Greece: no alternatives to market-oriented reforms

Angelo Santagostino

“There is no time to lose.” This was the unanimous cry sounding more as a warning than as an imploring, launched by the European institutions to Greece. The cry resounded, almost simultaneously, from the Baltic Riga to the Mediterranean Athens on April 24. In the Latvian capital, the Eurogroup was meeting; in Greece the “Hawk,” Finnish Vice-President of the Commission Jyrki Katainen, was addressing the parliament to illustrate the Juncker Plan, implemented in order to reactivate investments in Europe. Greek Finance Minister Yanis Varoufakis repeated again not to share the requests of his European partners, labeling them a failed recipe.

The reality of these days is that two EU member states, Cyprus and Spain, are painstakingly getting out from past troubles by applying the “failed recipes,” although the conditions of their economies were not as serious as Greece. The banking sector in the Republic of Cyprus, the heart of the crisis, strengthened after the interventions agreed with the much abhorred Troika. Government bonds are back in the market, as well as bank bonds. Ultimately the Cypriot banks have overcome the crisis, returning to solvency. In Spain, the recovery is in place, thanks to the structural reforms adopted by the government, always agreed with the institutions in Brussels and Frankfurt. Unemployment is still high, but on a downward trend.

These, in summary, are the facts indicated by Eurogroup President Jeroen Dijsselbloem and European Central Bank President Mario Draghi, all of them speaking from Riga. The latter stressed Greece suffers continuous outflows of capitals and savings are leaving the country - an ugly sign of lack of confidence.

It can be added that the Irish economy, by applying similar formulas, is recovering vitality. It does not seem, therefore, that the economic recipes suggested by the EU’s institutions are unsuccessful. Greece began to show signs of recovery last year, although more precariously than most of the sick or former sick of Europe, by implementing the agreed reforms. Then the political crisis, leading to early elections, the Syriza victory and the new course...

What is happening is that a relationship for anything constructive is taking form between Greece and the other eighteen Euro partners. The latter calls for precise commitments on economic reforms, while the former insists in providing vague data. We have been witnessing, since January, a sort of tug-of-war, which is not promising at all. This is because there is a country in the middle whose citizens are likely to see their salaries and pensions not just curtailed but unpaid, all because of the obstinacy, ideological style of the Greek government in proposing/imposing an unsuitable economic line. For these very reasons the Eurogroup ministers accused Varoufakis of being incompetent. In fact the Greek recipe, whether implemented, soon after producing a short but doped recovery, would generate a new collapse of the economy. 

Only productivity private sector development will put Greece on the road of investment recovery and job creation.

In Athens at the same time as the Eurogroup was pressing Greece to submit an acceptable reform plan, Katainen was informing the parliament about the opportunities offered to Greece by the Juncker Plan. In order to restart Europe’s stagnating economies, the European Commission has prepared an investment facility financed by his own budgeted resources and by credit lines of the European Investment Bank. The plan aims to finance innovative projects. The private sector could benefit, in particular small and medium-sized enterprises (SMEs). The Single European Market has to be completed as far as the digital economy, energy networks and financial markets are concerned. To get these funds Greece, like any other EU country, must present healthy projects.  

From Riga to Athens, the warning is clear: time is running out, credible reforms must be presented, rapidly put on the track and aim to boost the competitiveness of the economy. There is no other way to avoid the default.  


* Angelo Santagostino is Jean Monnet, ad personam Chair at Yıldırım Beyazıt University.