greece on the edge

8/6/2019 Greece on the Edge

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Greece on the Edge - Is Greece, coordinated with Europe?

The Prime Minister George Papandreou is likely to win this weeks crucial parliamentary

vote on his latest austerity measures the key condition of

Greece receiving the second bailout from its euro zone partner, but

there will be protests and possibly riots and the vote will be tense

and narrow. Thereafter, Greece can progress along the path

agreed in Brussels last week, but it will do so in a weak position

and in need of continued solidarity from its partners. The narrow

victory should be enough to abate the immediate crisis, however, Greeces vulnerability

on the financial markets will continue and the talk of default will not go away. Greece is

divided and weak country that must implement the new austerity measures, undertakeparallel institutional reforms and restore its international reputation. No euro zone or

E.U. state has faced this kind of challenge since the birth of Euro.

The Greek government must also contend with a political and social crisis. The main

political parties remain poles apart and the prospects of reform by consensus appear

close to zero. Opposition also comes from the powerful public-sector unions, an

increasingly fearful public, and disparate political forces maintaining constant street

protests. Within his own party, the Pan-Hellenic Socialist Movement, better known as

Pasok, Papandreou has lost MPs and supporters and has never been more

constrained. Socially, more and more Greeks appear despondent and unsure of thepath being taken. Observing the protests just over a week ago, it was clear that there is

a stratum of society ready for a radical and/or populist leader: either might provide a

nationalist answer to a seemingly interminable crisis seems to be the conclusion of

euro-experts cited by the international economic community and the European press.

On top of these conflicts there seems to be an institutional weakness that questions

the ability of any government in Athens to deliver serious reform. Many parts of the

public bureaucracy verge on the dysfunctional. Their staffs are too big the result of

parties in power using public jobs as electoral favors too unskilled, too rigid from

confused and archaic legal procedures, too hierarchical, and lacking morale. Too often,the ministers in charge lack efficient means, information and technical know-how from

those he or she seeks to direct. These problems are all the more deep and concerning,

when policies are highly controversial and uncertain to be sustained.

In fact t here is no realistic option of a coalition, a social pact or of a technocrat-led

government. The leader of the center-right New Democracy party, Antonis Samaras


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has regained much lost ground after he went out on a limb and opposed the first Greek

bailout in May. Avoiding all-out political war with the unions means Papandreous

socialist government has to act carefully on public sector cuts and privatization. Well,

tax rises there must be, but then these may stifle growth on the other hand and added

to these constraints, the opposition portrays him as indecisive and a poodle of Europe

and the I.M.F., therefore trapped with an agenda not of his own making. In these

circumstances its difficult to assert strong leadership and claim the right to be defending

the national interests. Having brought the E.U. around to help Greece in principle,

Papandreous euro zone partners must continue to support the reform effort in Athens,

but how ? Even though they have a shared interest in Greece not defaulting and thus

not undermining the euro and destabilizing the international financial markets but again,

they cannot force Greece out of the euro and no Greek government will volunteer to

exit. Even if Greece could be forced out, avoiding a catastrophe in the European

banking system would require some kind of Greek bailout at least as great as the one

agreed upon last week. Therefore, the test that must be imposed on Greece is not howmuch pain it is willing to accept via more austerity measures, but whether Athens can

remain committed to putting her house in order with systemic long term reforms.

No one wins if Greece goes under; but the European project will survive over the long

term if Greece achieves real reform. That is the proper lesson for other euro states in

difficulty

Politicians and the news media usually focus on the drama of a political crisis, the

street riots and the diplomatic squabbling, but serious debate and the decisions of

investors should cut to the realities at hand . Is Greece, coordinated with Europe,

getting down to the job of serious, long-term reform? That should be the focus of the

elusive confidence the market seeks.

Sacrifices in Greece

"People don't know why they are suffering and making sacrifices," says Athens political

science professor Seraphim Seferiades. "The privilege of being in the euro zone is

losing more and more of its value for people, because they benefit less and less from it."

Almost 30 percent of Greeks would prefer to return to the drachma sooner rather than

later. Now the government will have to approve additional austerity measures if it is to

obtain fresh cash from the EU and the IMF, in the form of a second aid package worthbetween 90 billion and 120 billion for the period until 2014. Greece will have to pay off

old debts and make new ones. The government debt is currently about 150 percent of

GDP and will likely rise to 160 percent soon. How can such a weak country ever pay off

such a huge debt? For once, almost all economists agree: It will be impossible without a

debt restructuring involving creditors writing off large parts of their debts.


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But a so-called haircut on Greek debt is not politically feasible at the moment. The

financial markets are still too fragile, opponents argue, warning that it could trigger a

new financial crisis like the one that followed the collapse of the US investment bank

Lehman Brothers.

Data: 06/28/2011

Mircea Halaciuga, Esq.

0040724581078

Financial news - Eastern Europe
http://investments-european-union-romania.blogspot.com/mailto:[email protected]://investments-european-union-romania.blogspot.com/

greece on the edge

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