Critical PR exercise for Greece today

Greece needs to present its own reform package today to get the rest of the Eurozone countries to ratify the 4 month extension of its bailout tomorrow. The extension was agreed on Friday provided the package to be presented today was sufficiently credible for the lender countries.

That leaves the new Greek government with the PR problem of presenting what is essentially an “austerity package” but which

  • is its own package and not “imposed” by others,
  • is packaged as something different to “austerity” for domestic consumption.

No doubt the leftist government will include items which are ideologically sound but which have little relevance in monetary terms. Among these cosmetic items will be such things as attacking tax evasion by the rich, and getting rid of some “fat-cat” bureaucrats in the civil service, reemploying some who lost their jobs and increasing some social spending.

But the bottom line is that they will have to present a package which is all about “austerity” in everything but name.

In every financial crisis in the last 40 years I am struck by how using economic jargon and quoting high-sounding economic theory does not alter the fundamental fact that a country’s economy is just like that of any household. Past profligacy leads inevitably to current austerity. That many of the profligates may have fled the nest does not alter the fact that the rest of the household must bear the burden of the austerity. There is little doubt that in Greece, the profligacy of a few (the nexus of corrupt politician/civil servants/ business) is leading now to the austerity of the many. Unfortunately not all of the profligacy is a thing of the past. Not all the profligates have fled.

A bankrupt household must increase its earnings to get out of debt. It has no other option. Of course it must first end profligate spending. All household members must “tighten their belts”. Luxuries must be given up. All external expenditure must be curtailed. Assets may have to be sold off. And Greece must do the same. (Selling some islands to Turkey is beyond the pale). The only quick way that I think Greece can increase its earnings is by tourism – not by industry which will take much longer.

And I am convinced that tourism to Greece will do much better with a Greek drachma which is allowed to find its own level rather than being forced to use a Euro which – for Greece – is at too high a level.


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