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Victoria Mindova

Greece has the highest percentage of domestic consumption compared to all countries in the European Union - 92% of GDP, and its direct private investments have dropped by half in four years. "High consumption is the result of easy credit policies, rising wages over productivity, large budget deficits and dramatic reduction in deposits. The result is inflation and deterioration of the domestic balance as well as reduced competitiveness." Thus, in a few short sentences, the Deputy Executive Director of Eurobank EFG and professor at the University of Piraeus Nicholas Karamouzis described the poor condition of the Greek economy. He spoke at the forum on "SOS Development: How to emerge from recession to stay in the eurozone", which was held in Athens. 

Nicholas Karamouzis identified four main mistakes in the government of the country in the last two years, which have led Greece to the present state.
The first is that the government and the political elite in the country have been slow to understand the problem of the Greek crisis and when it was already clear, they did not dare to enter into confrontation with the past. They have done everything possible to avoid direct confrontation with the unproductive structures established in the country and fed by public finances. The second omission according to Karamouzis is the lack of a national plan for restructuring, reforming and developing the local economy with wide public support. "This plan could be the basis upon which Greece would enter into negotiations with the supervisory Troika. It should incorporate measures for economic development, reforms and fiscal consolidation, focusing on cost cutting and downsizing the public sector rather than on tax increases."

The banker identified as a mistake the lack of effective measures to help Greece's foreign partners restore their confidence in the Greek economy. "The costs and public sector cuts, less bureaucracy, market liberalization, privatization are measures of low public and social cost and have little impact on the development of the recession, but they were not priorities. The result was that the markets have lost confidence in the country, and the Troika has begun to seek more radical measures, which have deepened the recession." The fourth problem Karamouzis pointed out was that since the start of the crisis there has been a major gap between promises and actions implemented. "It is not correct that after two years of trying to reform the possibility of bankruptcy is now greater than in the period preceding the signing of the first Memorandum."

Investment as a percentage of GDP dropped from 23% in 2007 to 16% in 2011, said the specialist. "There will be no positive economic growth until we see a jump in foreign direct investment. Therefore, restoring confidence in the abilities of Greece should be a government priority." Production in the country has been neglected for many years in the name of imports, which is part of the problem with the high budget deficit of Greece. Karamouzis said that the contribution of agriculture to the national economy has fallen to a shameful low and the balance of trade in agricultural products is negative. Today, agriculture contributes only 3% to the GDP while the ratio was 20% of GDP two decades ago. For the same period of 20 years, 117 billion euro in present value have been granted by the European Union. "Where is this money? Today, Greece imports agricultural products for four billion euro a year instead of producing and exporting them," said Karamouzis.

Karamouzis believes Greece needs a little luck to recover and not by keeping its fingers crossed, but by restoring the positive growth in the world and Europe. "With strong economic growth in the eurozone and in South East Europe, Greece has one advantage. 80% of our exports are directed to these countries. If Europe remains in stagnation or falls into recession, the Greek economy cannot become an open export oriented economy and cannot expect growth." Other conditions for recovery are to cancel the possibility of bankruptcy and the return to the drachma, which is the country is now pursuing. The country has no chance of attracting investment unless the suspected separation between the euro and Greece disappears and banks improve liquidity. Karamouzis also believes that the country needs a new generation of politicians and entrepreneurs. According to him, a new political government is necessary which is able to understand the importance of healthy entrepreneurship and a new business generation to operate without requiring the protection of the state in order to survive.

Nikos Christodoulakis, professor of economics at the University of Athens, blamed the politicians and the supervisory Troika for a lack of vision in drawing up the Memorandum of financial assistance. In his opinion, it was doomed to failure because the measures stipulated in it did not give any prospects for growth, but only for economic deprivation. As a result, GDP is gradually decreasing, whereas the deficit and external debt are increasing. He said that if the Greek economy remained in stagnation and the growth was zero in 2009, today the ratio of external debt to production would be 139% of GDP, instead of almost 160% of GDP at present.

Reform of the state structure, domestic devaluation and privatization are the three pillars of the current recovery programme. Christodoulakis insists that nowhere in this plan there are no clear measures to stimulate economic growth. "In none of the three sections of the plan is any success evident." He is clear that this is due to the lack of measures to stimulate economic growth.