At the end of August, “Koumoundouros Voice” had published an almost prophetic comment under the title of “A very macabre tale: The “end?” of the Greek programme”. It was summed up in its last phrase. “With the present policy mix, a Greek recovery is an exercise of mythical tourism in the Land of Utopia”. Recently released data, on growth prospects, are one more pitiful revision downwards of previous forecasts. Greek 10-year bond spreads still stand at the untouchable 4 percent range, compared to 2 percent for Cyprus. In August, we argued that the cardinal sin of the Greek policy mix is the unholy triad: Statism, Populism, Clientelism. The only way forward is an escape from the present misery through growth, which easily translates into less State, less taxes and a fixed tax environment, friendly to everybody, but especially to entrepreneurs.

Portugal, Ireland and Cyprus entered the crisis after us and are now well out of it. Why? There are three simple answers.

In these other countries:

  1. Restructuring programmes were accepted across party lines, as an emergency. Governments contributed to the formulation of the “packages”. In Greece they became the object of fierce political in-fighting. The SYRIZA-ANEL government organised a referendum against the last Programme and then accepted it, as proposed by creditors, in a hilarious somersault.
  2. Governments were enterprise and privatisation-friendly. The SYRIZANEL outfit is against both. They try their best to obstruct privatisations, investment and reforms.
  3. Restructuring programmes were “owned” by the governments and (more or less) by the people. In Greece they were fiercely resisted. Some of it was due to some IMF-confessed technical mistakes.

The key question, of course, which is on the e-lips of Wall Street Journal, Reuters and many other authoritative communication journals, is whether we have seen the backside of the Greek crisis. Can Greece go back to the markets, should the need arise? Is the Greek debt sustainable? Creditors’ experts, including the Eurogroup, ECB, the IMF and rating agencies raise various questions, ending in the universal chorus: “Carry on with Reforms and Privatizations”. They know well, and they mean well.

Ever since the Left-Right Government took over in January 2015, it stubbornly resists any effort to limit the unproductive State sector, dragging its feet over privatisations. It stopped housing investment (the locomotive of the Greek economy), by a crippling over-taxation. There is a confessed government plan to eliminate middle class professionals and small businesses, on political grounds, as their political clientele is massed in the Civil Service and its strong trade unions.

Creditors, on the other hand, for some inexplicable reason acquiesced in this crazy policy and aggravated it by insisting that Greece runs fiscal surpluses of the order of 3,5% of gdp for over a decade. The IMF was the only one to protest this folly, but to no avail.

The first sign of a political turmoil and the downfall of the Turkish lira, followed by the Italian budget crisis, were enough to demolish the extremely weak prospect of a Greek return to normality. Things are made worse every day by a spree of handouts to party cronies, ensuring a return to “business as normal”: Political appointments, an attack on private sector productivity, no credit, corruption everywhere.

Nothing learned, nothing changed, nothing reformed. It is a pity, but that is how SYRIZANEL will go down in history.

                                                                                                                                    30 November 2018


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