GREECE DEBT CRISIS : A TRAGEDY IN THE MAKING

GREECE DEBT CRISIS : A TRAGEDY IN THE MAKING

Date: 20 Jul 2015 07:48:38


Intro : Greece is moving closer to defaulting on its debt. The country has been in a long standoff with its European creditors on the terms of a multibillion-dollar bailout. If the country goes bankrupt then the Greek debt crisis could create instability in the region and reverberate around the globe.

It would be no far stretch of imagination to liken Greece’ Prime Minister Alexis Tspiras to mythological Greek hero Odysseus. The Greek hero Odysseus was forced to choose between two routes for his ship: one that passed close to a sea monster (Scylla) and another that skirted a whirlpool (Charybdis). In today’s terms Alexis Tsipras (Greece’s newly elected Prime Minister) is left with little choice exiting the Euro zone or face the possible outcomes which could be harsh if the Greeks vote in favour of a referendum on a proposal made by its creditors. If the Greek vote is in favour of the referendum Tspiras might even lose his office though it is highly unlikely that the Greeks will vote in favour of more austerity measures like increasing the vat taxes on medicines for the old, cutting down of pensions further (already there has been a pension cut) to the old and more privatisation which means further job cuts and a rise in unemployment which is already at an alarming 26 per cent.

Restrictions imposed in Greece

  • Banks closed up to and including July 6
    Cash machine withdrawals limited to 60 Euro per 
    day
  • Card payments and online transactions in Greece allowed but not to accounts abroad
  • Tourists can use cash-points if they use cards issued abroad
  • Pension payments not affected: 1,000 Greek banks to open on Wednesday for pensioners without debit cards.

There will be various social and geopolitical implications of Greece’s exit from the Euro zone importantly poverty will soar, stretched safety nets will prove even more inadequate. An exit would mean that the young who have taken pride in their country and its resources will have to work twice as hard to bring it out from the economic mire that it is in. The enthusiasm with which the young have voted for a Left leaning Syriza Party Government will have to strengthen itself by its actions and the programs that it sets for to drag the country out of the fiscal mess. The young know that the Europe in which they live is divided along the tribal lines like the Germans, Dutch, Finns etc and the politicians of those countries tend to their own. In showing that understanding Greek Government will have to ensure that Tspiras and his Finance Minister Yanis Varoufakis do not contract the economy even more which then goes further into a deflationary cycle.  
There are lessons for India in the Greek crisis one the sincere commitment of politicians to the electoral agenda that the majority votes them with high expectations. This is big learning since most of our politicians get airs after they come to power and only in the fourth year start to work, thus leaving the pollsters only grudging and driving them away from election process resulting in a shoddy ill attempted electoral promise with no results on the ground. The sincerity that Mr Tsipras has shown to his political promise is amazing given that the Euro zone is likely to bay for his blood since his ideas are primarily leftist and Europe is seeing a resurgence of right wing and far right governments. There is also a strong reason why Greece has reached this stage despite having a surplus economy it is mired with corruption nearly 8-10 per cent of its GDP is eaten into by corrupt practices of its politicos. This itself should be a strong message for India and an area of concern in a country where scams are just a norm and corruption is an adopted practice.  
India has to strictly adhere to economic and fiscal reforms that are much required to take it forward. Since India is still way behind the advanced economies of the Euro zone such as Greece but still it has to carefully chart its future.  The privatisation program needs to be taken with greater earnest as this will bring technology, competition and that will bring in efficiency thus replace the old tardy machines and style of doing work with new and relevant methods. Privatisation will also mean that ancillary industries termed as small and medium scale, will also have to spruce up their act and the manpower that is too used to making substandard products and handing them over to public sector companies that do not compete even in the domestic market. In the privatisation process and bringing in efficiencies and economies of scale there will be unemployment and those unfit and inefficient will be thrown out of the system but then for those who are facing the music the line is very clear to go back to school and upgrade the knowledge/skill rather than using age and stage as an excuse for continuing making substandard products which more often workers in India do.  
India will also have to think about how in years to come it will deal with its pensioners and the social security net that has been created by institutions like railways, mines, public sector utilities and banks. This is an issue that is raising its head in the country’s finances. On one hand there are increases in wages for the public sector and pay commissions. There is also a consequent increase in pensioners. A huge payment of tax payer money goes in fulfilling the payment for those who no longer contribute to the economy. How we deal with creatively by employing more young hands is important. Creating lucrative jobs and increasing the tax net is a constant effort but we have not been successful in managing the same and still many of our young look to foreign shores for opportunities despite the fact that West and Far east are mired in economic wobble creating job uncertainty while ours is an economy that is gathering steam albeit slowly. 
On an international level, India too has an opportunity being a part of the BRICS nations which now has a banking entity New Development Bank it could throw a lifeline to Greece. Russia has already invited Greece to join the Bank in doing so Russia will get trade concessions and a foot in the door in Balkans which is where the wealth of rich Greeks is invested. India too should take a gamble and get trade opportunities from Greece and Balkan which is a largely looking at modernising itself and is dependent on Turkish and Chinese products. Greece’ garment industry which was vibrant has taken a beating in economic crisis India could well answer to those needs. Besides the country has a primarily service led economy which India could look at by supplying IT and enabled technologies at a more competitive price a trade trick that has kept many IT companies from India in grasp of business in the West. Besides Greece is a large player in Merchant navy and controls nearly 16- 18 per cent of shipping trade in the world. India with its maritime coastline and wanting to develop its shipping sector could take advantage of Greek expertise and investments in developing its shipping sector.
The Greek economy is now in intensive care, as its parts - notably its banking system - have ground to a halt. The economy that eventually comes out of intensive care will be smaller and uncomfortably different in form, but it will also have the potential to prosper over the longer term if some important decisions are made rapidly and consistently. The Greek economy that eventually emerges will not just be smaller and fragile, it will also likely operate in a fundamentally different context. Here is an opportunity for India as well as a learning curve that it so importantly needs unfortunately with a practical example.
Odysseus (considered as most clever Greek) was known for his self restraint and diplomatic skills. Mr Tspiras may not have those qualities but he certainly has championed the cause of his people sincerely which Odysseus did leading him to the Trojan War.
Bhagyashree Pande (Ther writer is Mumbai based senior journalist)

( July 12, 2015 Page : 26-27)