Greek Problem Is a Greek Problem: The Economy Needs Radical Reforms

15.06.2015

If the current impasse with the three institutions (IMF, the European Commission and the ECB) is not a staged act and in reality there is a real crisis and fall of confidence, the inevitable result will be a default of the Greek economy and a very painful and socially disturbing road to a future recovery.

Alexis Tsipras, the Greek PM, has rejected the creditors' latest proposal as "absurd" (FT, June 5, 2015) but he nevertheless insisted that an agreement is imminent!! It is without doubt a flamboyant public relations maneuver without any similar precedent. Due to the fact that the militant left wing Greek government would have been unable to pass any negotiated agreement through its Marxist rank and file, a settlement "under duress" was discovered.

What the two parties have agreed on has been named 'proposal of the Greek government' while the creditors have put forward a preposterously unpopular set of measures. Mr Tsipras would then proudly dismiss the creditors' ideas while eventually 'forcing' them to come to terms with his goverment' s demands. At the end everybody will be happy. An agreement would have been negotiated, Mrs Merkel would have saved the integrity of the euro while the militant leftist Greek government could claim victory over the "absurd" demands of the capitalists.

The fact that the final settlement would mean further hardship for the suffering Greek people, by means of unbearable taxation, heavy state regulation of market procedures and an assault on private property, would pass almost unnoticed!

The discussions at the G7 about Greece did not essentially add anything substantial to the issue. The Greek problem is a Greek problem. This is something that the newly elected government in Athens, as well as the majority of the Greek public, tend to overlook. They as usual look outside for solutions, which of course are not forthcoming. The Greek government has spent five whole months without acting on its financial problem aiming to its creditors for providing relief without serious commitments. Unfortunately, this is not a feasible option. If the current impasse with the three institutions (IMF, the European Commission and the ECB) is not a staged act and in reality there is a real crisis and fall of confidence, the inevitable result will be a default of the Greek economy and a very painful and socially disturbing road to a future recovery.

The problem is that Greece has been conditioned to live through loans, which ended in handouts for the guarantee for votes in forthcoming elections. The Greek economy needs radical reforms based upon the principle of free markets, limited state intervention in the economy, meritocracy and a substantial reduction in direct taxation. Unless there are commitments to similar policies the future of the country is bleak ridden with instability, increased poverty and social turmoil. It won’t be long before the results of the long negotiations with the creditors will reach an end. I hope that a new agreement will be signed, based on a pre-determined scenario. Otherwise, the country will face an uphill struggle to find its way among bumps and difficulties. 

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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