Greece on a knife edge

By Isidoros Karderinis

It’s been five years since Greece joined the European Support Mechanism, with the close cooperation of the International Monetary Fund (IMF). At that time (around the end of 2010), the nation’s GDP amounted to about 222 billions dollars. The public debt was 148.3 per cent of the GDP. Unemployment stood at 12.5 per cent. The percentage of Greeks living below the poverty line (earning less than 60 per cent of the national median disposable income) was 27.6 per cent.

The policy of extreme austerity applied in the country at the behest of international creditors over the years has further aggravated the situation. GDP shrunk to 186.54 billion in 2014. Public debt has soared to 176 per cent of the GDP. Unemployment has risen dramatically to 26 per cent, affecting mainly young people, many of whom ended up leaving the country, leaving the country to grapple with a brain drain at a critical juncture. The percentage of Greeks living below the limits of poverty is 34.6 per cent of the population.

The programme of fiscal consolidation in a country that was already in recession before 2010 has completely failed. It would not be rational, economically and socially, to continue its application. This particularly restrictive fiscal policy and austerity measures form an exceptionally lethal debt-recession-austerity spiral, ruling out any prospect for development.

The debt is huge and unbearable

The strict continuation of the extreme austerity programme will have truly tragic consequences for Greece. It will lead to total economic disaster – one that will not be healed for decades – and certainly to a serious humanitarian crisis for the standards of a post-war Europe. The homeless and impoverished citizens already seen on the streets of Greek cities like Athens will rapidly multiply. Suicides due to hopelessness and despair will continue its frantic upward trend. Children blacking out in schools due to lack of adequate nutrition will become an everyday part of life.

The question then arises: what should be done in order for Greece to leave the pitch dark tunnel of deep economic crisis and enter the bright avenue of development and progress?

First, the burden of debt the Greek economy carries is huge and unbearable, and there seems no possibility of payment in full. Therefore, there is a need to write off the majority of the nominal value of the debt so that the debt burden of the country will be below 100 per cent and become sustainable with a technique that will not harm the other peoples of Europe. The repayment of the remaining debt should be connected to a “development clause”, so as to be serviced from development, and not from any budget surplus.

Secondly, the reconstruction of production in the country is required, with these key elements:

a) A sustainable equilibrium in the balance current account, achieved through changing the mix of produced products in the country, thus strengthening the export orientation margins of many sectors of the Greek economy;

b) The implementation of an integrated sustainable industrial policy, the development of domestic research, and production of a wide range of high added-value products. The processing sector is particularly critical since it is impossible to hope for a country to rise in the value chain in the global apportionment of labour without creating the necessary manufacturing base that includes primarily the manufacture of finished industrial products;

c) A special emphasis on tourism, to which Greece has a strong comparative advantage, shipping – Greece has the largest merchant fleet in the world – and certainly agriculture for the production of basic social goods, and

d) The efficient exploitation of raw materials – such as bauxite from which aluminium is produced and the potentially large oilfields located both in the Aegean and the Ionian Seas.

Building a modern and efficient State

Thirdly, Greece needs to build a modern, efficient and rational state that will operate with honesty and will not introduce countless bureaucratic obstacles to business development and the effective fight against corruption and tax evasion, The state also needs to apply fair taxation.

The economic effects have not only to do with the losses of state finances but also with adverse effects on the private sector. When the notion that only with the bribing of individuals holding nodal positions in public administration can achieve the desired effect is entrenched in the system, investments are discouraged, fair competition is distorted and businesses that refuse to engage in such lawless and immoral trade are condemned to stagnation.

The social and political consequences of corruption are also extremely serious. Corruption causes resentment, frustration and a collapse of a strong sense of values among citizens. It consolidates the belief that nothing works properly and that there is little benefit in abiding by the law. Institutions are undermined in the eyes of citizens. Greece would definitely need an immediate establishment of a fair tax system that will not encourage or “justify” tax evasion, but will contribute decisively to the development of taxpayers’ consciences, and will have as a result a significant increase in government revenue.

Greece can’t handle austerity any longer

These measures should apply immediately to pull Greece out of its current state, and put the country on the path to development.

For their part, European citizens should stand in solidarity with the Greek people who have borne the greatest burden, since the vast majority of money borrowed by the Greek government does not go to Greek taxpayers, but rather to banks, to the payment of loans, or to recapitalise Greek banks.

In conclusion, Greece does not stand to continue with austerity. It has already reached its farthest limits: the standard of living has collapsed, and with it, the dignity of the Greek people. This has to be understood by the creditors. The new third agreement with the extreme austerity measures will reinforce the recession and will have a destructive effect.

Isidoros Karderinis was born in Athens, Greece in 1967. He is a novelist, poet and economist with postgraduate studies in tourist economy. His articles have been republished in newspapers, magazines and sites worldwide. His poems have been translated in French. He has published seven books of poetry and two novels. Five of which have been published in the USA and in Great Britain.