Greece's Herculean task is to survive a recession as big as the Wall Street Crash
Monday 16 September 2013
Amid the frenzy of strikes, street protests and stalled negotiations it is difficult to get a clear picture of whether or not the two debt bail-outs for Greece are working. The renewed speculation that Greece might need further support next year adds further concern.
Soon Greece will have gone through a recession similar in size to that of the Wall Street Crash of 1929. If the task remains Herculean, the experience has appeared akin to that of Sisyphus.
Progress has been made on the core issue. In the first year of the crisis, Greece achieved the biggest deficit reduction recorded by any European economy in the post-war period. Last year, its budget consolidation was ahead of target and in 2013 it may well achieve a primary surplus (net of interest repayments). Currently, only Ireland is out-performing Greece in its budget consolidation effort.
Yet with their deficit reductions, both Ireland and Portugal are enjoying much better rates of economic growth. Greece may not return to growth until next year. And the social pain in Greece creates a cauldron for popular protest. Two out of three young people are unemployed, public sector salaries have been slashed, and bankruptcies have exploded. Some months ago, the IMF admitted it had wrongly estimated the ‘multiplier’ effects of the cuts it insisted upon.
Greece needs investment in growth and it has sectors that offer good returns. But, not only has the rescue so far had the wrong speed, its direction has also been wanting. Given Greece’s record on structural reform, the ‘troika’ overseeing its bailouts opted for crude, across-the-board savings. So, this week’s protests over public sector job cuts are both correct in the sense that the target figures are not the result of any serious review of what resources and skills the state administration needs, but wrong in dismissing evidence of under-performance and wastage. The target figures for job cuts follow a purely fiscal-savings logic.
Thus, the bargaining between the troika and Athens does little to focus attention on reform priorities. The Opposition is encouraged to defend every last job, making the state sector a poor substitute for an all too absent welfare regime.
And, after all the painful measures, the best Greece can hope for in 2020 is to have a debt burden higher than the one it had at the start of the crisis.
Professor Kevin Featherstone heads the LSE’s Hellenic Observatory.
Sales of the tablet are set to fall again, say analysts
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Parties threaten resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake report claiming the street artist's identity has been revealed
- 3 Are you ready for Crazy Doritos, the red-hot snack food craze sweeping Mexico’s streets?
- 4 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 5 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Isis in Kobani: US resupplies Kurdish fighters by plane - then Turkey allows reinforcements through its border
Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
Banksy arrest hoax: Internet duped by fake report claiming the street artist's identity has been revealed
Super-sized ships arrive in Britain: How big can they get?
Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
£90 - £150 per day: Randstad Education Leeds: NQT and Experienced Primary Teac...
Negotiable: Randstad Education Hull: Year 1 Primary Supply Teachers needed for...
Negotiable: Randstad Education Plymouth: EY/KS1 Qualified Teaching Assistant J...
£21000 - £35000 per annum: Randstad Education Cambridge: Qualified and unquali...