Greece and the Crisis; Walking-the-Walk (?)

The World

Greece: Walking the WalkFollowing meetings between Greek government officials the IMF and the EU, Greece now must push forward to implement the measures and objectives attached to the second bail-out package.  Swift and successful implementation of these measures (or not) is likely to judge whether the country defaults over the next 12 months.  Greece now must shift not only its public management practices but also its mentality; a task easier said than done. 

The country faces for a start a higher deficit than originally estimated, now reaching around 10% for this year while the debt is estimated to reach approximately 140% of its GDP.  Moreover, the second bail-out package voted in has come in largely as a result of a weakness in implementing the objectives of the first package.  Both the EU and the IMF seem reluctant to keep further providing loans without results.  Already three Member States (MS); the Netherlands, Finland and Slovakia are demanding guarantees for their part of the loan in case the Greeks don’t pull through.  Mr. Soible along with the IMF and the EU has openly stated that without implementation of the demanded objectives the 6th instalment of the bail-out/ loan will not be submitted.  Whether they mean it or not can be doubted; abandoning Greece now would risk making markets fidget with financial repercussions across the PIGS.  Moreover, with the banks of wealthier States holding toxic loans in Southern Europe, a Greek default might demand further direct bail-outs for banks.  Finally, as new markets in South Asia show a decline in development their demand for German products has dropped.  This has resulted in a reduction of German exports, and acted as a reminder over the need for strong MS in the EU to drive up demand in the German market.

But with elections closing in both for Germany and France, government officials and political representatives must talk-the-talk, guaranteeing their public that their interests are being served.  Similar rules apply for complaining or worried MS.  This might prove a dangerous game to play.  On the other hand Greek government officials and in fact the entire political system, with respect t the crisis, has been mostly talking (if nothing at all); angering both the public but also EU-IMF counterparts. 

If Greece is to avoid a default it needs to move beyond cosy talks on development, the future and butterflies, to actual implementation of hard measures that will include in the short term; hard social effects, radical policy and public management changes and political costs of course.  Correct application of these measures is most likely to save the country from a collapse and put it back on track over the next five years.  Elections are closing in also for the Greek parliament and the government might be tempted to keep on talking.  Recent talks with the IMF and the EU seem to have put them back on track however many wonder whether it’s just too late.

Greece has been keen on words over the past 30 years as a member of the EU, lagging in implementation of EU directives as well as in advancing its economy.  With vast amounts of EU funds poring indiscreetly into the country talk was cheap.  Both the Greece and the EU got comfortable to the idea that development would naturally come.  As the cash flow got reduced so did the positive figures; just talking is now a rather expensive/ dangerous hobby.  But with the stakes raised for all the actors involved domestic and European there are few options left; Greece needs to walk-the-walk.

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