Thursday, 5 April 2012 - 10:25
Samaras: Greece can still make a spectacular comeback
When Galileo Galilei was forced by the Catholic Inquisition to recant his heliocentric beliefs in 1633, the Italian astronomer was said to have uttered, "And yet it moves." Since then the phrase has become shorthand for defending counterintuitive truth in the face of deep-rooted prejudice, explains Antonis Samaras, leader of Greece´s New Democracy party in an article published in Wall Street Journal.
Since Galileo´s day, we Europeans have learned to question things beyond the obvious and to look beneath the surface. We have learned to search for clues, not evils -- for answers, not culprits.
What is obvious in the European debt crisis is that many member states have lived beyond their means for years, accumulating debt that exploded out of control. My country, Greece, is a long-term fiscal failure and currently in its fifth year of recession. It has lost 16%-18% of its GDP since 2009.
More recession has meant more stubborn deficits and ever-exploding debt. Greece has already implemented deficit-cutting measures of around 20% of GDP to curtail a deficit of 15% of GDP in 2009. Two years later, and despite all these measures, Athens´s deficit was still around 10% in 2011. Three quarters of deficit-cutting produced more recession, not less deficit.
Meanwhile, Greeks´ standard of living has dropped precipitously since before the crisis. They shifted abruptly from one extreme to the opposite: from too much consumption with insufficient production, to bottomless austerity with insufficient adjustment and no real progress.
Greeks should adjust -- no question about it. But what country can lose so much in such a short time? And what democracy can sustain so great a shock with such poor results?
The Greek experience suggests that adjustment and structural reforms will not enhance competitiveness without one more vital ingredient: measures to assist recovery and promote sustainable growth. Without recovery you cannot accomplish much. Things will most probably worsen.
This is exactly what has happened in Greece. It took 30 years of frivolous public spending to bring the country to a debt-to-GDP ratio of 120%. Two years of severe austerity brought debt to 168% of GDP. Obviously the medicine didn´t work.
We are resolved to tackle the crisis. We should not hesitate in the face of hardships, but neither should we postpone changes and reforms long past due. Rather, we should make them more efficient and ameliorate some of their most toxic side effects by simultaneously applying recovery measures. We need time so that structural changes can work their way toward improving competitiveness. But we should not undermine these reforms in the short run while expecting them to work in the long run.
For instance, how competitive can an economy be when its tax rates are twice those of its neighbors´ and far above the average of its trading partners? In the past two years the employment costs of the Greek private sector have decreased by more than 15% while the tax burden has increased by 50%, energy costs have increased by 450%, and there is no more liquidity in the market. Even if you could make people work for free, nobody would hire them in such an environment.
We need to allow for a recovery to jump-start the Greek economy. We made a commitment to fulfill the objectives and the targets of the European Union program for Greece, and we want to honor our obligations to the letter. But the longer we are stuck in such a self-perpetuating recession, the more we will drift away from our targets. We want to reverse this trend. We want to break out of the vicious cycle.
We want to make Greece work. We want to set an unprecedented positive example for the euro zone.
To accomplish this, we need the help and understanding of our fellow Europeans. Some of our European partners have not hesitated to call Greece a burden that the EU should cast off. And yet it moves.
I am absolutely confident that Greece is not a lost cause. Greece is not a liability; it is an asset. Greece can still make a spectacular comeback.