Monday, March 1, 2010

Greece - the addict of Europe

Greek statistics. Those two words are now synonymous with false bookkeeping, and in a way epitomises the state of affairs in the Balkans. The past year has seen the Greek economy and its reputation hit rock bottom.

But how did Greece in particular reach this state. In February of 2009 the then Karamanlis government and Economy and Finance Minister Yiannis Papathanassiou, announced that the budget deficit in 2010 would be 'reduced' to 3.2 percent of gross domestic product (GDP) from a targeted 3.7 percent in 2009. One change of government later the deficit was revealed to be the largest in the euro-zone and projections predict that the deficit will reach 13.7% in 2010.

This revelation has sent shockwaves across some markets and economists across the euro-zone and the world, and has even become a talking point for many politicians in the EU. However when one looks at the statistics and the state of affairs in Greece dispassionately, what is shocking is the amount of pretense that went on when the government first announced the 3.2 percent deficit, a figure market analysts knew would never be reached. One newswire, Bloomberg, would frequently reject the governments own Budget statement because the accounting didn't add up. Analysts and governments the world over knew that something was wrong, but those with the power to speak up, did not.

Now in 2010, the Greek government is sending reassurances to its EU partners and economic teams from the IMF will further investigate. Concern still remains that the pretense will continue in an effort to prevent a further collapse of the Greek economy.

In this way, Greece's partners and financial supporters are acting as its enablers, supporting Greece's addiction.

Because that's what Greece is - an addict. And even worse than that, an addict living in oblivion.

The first lesson in economic development is, never enter a community if you have not been asked to enter. Looking across the world there are many areas that the more developed economies can assist lesser developed countries. Experience however has taught practitioners that success in any development program lies in the willing participation of the locals. If they don't support it, sustainability will never be attained and gone is any chance of change.

The same is true of drug addicts. No matter how many times family and friends help, if the addict doesn't want to change, they never will. And in many cases the addict has to really hit rock bottom before they themselves realise that they need to change.

And that's what Greece is. An addict who has gone through decades of promising change, and while some change has occured, it has been glacial. However structural problems still exist.

Corruption is still rampant and is a way of life - akin to breathing.

Clientalist politics (political patronage) is the way of survival here and has been for most of the last century. In many ways its political structure shares more with the Philippines than it does its northern neighbours in Sweden.

Crony Capitalism is the only form of capitalism. Small companies are created overnight, are awarded government or EU subsidies, then vanish into the ether. Other large companies own media outlets to apply political pressure so that contracts are awarded to them instead of Greece's nascent entrepreneurs.

These problems have been around for decades and Greece's partners in the EU have known about them for just as long, and in many instances, have benefited from them. Because of the power structure here in Greece, the politically disadvantaged have long wished that 'Those efficient Germans' come in and run Greece's economy. Meanwhile they go cap in hand to some political bigwig, cap in hand, to get a job to feed their family.

Now however is not the time for accusations and false pride. Greece must realise that now is the time for change, and their partners in Europe must keep up the pressure and demand that changes be made now while the whole world is watching and not later.

Yes things are bad in Greece, and things will get worse. My only hope is that Greece realises the magnitude of the problem and understand that the problems are home grown. Only then will Greece and it people wake up and actively begin to throw off its shackles of economic beggary.

Today the European Commissioner for Economic and Monetary affairs must keep up the pressure on Greece and demand that measures be implemented immediately.