Athens, August 4, 2016/ Independent Balkan News Agency
By Konstantinos Manikas
We have been through the same discussion, over and over again since 2010. How unsuitable, for the overall socioeconomic environment of the country, was the economic adjustment program applied in Greece? Were those mistakes deliberate or just a matter of insufficient evaluation of the fundamental data based on ordinary preconception that did not fit to this particular situation? Was it just a matter of proper and timely implementation of the reforms or there was a broader issue regarding the structure and nature of the Greek political and economic institutions?
One could argue in favor of any of these statements. IMF chose, a more or less, customary program from the ones it used to propose to countries of the Third World and definitely not one that responds to the needs of a country which belongs to a common currency union. It overlooked the political and social frustration it would create and it underestimated the negative impact of the fiscal adjustment in the development of the economy while it overestimated the positive results from the reforms that would definitely appear a couple of years later even if they had been completed the sooner the possible.
SYRIZA misinterpreted the recent announcements from the part of the IMF and used them as a political instrument in order to overlook the lack of responsibility from the Greek governments that decided to raise the taxes so as to avoid confronting timeless irrationalities in the management of the public sector and eliminating the bureaucratic procedures that deprived much of its creative urge from the private sector.
Blinded by their ideological obsessions and deafened by the sirens of the populism the SYRIZA – ANEL government officials insist that the solution for the Greek inability to finance its own debt would be to proceed to a massive reconstruction of it in 2010. Nothing is mentioned on how this would solve the major issue of the large primary deficit or how it would boost the economy and turn it into a mandatory more export direction.
Nobody bothers to wonder how this procedure would take place and what would be the consequences. Even if the private holders of the Greek debt agreed to a reconstruction at that time (a rather unlike possibility since according to the IMF forecasts Greece would return to the markets in 2012 thus minimizing the losses for the Greek bonds investors) the completion would take many months leading to a vast depreciation of these bonds value, a haircut of 70-80% within hours and a collapse of the banking and the public insurance systems.
The Greek government needs to overcome the myths to which it built the rhetorical scheme of the last year and a half and concentrate on restoring the international confidence in the Greek political and economic perspectives and prove the credibility of the promises given on the privatization goals and the implementation of necessary reforms. Everything else is a unacceptable distraction and a potential hazard on the path to overcome the crisis.
Konstantinos Manikas is Economist – Psychologist, Investment Consultant