A Toxic System: Why Austerity Still Isn’t Working in Greece

July 11th, 2013

Published on Spiegel Online International, by Anne Seith, July 9, 2013 (Photo Gallery).

Despite drastic austerity measures, a new Greek debt haircut looks unavoidable. The old system has proven resistant to reform and billions in emergency aid hasn’t been enough to turn things around … //

… Yet Another Debt Haircut?  

Greece’s euro partners have already pledged more than €230 billion in aid, and government spending has also been slashed by dozens of billions. Representatives of Greek business are now convinced that the country cannot survive without yet another debt haircut.

The subject is politically sensitive, especially in Germany, because this time a debt haircut would also affect public creditors, which already hold 80 percent of Greek sovereign debt. In other words, a large share of German assistance loans would be irretrievably lost.

German Chancellor Angela Merkel is still strongly opposed to a debt haircut, fearing that Greece’s enthusiasm over reforms will vanish once financial pressure subsides. The country needs more than money alone to get back on its feet. Even the IMF is critical of the devastating effects of austerity programs on the country’s economy. But that is only half the truth. The fact is that while Greece has drastically cut spending, efforts at structural reform are stagnating. This also hampers economic success.

When the troika observers first arrived in the country in 2010, they were surprised at just how overregulated the economy was, at how inefficient the entire government and judicial apparatus had become. Not even the estimated government deficit for 2009 was correct. When it was recalculated, 6 percent turned into 12.7 percent and eventually even went up to 15.6 percent.

Six austerity programs later, the deficit is expected to decline to about 4 percent for this year. Greece’s euro partners attribute this success to the efforts of conservative Prime Minister Antonis Samaras. “The current government is finally strongly committed to bringing order to the state,” says Panos Carvounis, a representative of the European Commission in Athens. “Things are moving.”

Greek Success Story? … //

Our Political System is Toxic:

In light of such conditions, the troika has often proposed that the wealthy be required to play a stronger role in financing the government. But even the Samaras administration shies away from challenging their influential lobbying groups. Greek ship owners, for instance, the country’s most powerful business group, contribute little to the country’s recovery. In fact, their ample revenues from shipping are tax-exempt.

“Our political system is toxic,” says Antigone Lyberaki, 54, an economics professor at Panteion University in Athens. According to Lyberaki, the government apparatus and economic structure were destroyed by decades in which bribes and political relationships were more important than performance.

Over the years, powerful lobbying groups were able to secure privileges that they are now fiercely defending. For instance, when the government sought to eliminate overpriced licenses for truck drivers, the drivers shut down traffic throughout the country, and the military had to be brought in to bring supplies to hospitals.

It was only one of hundreds of bitter conflicts over the gradual liberalization of Greece’s utterly overregulated economy.

(full text).

(Down the page: Comments – Discuss this issue with other readers).

Part 2: An Uphill Battle to Reform.

Links:

Andreas Popp: Wut-Rede # Alle sehen und wissen es # Realitätsverweigerung, 7.48 min, von PackDieBadehoseEin am 10. Juli 2013 hochgeladen;

Andreas Popp: Plan B für Einsteiger, 15.16 min, von VivalaVidaNet am 7. Juli 20913 hochgeladen: Wirtschaft ist auch ohne Krise möglich!

Comments are closed.