MONTREAL — Greece has turned the page: the Dec. 13 official decision by the eurozone finance ministers, giving the green light for the disbursement of the “mega tranche” of 52 billion euros, constitutes a very important step in the process of restoring confidence in the Greek economy.
To start with, a commitment of this magnitude by Greece’s lenders strikes a death blow to speculations about a Greek exit from the euro and an eventual collapse of the currency zone.
Secondly, the decision gives Greece more time and space to repay its arrears. Also, it highlighted the issue of the long-term sustainability of the debt burden. Greece’s lenders seem determined to ensure that the country will be in a position to repay the debt in the long run, by providing adequate tools to honour interest payments without choking off growth.
Thirdly, the tranche offers a huge psychological boost to Greece in order to restore confidence in the economy and begin the process of repatriating almost 80 billion euros that have left the banking system since the crisis started.
Furthermore, 24.5 billion of the 52 billion will go to the recapitalization of the banking sector, allowing banks to recommence lending, thereby kick-starting a stagnant economy.
The decision of Dec. 13 did not come easy for the Greeks. Parliament had already passed a series of very painful cuts of 13.5 billion euros, as well as a series of additional structural reforms. The message that came out of Athens is that the Greek people remain committed to the euro, knowing all too well that any return to the drachma could be destructive — a kind of Pandora’s box no one wishes to put to the test.
It seems that the Greeks can, for the first time in years, look forward to the future. If all goes as planned, the country will have managed to pull itself back from the brink of collapse and return to growth, despite doom-and-gloom predictions that only a few months ago were saying all was lost. This is a significant achievement. After all, it was the Greeks who gave their word to the bird reborn from its ashes — the phoenix.
This humorous article, written from the imagination of the Greek consul general, contains so much wishful thinking and fantasy it can not go unanswered.
The author implies that Greek financial problems are due to a lack of confidence and an under capitalized banking sector.
While these are minor factors in the Greek crisis, the true issue is not even mentioned.
The real problem is the Euro itself, and the illegitimate credit rating it gave to all sectors of the Greek economy allowing them to borrow themselves into oblivion.
The problem is twofold:
1) Massive government overspending and accompanying debt levels.
2) A gigantic trade deficit thanks to Euro buying power as Greek exports pale in comparison to imports.
There is no possible way Greece can pay back its arrears and reduce its debt going forward with these two monstrous issues.
Further, the return to the drachma is not the Pandora's Box that the author suggests at all.
In fact, the Euro was Pandora's Box, as many Mediterranean countries are now discovering.
By giving away the power to control a nation's currency, the countries participating in the Euro have permitted a central authority to dictate the currency's buying power producing massive trade imbalances! All the evils contained in the Euro have now been released into Europe and, indeed the World.
But hope remains. Just as Elpis remained in Pandora's Box once the evil was released, the Greeks can hope that eventually they will return to the Drachma and throw off the tyranny of trade imbalances.
A return to the Drachma will be chaotic for the first year or so. Yet, once the initial pain is endured, Greek manufacturing will return, exports will grow, and tourism in particular should thrive. A balance economy would then arise from the ashes.
But for now, as long as Greece clings to this devil currency the Euro, the so called Phoenix of Mr. Kafopoulos' dreams will certainly go down in flames.