Welcome to Close-up Europe. Like many things in history, the euro debt crisis originated in Greece. Today the country is bust and dependent on external life-support. Everybody is aware of that. Discussions about a rescue have been going on for more than a year. But beyond that, Greece needs to carry out profound and drastic reforms of its society, almost a cultural revolution. The shadow economy and illicit employment, tax evasion and nepotism, as well as a hugely oversized public sector – all this has to go.
Otherwise the return to economic growth will be an illusion. It remains to be seen whether the country, with its Mediterranean mentality, is up to this job.
Euro crisis: Greece’s epic battle to recover
Greek taxi drivers are on the warpath, protesting against the liberalisation of their trade, which will allow more licences to be issued.
The opening up of professions is part of a reform package agreed by the government under its first bailout from the EU and IMF last year.
Greeks have no choice. They must improve the competitiveness of their 230 billion euro economy
currently crushed by the weight of 350 billion euros or so in government debt.
To help bridge the gap, Athens hopes to rake in a targeted 50 billion euros in proceeds from privatisations between now and 2015.
But a broader solution is needed to help Greece get back on its feet, according to the country’s finance minister Evangelos Venizelos.
“We are ready to implement the privatisation programme but we need also the real support of our partners because, without help on the field, it is not possible to achieve our target, not formally but substantially. We need not only figures but real results,” he said.
Greece’s challenge is enormous.
As a financial market pariah, how will it be able to pay back its debt with an economy stuck in recession, after two years of austerity?
It won’t be easy. The IMF says the Greek economy will contract more than previously expected. The jobless rate is seen reaching 17 per cent this year. Youth unemployment is already an eyewatering 42.5 per cent.
Prior to adopting the euro, Greece was cheap. Not any more. Today it is expensive enough to shock a visitor from abroad. A cappuccino costs the same or more than it does in Paris, doing nothing to improve prospects for the country’s most lucrative sector, tourism.
Visitors to Greece’s tranquil islands and ancient monuments account for nearly a sixth of the economy and one in five jobs. But its tourist industry must cut through endemic restrictions and red tape to lead the way in giving this Greek tragedy a happy ending.
Can Greece survive the crisis?
To get some additional insight on the Greek role in the threat to the euro zone, euronews spoke to Louka Katseli, who was the Labour Minister of the Papandreou government until last month and Greece’s Economy Minister in 2009 and 2010.
euronews: “Mrs. Katseli, as well as being a former minister you are also an American-trained economist and a close political ally of Prime Minister Papandreou. Let me start with a simple question. Do you still believe in the euro and the euro zone?”
Katseli: “Absolutely – but, of course, it all depends on whether European leaders show their willingness to support the euro zone at Thursday’s summit, in the days to come and the weeks to come through appropriate measures to provide financial stability and sustainability throughout the euro zone.”
euronews: “Apart from the riots and protests in the streets, how has the crisis changed Greek society? Is there any sense of ‘We have been living beyond our means for too long and now we have to work harder’ or is it ‘The political class has betrayed us and now we are all victims?’”
Katseli: “There is a little bit of both. When you have a crisis of such unprecedented magnitude people are angry, family budgets are cut, people see their lives reversed. Purchasing power has fallen and unemployment is on the rise. So there is anger, there is frustration, but I think there is also hope that we can do all that is needed, move forward and resume growth and get the country out of this mess.”
euronews: “Some of the conditions imposed by your international creditors are a tough austerity package and structural reforms. The government has produced a list of public properties which are going to be privatised. How does that affect the national pride? We are talking about infrastructure, real estate, even islands here.”
Katseli: “Well, the issue of privatisation is an old one and structural reforms means much more than privatisation. But privatisation is an integral part of a package for improving competitiveness. There is no doubt that most Greeks would not object to a sensible and credible programme of privatisation, especially in sectors where the public sector does not need to be involved. But this has to be done with transparency, with accountability, and to make sure that assets, when they are sold, they are sold at reasonable prices in a credible time horizon.”
euronews: “Greece is not just bust, it is deeply uncompetitive. Dealing with that will require years of painful reforms. Is the country prepared for that?”
Katseli: “The country is prepared to do all that is needed to improve its competitiveness, put jobs back in the centre of the policy agenda, and resume growth. And for this we need European support, because we cannot manage debt by ourselves, there has to be a European solution to the debt issue. We need an equal sharing of the burden and we need a gradual shift of policies as things improve, so that the burden of adjustment is equally shared across all groups, with a fight to tax evasion and improving the productive structure, restructuring and attracting investment which is very much needed.”