There has been a noticeable change of position on the part of Greece regarding the foreign debt. Perhaps it comes as a result of the change in Finance Ministers; perhaps the change in Finance Ministers was the reaction to the changed attitude of Greeks which had already occurred.
Before, the position was "we will do everything you want us to do as long as you help us". Now, the position seems to have become "ok; we'll handle our part the way we deem right; and, by the way, these are the things we would like you to do before we move forward".
It would principally be a welcome change if Greece took more of the initiative in solving her problems. However, that has to be a constructive initiative and not a destructive one.
Any policy which incorporates delaying tactics; which attempts to "divide and conquer"; which essentially continues to consider this process as one giant poker game - any such policy is destined for failure.
A constructive policy initiative would be to propose credible measures how the Greek economy can be turned around on a growth pattern; how the Greek population will finally believe that justice as regards tax evasion and corruption is on its way; how Greece can become a value-generating member of the EU.
We are presently witnessing a financial game unfolding which has similarities with the political games played before WW1. Everyone is getting kind of tired of the behavior of the others; there has been bickering on all sides for very long; nothing really moves forward; the temptation rises to say "let's get this over with"; perhaps a couple of shots will help to clear the air and then we can return to discussing solutions in a serious way. Well, we know where those couple of shots in the political game prior to WW1 led to.
We can have NO idea where such a couple of shots might lead to in the financial world of today!
Could someone please explain to me what is so terribly difficult about developing an industrial development plan which would get the Greek economy going again? If you don't know how to do it on your own, hire the likes of McKinsey, Boston Consulting, etc. and they will have beautiful PowerPoint slides for you within days.
These slides would be grouped into the following parts:
(1) Analysis of the factors which got Greece into the problem in the first place (misapplication of the cheap financing which had become available after the Euro in seemingly unlimited amounts; focus on consumption instead of investment; de-industrializing the domestic economy by buying cheap imports; allowing everyone to transfer the funds coming into the country to private foreign bank accounts; and, of course, unbelievable government spending).
(2) Proposal of measures to correct this situation (basically nothing other than reversing the factors which caused the problem in the first place, i. e.: substantially curtail imports; attract new investment for domestic production primarily for import substitution; control capital outflows; and, of course, reign in government spending).
(3) A waterfall-chart for the implementation of these new measures.
Just as simple as that (and it wouldn’t require all that many slides…).
The government so far has taken measures only as regards the reigning in of government expenditures (albeit it rather impressive measures). As regards the other points, the government has done nothing and why this is so is simply not understandable to me.
The sale of state assets, for example, is indeed a measure which would generate one-time cash. But Greece’s problems will not be solved be generating one-time cash. They can only be solved by making the Greek economy function again and a functioning economy means that it can on its own deliver as much of the products and services which its consumers desire. If it cannot deliver all of those products, then the economy needs to import but it should only import those products which definitely cannot be produced domestically. To finance imports, the economy needs to generate funds from abroad through exports. If exports do not suffice, then the remaining hole should be closed, in the case of Greece, through revenues from tourism. And only if there is still a hole left after that, foreign debt should used. But the greater priority should be to close that hole through foreign investment.
New domestic production requires new investment. Such new investment cannot take the form of debt because Greece is already leveraged to the tilt. Thus, new investment in the form of equity capital must be attracted. Equity capital moves without consideration for patriotism, national beauty or whatever. It moves when the security of an investment and the return on it meet the investors’ requirements.
The foreign financial assets of wealthy Greeks are just waiting to see that Greece will offer them the same security which Switzerland offers and much better returns than Switzerland presently offers.
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