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Saturday, May 4, 2013

Greece will probably pull through!

In this article, Hugh Dixon of Reuters comes to the conclusion, after spending one week in Greece, that Greece will probably 'make it'. I asked him how high he expected unemployment to be when Greece had 'made it' in his definition. He tweetet back:


I would agree that, when looking only at internal and external accounts, Greece has a fair chance of making it. After all, the primary budget is already in surplus and the current account is approaching break-even. Remarkable achievements! Where I have trouble recognizing success is when unemployment remains, on a sustained basis, around 30%. Granted, if by some miracle unemployment were to fall below 20%, that would be heralded as a great success. But can one envisage a society sticking together when unemployment is close to 20% on a sustained basis?

What is painfully missing is some form of a narrative which explains how the Greek economy can and will employ its people on a sustained basis without subsidies from abroad. The only narrative so far seems to be: let Greece become competitive pricewise (i. e. cheaper); implement the reforms and then wait to see how all pieces fall into place. That might indeed happen at some point but I would fear that it will take a very, very long time if the process is not accerated by incentives.

My own narrative is simple and well known to the readers of this blog: incentives for import substitution where Greece ought to have the necessary comparative advantages (agriculture, etc.); incentives for export expansion where Greece ought to have the necessary comparative advantages; focus on tourism and shipping; attract direct foreign investment as a source of funding and know-how transfer; modernize the state with the help of the EU Task Force; and - start spreading good news instead of whining about the past.

One might want to dust off the Greece Ten Years Ahead report by McKinsey, too!


  1. > "modernize the state with the help of the EU Task Force"

    Imho this is the crucial point. How make this happen (fast!) without the population seeing it as meddling of grasping Germans?

    H. Trickler

    1. Here is what I had proposed a few months ago: