With Prime Minister Tsipras himself exhorting the people to say ‘no’ to the creditors, there can hardly be any doubt about the outcome of the referendum. It means that the financial earthquake is about to hit the world
By the time these lines appear in print, the Greeks would have voted either way in the referendum to accept or reject the lifeline offered by the other members of the Eurozone to rescue it from total bankruptcy. And there hangs a tale which underlines the perils of mindless globalisation and populism.
The Government at Athens has already shut the banks for a week and a host of welfare measures have been cut as currency collapses and widespread unemployment stares the Greeks in the eye.
Almost every analyst has exposed the real villain in this gathering tragedy. It is the international financial institutions, the World Bank and the European Bank etc backed by leading creditor nations that are acting Shylock on the poor Antonio.
Greece owes some 312 billion euros to the creditors and the last date for re-payment is already over. The creditors want their pound of flesh and the Greek Government is unable to pay it. The creditors are willing for yet another bailout on a strict condition that the Greeks impose further measures of austerity on a nation that is already facing 50 per cent unemployment and 25 per cent fall in the gross domestic product.
Greece had two bailouts earlier and together it works out to 240 billion euros but that has not stopped its steady slide down to the economic crisis.
The country’s total debt is said to be at 171 per cent of the GDP. And its GDP is steadily decreasing further.
The cornered leftist Greek Prime Minister Alexis Tsipras, who won the last election specifically on the basis that any more austerity measures will not be acceptable, has put the creditors’ demand for more austerity to a referendum.
With the head of the Government himself exhorting people to say ‘no’ to the creditors’ proposal for more austerity to be eligible for the bailout, there can hardly be any doubt about the outcome of the referendum slated for July 5. So the referendum results would mean that the financial earthquake is all but about to hit the world.
This writer expect the Greeks to say ‘no’ in the referendum to the proposals for bailout handed out by the creditors. And Athens would be the new ‘paraiaha’ in Europe — no one will extend credit to it, its export earnings can get confiscated to reimburse its creditors and the Greek economy will be in tatters.
The global fallout will be worse as the global financial institutions will be in deep trouble — facing huge bad debts that the debtor has denied. For Europe, already facing a crawling growth rate and large sovereign debt, the situation can be worse.
With other Eurozone nations like Portugal, Spain and even Italy having large national debts to repay, the credibility of the euro as a common currency itself will be in question. What happened to Greece is a lesson for those who tout globalisation as the final answer to all the poverty and other economic ills of the world.
Michael Porter’s book, The competitive strength of nations had shown, how the most efficient would take the crown in the globalisation process. This was proved when the European nations sought to become a single economy with a single currency.
Value of the single currency euro was high but it was the German economy which was the most competitive with a workforce that is constantly upgrading itself, manufacturing enterprises that are constantly renewing their capital assets and a traditional capital-labour participation in enterprise management. So euro in Germany was under-valued and was floating on a lot of surplus.
The situation in countries like Greece was entirely different. Michael lewis’s book, Boomerang: Travels in the New Third World that analysed the financial crisis sparked by the housing finance bubble in the US shows how inefficient the Greek economy has been. “The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million plus 300 million euros in other expenses.”
It was the same for Greece’s other sectors of the economy. Greece’s socialism meant that people could retire at age of 55 and then gain fat pensions for a lifetime, provided they worked in ‘arduous’ jobs. So every sector was pressurising the Government to declare itself as ‘arduous’ — hairdressers and radio announcers managed to be so classified.
Men could leave their jobs at 55, women at 50 and gain high pension benefits. Over 600 professions were so classified. When these low input professions get paid generously in high value euros, what results is that the country has to borrow more and more to fill the gap.
And clever bankers from outside Greece made the Greeks lotus eaters by lending them more and more confident that the Eurozone’s big brothers will anyhow never let down their poor cousins. Greece thus slithered into debt and as the rich cousins sought to bail them out and each bailout created the need for more bailout.
What economic policies a nation must pursue must be a choice that its people should make through their elected Governments. When their creditors ask the Greeks to put on the sack clothes and ashes, the clever left-leaning Government in Athens is saying that it has already made its choice — the Greek Prime Minister has told his folks to say ‘no’ to the creditors’ formula to Greece to get any further bailout.
Even a distinguished columnist like Paul Krugman has advised the Greeks to say ‘no’ to the main question about the bailout terms and save their sovereignty.
Free trade, global competition and market-driven reforms are real nice words and their potential cannot be challenged. But nations that get sucked into such economic tunnels must also be prepared to raise their competitive index to the level of the high fliers in the sector.
You see even the start-up enterprises in America as flourishing. But you do not hear of the thousands of small enterprises failing every year. To beat competitors like China who produces goods at throwaway prices and shipping them to India in the shadow of free trade Indian enterprises, need to be as disciplined as the Chinese where workers and managers together exercise — something alien to our culture of high brow and low brow human relationships.
Strikes are forbidden in China; and back home even the mention of labour law reform and exposing workers to hire and fire gets the trade Unions at the throat of the Government. Where is the level playing fieldIJ
Understanding the crisis in Greece will be a right warning to us on the lower rungs of the ranks of competitive nations, to be prepared for the price such utopia comes with, or go bust. Neither globalisation nor blind population are panacea for fighting poverty and ensuring social justice.