No haircut. No default. Greece will persevere. This is our government’s unyielding stance on the current crisis, stressed by the prime minister in Germany this week. He also called on the other eurozone countries to show an equal commitment.
Despite all the talk and speculation, we remain committed to the euro and therefore the terms of troika’s lending programme (16 months into it) even by accelerating budget cuts. Most importantly, however, we match austerity measures with much-needed structural reforms.
Of course many people are critical of the painful austerity measures being imposed. Greeks are upset over having to endure higher taxes, harsh wage and pension cuts, public sector redundancies and the squeezing of public services. Yet we all show a tremendous level of persistence and maturity. Will these sacrifices be worth it in the end? Yes they will. We Greeks are already treating the crisis as an opportunity. We all share a vision of change for the better and are sticking with this.
Structural changes are key, as they focus on the solvency aspect of our crisis. They are about restoring our economic infrastructure by recalibrating our productive capacity, reducing transactions costs and increasing our competitiveness. It is well-known though, internationally, that such changes tend to take a couple of years at least. We have already started simplifying and standardising procedures, consolidating registries, streamlining bureaucracy and deregulating markets. But we need to do more. The faster we deepen and continue these changes the better chance we have to reach our goal, win our battle against investor doubts and turn Greece into a stronger economy.
Though these reforms will take time to bear fruit, they do yield the necessary impetus for sustainable change. At the end of the day, we will have prepared the groundwork for a new, better generation of productivity. We have to be patient (not only the Greeks but also the eurozone members) and disciplined.
As for the opinion that Greece is better off defaulting on its debt andexiting the eurozone, this could not be further from the truth. Not only would this be bad for Greece, it would be even worse for the euro. A default would undoubtedly handicap the eurozone with severe repercussions for the interconnected markets of the US and Asia.
Hence the commitment to remain in the euro should not only be that of Greece, but shared by all other members of the euro family. The coming days, weeks and months will be a test – not only for Greece – but for the entire eurozone and its ability to get a handle on the debt crisis.
Much like a canary in a coal mine, the crisis in Greece has been a warning not only to other euro members, but also to countries with very high debt-to-GDP ratios. A growing debt with reduced GDP productivity is a lethal combination. This is why the Greek crisis is probably the loudest possible wake-up call for the European Union and the world. It’s sending up red flags and sounding the alarm bells for countries with high debt levels.
Nonetheless, our European partners may have been too quick to zero in on Greece, as though the crisis would not affect the rest of the EU. Unfortunately, it has. Other than touching Portugal, Ireland, Greece and Spain, it has now arrived on the doorstep of Italy, a G8 country.
Solving the crisis requires analysts to ask the right questions, but most importantly it requires the eurozone to act fast. Otherwise, world markets will be quick to punish delays. The eurozone countries need to define the role they expect the euro to play in the very integrated world financial markets and act accordingly. They need to impose their own deadlines for taking needed actions (eg higher level of fiscal integration) in the same way we Greeks have been asked to do regarding our deficit reduction targets. This will be helpful as a signal, not only to the member countries and Greece, but most importantly to the financial markets.