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Myths about the Greek crisis

29 March 2012 / 17:03:04  GRReporter
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The Greek crisis has brought many contradictions, doubts and controversial claims of analysts, economists and politicians. The local Capital edition published the opinion of Antonis Kroustis, who claims that there are at least ten Greek myths of the financial crisis circulating in the Greek public sphere and he tries to refute them one by one. GRReporter decided to enter into an indirect dialogue with the author and find evidence to support or oppose the thesis put forward:

Myth 1: The International Monetary Fund plunges into a deep recession every country which it touches. This is not quite true, because twenty states have relied on the assistance by the International Monetary Fund. Thirteen of them have recorded good progress and two of them are in the group of the twenty most powerful countries in the world G20. Turkish financier and former World Bank official Errol Yuser is clear that a strict implementation of fiscal consolidation and effective structural reforms of public administration can work miracles. He gives the example of Turkey, which has 11% economic growth after implementing the programme of the International Monetary Fund.

Myth 2: Funding for Greece can come from Russia. This is one of the countries that opposed the financial assistance from the International Monetary Fund, because it considers the rescue of Greece a losing card. Russia did not supply fuel to the Greek industry on credit, nor did it buy Greek government bonds on the open market when the problem had not arisen yet. From this viewpoint, sceptics believe that waiting for financial support and investments from Russia is an empty hope. Those more practical, however, say the only countries in the world with strong economic growth in 2012 will include Russia, India and China. What is the choice of small countries that need investment, but to make better offers to the powerful ones?
Myth 3: Help from China. Here, similar to the above situation, Greece faced a closed door. Greek-Chinese business forums in Athens, meetings and friendly patting on the back between Greek and Chinese politicians and businessmen had no serious results, unlike the great hopes of the troubled Mediterraneans. Like the Russians, the Chinese have not rushed to buy Greek government bonds, despite the apparent promises which they made at formal meetings in Athens. They also believe that there is no point in risking their money with an unreliable payer and miracles will not happen unless Greece restores the positive economic rhythm.

Myth 4: Greece’s lenders are ruthless money-spinners. No matter how popular this idea is mainly in the left flanks of Greek politics, the truth is that the Greek financial support has very good conditions given the current instability in the euro area. The difference in the risk of lending in Germany and Greece is reflected in the spread-indicator. In times of crisis, it sets the interest rate for lending to Greece at about 20%. On the other hand, Greece received an interest rate of 4% -5% on the financial aid with the first memorandum and 3.6% with the second memorandum. Taking into account that Italy and Spain are credited at 6% -7% at present, it turns out that the position of Greece is much more advantageous than that of other countries.
Myth 5: Germany helps Greece in order to buy all the good assets of the country for pennies later. This is the most common statement you can hear from television commentators, in the bus, at the next table in the cafeteria, in almost every part of Greece. However, that argument is self-eliminating, because one cannot but ask the most obvious question: "Why is Germany pouring hundreds of billions of euro in Greece instead of letting it go bankrupt and then easily buying everything on the cheap?" This statement has another peculiarity. Basically, when it comes to impure motives of foreigners who are willing to take advantage of the Greek natural gifts, always the Germans are accused. Being an obsession of the occupation during World War II, they always take the role of the bad person but the bailout involves another 15 countries.

Myth 6: Germany gives financial aid to Greece to support its exports. Figures show that Greece takes only 0.7% of German exports and it is quite clear in absolute terms that a market relying on approximately 10 million people in Greece cannot be crucial for the export of a country with 80 million people.

Myth 7: Germany forces Greece to buy military equipment and programmes from it. Annually, Greeks spend around two billion euro on average on military equipment. Of these, 20% or an average of 400 million euro go to German military companies. On the other hand, cash flows from Germany to Greece are much larger. One example is the European subsidies for Greece, which mainly come from the pockets of German taxpayers and according to Eurobank EFG data, they have reached 203 billion euro in the last 30 years. European funds have not been given to Greece because of affection but as a part of the significant interest from the European Union states. It is a different question how they were spent.  

Tags: PoliticsEconomyMarketsGreek mythsCrisisBailoutChinaRussia
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