that "whoever speaks to you today with certainty of the markets, is lying." And it is certainly true, the behavior of the markets during a crisis, given the uncontrolled way they operate, is as predictable is a chess, or rather a monopoly, game with 100 or more players. Game Theory tells us that selecting a strategy with substantial likelihood of success in these cases is impossible.
Therefore, questions like "Was it right to sign the Memorandum or should we have opted for default in the first place?" Or "Is it beneficial to restructure the debt now?" are unnecessary and hypocritical, because they cannot be answered. This is because at this stage, no one can predict developments in markets, even when it comes to negotiating with them. Exaggeration, panic and the ultimate gambler's mentality that prevail in them (in fact have been established in them) do not make them a credible cooperative for an exit plan, even if a smooth exit would be to their benefit.
The government knows this and in my opinion this is why they have chosen a strategy of a "political exit" from the crisis, relying on our partners in the Eurozone, who in this case are probably more predictable than the markets, even when taking the possible election results and subsequent government changes into account. The government therefore wants Greece to remain the Committee's "good boy" in order to be able to request additional assistance in some form in the future if necessary. For this reason, although it is clear that the numbers do not come out, it believes that this strategy poses less risk, hoping for a future European final solution.
A similar tactic is followed by the other Euro countries. It is true that in March they did little to appease the markets. The question "Would doing A or B calm the markets?" is forwarded along with the rest to well... Game Theory. Instead they did the minimum possible to avoid a Eurozone collapse, leaving the final decisions for later, perhaps at a moment when the markets have calmed down or even be regulated somehow. Until then they will push our country to reduce the debt as much as possible (and here privatizations come into play), while advertising the sacrifices of the Greek people as best they can to the taxpayers in order to have their consent when the time comes for crucial decisions. The most important success of the Eurozone at this stage is the fact that bailing out Spain has been avoided, at least for the time being.
The risks of this strategy are many. Either way we live in an age of uncertainty. Good cooperation of the states of the Eurozone is not given, although disagreements between the Commission, governments and other actors in the Euro area have declined significantly. The confidence in Greece, due to its sinful past is also not given. Finally, and this is the most significant risk, there is the possibility that the anarchy of the market resists the will of the European institutions and governments.
Growth sure, but when?
What can Greece do at home to accelerate the exit from the crisis? The easy answer is growth. Unfortunately, as is well known, our country entered the crisis having an eroded economic growth model (interconnected with an equally eroded socio-political model) which was based on domestic consumption at a percentage of 60 - 70%, which was sustained by increasing state debt. Greek industries, including tourism, have focused on the internal market, driving trade balance towards collapse. Companies that inherently can not target markets abroad, such as shops and construction companies, have become unsustainable. The borrowed money (from the state through the salaries of civil servants) who supported them no longer exist.
This explains why the "rage for padlocks" of mainly right-wing parties is pure populism and hypocrisy. In order to develop our country should, among other things, restructure the tourism sector and to initiate a true revolution in agriculture, and build a green economy from scratch. These reforms will require several years, especially at a time when the Greek banks, infected by the Greek government bonds and the general atmosphere of uncertainty, are trying to ensure their survival. It is true however, that reforms that are needed in these areas for growth to begin, albeit slowly, suffer from delays and lack of organization.
One area though that could certainly move a lot faster is combating tax evasion, contribution evasion and the underground economy. For the first the government admitted their utter failure with the dismissal of the Revenue Secretary General Mr. Georgakopoulos, while on the contribution evasion front labor inspectors are still facing a tragic situation. Government criticism regarding these matters one and a half year after the elections, is absolutely justified.
Apparently the return to economic stability is a process that will last for years. The least the government can do is to try to keep the society alive by preventing the uncontrolled growth of economic inequality by equal distributing the burden of the crisis. It is indicative that criticism in this area has been expressed by Mr. Strauss-Kahn as well. Ensuring a minimum level of social cohesion is not only fair but also the basic condition for the government strategy to have the slightest chance of success.
Therefore, questions like "Was it right to sign the Memorandum or should we have opted for default in the first place?" Or "Is it beneficial to restructure the debt now?" are unnecessary and hypocritical, because they cannot be answered. This is because at this stage, no one can predict developments in markets, even when it comes to negotiating with them. Exaggeration, panic and the ultimate gambler's mentality that prevail in them (in fact have been established in them) do not make them a credible cooperative for an exit plan, even if a smooth exit would be to their benefit.
The government knows this and in my opinion this is why they have chosen a strategy of a "political exit" from the crisis, relying on our partners in the Eurozone, who in this case are probably more predictable than the markets, even when taking the possible election results and subsequent government changes into account. The government therefore wants Greece to remain the Committee's "good boy" in order to be able to request additional assistance in some form in the future if necessary. For this reason, although it is clear that the numbers do not come out, it believes that this strategy poses less risk, hoping for a future European final solution.
A similar tactic is followed by the other Euro countries. It is true that in March they did little to appease the markets. The question "Would doing A or B calm the markets?" is forwarded along with the rest to well... Game Theory. Instead they did the minimum possible to avoid a Eurozone collapse, leaving the final decisions for later, perhaps at a moment when the markets have calmed down or even be regulated somehow. Until then they will push our country to reduce the debt as much as possible (and here privatizations come into play), while advertising the sacrifices of the Greek people as best they can to the taxpayers in order to have their consent when the time comes for crucial decisions. The most important success of the Eurozone at this stage is the fact that bailing out Spain has been avoided, at least for the time being.
The risks of this strategy are many. Either way we live in an age of uncertainty. Good cooperation of the states of the Eurozone is not given, although disagreements between the Commission, governments and other actors in the Euro area have declined significantly. The confidence in Greece, due to its sinful past is also not given. Finally, and this is the most significant risk, there is the possibility that the anarchy of the market resists the will of the European institutions and governments.
Growth sure, but when?
What can Greece do at home to accelerate the exit from the crisis? The easy answer is growth. Unfortunately, as is well known, our country entered the crisis having an eroded economic growth model (interconnected with an equally eroded socio-political model) which was based on domestic consumption at a percentage of 60 - 70%, which was sustained by increasing state debt. Greek industries, including tourism, have focused on the internal market, driving trade balance towards collapse. Companies that inherently can not target markets abroad, such as shops and construction companies, have become unsustainable. The borrowed money (from the state through the salaries of civil servants) who supported them no longer exist.
This explains why the "rage for padlocks" of mainly right-wing parties is pure populism and hypocrisy. In order to develop our country should, among other things, restructure the tourism sector and to initiate a true revolution in agriculture, and build a green economy from scratch. These reforms will require several years, especially at a time when the Greek banks, infected by the Greek government bonds and the general atmosphere of uncertainty, are trying to ensure their survival. It is true however, that reforms that are needed in these areas for growth to begin, albeit slowly, suffer from delays and lack of organization.
One area though that could certainly move a lot faster is combating tax evasion, contribution evasion and the underground economy. For the first the government admitted their utter failure with the dismissal of the Revenue Secretary General Mr. Georgakopoulos, while on the contribution evasion front labor inspectors are still facing a tragic situation. Government criticism regarding these matters one and a half year after the elections, is absolutely justified.
Apparently the return to economic stability is a process that will last for years. The least the government can do is to try to keep the society alive by preventing the uncontrolled growth of economic inequality by equal distributing the burden of the crisis. It is indicative that criticism in this area has been expressed by Mr. Strauss-Kahn as well. Ensuring a minimum level of social cohesion is not only fair but also the basic condition for the government strategy to have the slightest chance of success.
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