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Economists: Greeks have learned to look for easy solutions in the public sector

17 December 2010 / 15:12:55  GRReporter
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The system in Greece destroyed in recent years the freedom of choice and development of new ideas. We all learned to look for easy solutions to any problem in the public sector. Civil service, European grants, allowances, bonused if your are at work on time and many others. Skillful, unskillful, hard-working or lazy - the public sector in Greece tried to accommodate in recent decades all who were able to get to the public service in order to ensure safe place and good salary. The public sector grew steadily, costs have become waste, and the private sector footed the bill for years. This is how the liberal Andreas Andrianopoulos – chairman of the newly liberal think tank of economists Forum for Greece described in brief the reasons for the situation in Greece today.

Andrianopoulos stressed that the Greeks have learned to live with credits for the past 30 years. "The point of intersection of the global and the Greek crisis was the end of free funding. Banks have found themselves in a difficult situation that led them to lend only against guarantees and financial sustainability - these two things are a dream for Greece." Andrianopoulos said that permanent lending has ensured the Greeks living standards that do not correspond to actual productivity.

He noted with irritation that some Greeks are not yet aware of the seriousness of the situation in the country. The essence of the Memorandum of financial support is to secure the time needed to carry out structural and fiscal reforms as well as to reduce the government deficit to a minimum level and the country to begin accumulating primary surpluses. According to the economist, Greece will not announce suspension of payments because the consequences for the Euro area would be disastrous. Several European banks have absorbed the greater part of the debt of Greece (government bonds). This means that if the country declares suspension of payments the governments mostly of Germany and France and less of Spain and Portugal should provide plans to rescue their banks, so as not to get a chain reaction.
 
Andrianopoulos added that those same European banks will start to clear the Greek government bonds over time and pass them to the European Central Bank. "If we do not accurately implement the tasks and reforms set before us so that we could use money from the bilateral financial aid, European banks and European governments could easily turn their backs on us in the near future." Thus Andreas Andrianopoulos described the hazards Greece could face had the government not meet properly its obligations for fiscal and structural consolidation under the Memorandum of financial support.

Much more extreme was the opinion of the former vice president of the European Investment Bank Panagiotis Genimatas. He said the measures set out in the Memorandum are not sufficient: "The Memorandum is seriously behind the real problems of this country." According to him, it contains the measures of a political program that was supposed to be implemented in the last 20 years anyway. However, if the government wants to achieve real and long-term results it should introduce fiscal discipline with no deviations from the budgeted goals, nor difficulties with the tax revenues or fluctuations in the reduction of unnecessary costs. A much more rigorous economic policy today would provide much better results tomorrow.  
 
Economic development will be an indirect result of the express implementation of this program the next two years. "To be honest, the actual implementation of the fiscal consolidation program begins just now, because neither the attack on low income households, nor the reduction of low pensions were priorities of the Memorandum. These were decisions taken by the government before signing the agreement for financial aid."

The budget is the main tool of control and economic development of the countries. The budget in Greece, however, has been drawn up almost by heart for decades and strict compliance with it has never been a priority of state leaders from both sides of Parliament. "How should a country with no financial plan know where it is going?" asked rhetorically Genimatas, explaining that the lack of responsible government and strict economic plan have pushed the country into the hands of the supervisory mission. Foreigners can not understand how the public sector has no real long-term financial program. He gave the example of government attempts to reduce health care costs without yet appointed financial advisors in all public hospitals to revise the actual state of the sector before starting to apply any recovery program.

Genimatas was unbelieving about the successful PASOK government’s performance, which is to draw up, vote and approve over 60 drafts over the next four months to restructure the domestic economy. He said this is a difficult task for a government with a four-year term. He expressed uncertainty about Greece’s ability to regain positive growth after two years. Even after deferring the payment of the financial support, Greece must have a permanent budget surpluses within 5% -7% of GDP in 2013 to be able to talk about gradual external debt settlement. "Those who believe that Greece could reach similar levels of economic development in ten years must be out of their minds," concluded Panagiotis Genimatas.

Tags: PoliticsEconomyLiberals
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