By Andy Heong
Tiger was having a weekend reunion with family from all over the world. After dinner (and over a glass of vodka that cousin Siberian Tiger brought along), Tiger was pondering that last week was one full of excitement and uncertainties. Leaving aside local doings, the biggest news around was the people of Greece voting to accept or reject a bailout package offered by the troika of the ECB, EU and IMF.
On June 30, 2015, Greece did something a country with “developed” status has never done. They defaulted on their international debt obligations. Greece had defaulted on its 1.6 billion euro (RM6.7 billion) payment due to the International Monetary Fund (IMF). The status of Greece, its economy, and its membership in the euro zone economy became big question marks.
Tied into the default is the reluctance of the troika to provide more financial aid to Greece without additional financial “reforms” to its pension system, retirement age and additional austerity measures which the Greek government of Alexis Tsipras refuses to accept. After the referendum vote which rejected the troika’s bailout terms, Greece is now on the brink of exiting from the euro zone. How did Greece end up in this state of affairs?
Well, for one thing, Tiger thinks it’s because birds of different feathers do not flock together. In Tiger’s view, the German eagle and the Greek phoenix are really too different. Unlike Tiger and his cousins from Siberia (thanks again for the vodka), Bengal (lovely curry) and Sumatra (great ayam penyet), different birds do not get along.
Firstly, the Germans demanded more austerity which included more cuts to pension and raising the retirement age before agreeing to another bailout package. The Greeks on the other hand drew a “red line” which rejects these terms. So there you have it, a line in a sand (and in red for the Greeks). Not exactly very promising when you have to negotiate with each other.
On one paw, the troika says that the Greek government is living beyond its means and there’s no point in giving more money to be wasted. On the other paw, how much more cuts and austerity can the Greeks take?
After all, five years’ worth of austerity programmes have resulted in unemployment hitting 25% and almost 50% among youths below 25 years old. Greece never truly developed the private sector and it was the public sector which was driving growth. Only now, the public sector can’t anymore, due to the cuts from the austerity measures.
Not helping matters was the fact that the Greeks ruffled the troika’s feathers during the initial stages of the debt relief negotiations by taking the position of not wanting to pay the debts owing because the terms were unfair, onerous and humiliating to their Greek pride. Wow, Tiger wonders if he can speak with his bank and tell them that Tiger is not paying that loan for the Myvi because the terms are too onerous or humiliating.
Tiger thinks that both sides are playing chicken. While this might look great in Hollywood action movies (go see Vin Diesel playing chicken with Jason Statham in Furious 7), in reality, a lot of people’s lives will be affected. While IMF’s Christine Lagarde asked the Greeks to negotiate as “adults” and thus painting them as children, Tiger thinks both parties are equally making like petulant five-year-olds.
In this case, neither side wants to blink and just like the scene from Furious 7, they will crash into each other. Unhappily, the people of Greece will be the ones getting crushed in this fowl situation.
The fact of the matter is that the Greeks had some wonderful years with cheap euro zone credit and it looked as if the pot of gold at the end of the rainbow would never run out. The use of cheap euro zone credit funded Greece’s inflated civil service and generous pension plans as well as the 2004 Olympics. Everyone had a job and a lot of them were government jobs or related to the public sector. Unfortunately, everything comes to an end. Taken together with the loans prior to Greece’s entry into the euro zone in 2001, this meant that the Greeks (or at least its government) never got a handle on their spending.
Still, all being said and done, Greece’s creditors are also taking an extreme hard line. Tiger thinks that they can and should do better in dealing with Greece. By now, the majority of Greece’s debt has been taken over by the euro zone governments. The creditors have within their means to extend better terms to Greece.
Telling the Greeks to spend less with unemployment rampant and a crumbling economy merely makes them look like greedy bankers who want their pound of flesh no matter what the consequences. Surely they can do better. After all, some of them are supposed to be eagles and not vultures.
Providing an “aid” package merely for Greece to service its loans does not resolve the underlying problem of a crumbling Greek economy. Without money to foster growth, what can the Greek government do?
Tiger believes that the troika should seek means to help Greece’s economy. Perhaps interest rates can be reduced and a longer repayment period be given. Let Greece have use of credit to bolster its economy. This will lead to higher GDP, reducing its debt ratio, ensuring that there are solid fundamentals to Greece’s economy and ensuring its ability to repay its debts in the long run. And the euro zone will benefit as a whole.
If Greece wants to be reborn in the manner of the phoenix, then they have to do their part too. It was the populist policies of the 1990s and early 2000s which got them into this mess. Unrestricted government spending to boost election chances (by offering government jobs), social benefits and so on without having a sound economic base is a prelude to disaster.
While they may not be able to do much about pensions at this time (many pensioners are using their pensions to support their family due to high unemployment), the Tsipras-led government must curb further expansion of the public sector as a start and follow through on the privatisation of state companies. Greece will also need to tackle rampant tax evasion and corruption. Greece can rise again like the phoenix but they will need to do their part too.
Perhaps some may think that Tiger looks at things in a simple manner, but then again Tiger is a simple animal. Not everything needs to be complicated. All the parties involved should put aside their preening – leave that to the British lion. Perhaps it is just possible for birds of different feathers to flock together.
Now Tiger is still hungry and wants to have more of that delicious curry that Bengal Tiger made.
GRRRRR!!!
You must be logged in to post a comment.