You still have a long way ahead, Greece!

by Emmanuel Bouhalakis

German chancellor Angela Merkel keeps reiterating in a monotonous and stern way that Greece is still way behind in its essential financial reforms and that it ought to adhere to its ongoing austerity plans if it ever wants to see economic recovery and stability.

It would seem that Mrs. Merkel is overlooking a crucial factor and this is the Greek people's sentiments after 3 years of radical salary and pension cuts and the rising unemployment and poverty in a country that even before the crisis, with its considerable corruption and the many organizational and structural shortcomings, was still way behind Germany, France or Sweden in per capita GDP and most financial indices. 

It is needless to say that Greece, Portugal, Spain and Ireland may never obtain the industrial and export output of Germany and any expectation of meeting the exact standards of a massively industrialized and technologically advanced country of 80 million people would appear to be illogical.

Taking into consideration, then, the fact that Greece was already behind in per capita income and its GDP was about 12 times smaller than that of Germany (also having 1/8th of its population), one can understand the shock the Greek people had to suffer in order to adapt to the cruel terms the Troika dictated upon them. 

Although there had been many areas in which Greece needed better financial stewardship and the tax authorities were often behind in their quest against tax evasion, many Greek politicians were carried away by the easy loans, cheap credit and consumerism that had gripped the country due to the Euro currency which was adopted in 2002. This "bubble" development enabled both the politicians and the voters to stick to the prosperity illusion, ignoring the need for fiscal reforms and further tax measures. 

It is important to state at this point that Germany had considerable profits from the consumerism in Greece. House appliances, cars and even military equipment made in Germany was bought from Greece, adding to the development in Germany and securing more jobs there as well. 

Now, things have been reversed and Germany is dictating how far Greece has to travel in order to obtain financial recovery despite the massive job losses and unprecedented salary cuts. That a shock therapy was needed is a debatable matter. That Greece ought to be further "squeezed" in order to please the ravenous money markets, that is out of the question. And although the EU and the IMF have lent money to Greece and forced a bond "haircut", the reminding of a tough road ahead is unlikely to act as a soothing agent. Rather, it may cause further social unrest and the jeopardizing of the rescue plans that Germany and the IMF have in mind. 

And then, the uphill road for Greece may become an uphill road for Europe too. Because a Greek default will only cause more defaults from countries that will not tolerate unattainable disciplinary measures.