June 17, 2012 Harold Tor

Greece at crossroads? Not exactly.

I have the following to say about the current media and political whirlwind about Greece.

Should Greece remain in the eurozone?

No. As an economy Greece had not qualified to be in the eurozone. Why does one think it does now with the additional baggage of loan conditionalities on its back? Both Greeks and non-Greeks seem to think that not being in the eurozone means it is not able to use the euro anymore. No. What Greece should do is to continue to use euro as a de facto currency and use the drachma as a financial currency pegged to the euro. Not being in the eurozone’s biggest advantage is that you have full control over your financial system, a strength which Greek economy badly needs.

“But Greece is part of Europe!”

Stop spouting stupidity. Especially this unfounded Grecophilia. Modern Greece is more influenced by its Ottoman and Byzantine past than by its Antiquity to which Western Europe claims descent and likes to romanticize about. Furthermore, being out of the eurozone does not mean it is out of the European Union.

Should the new Greek government impose austerity measures as imposed by its lenders or should it postpone/default on the conditionalities?

Yes and no. First of all, “austerity measures” is a sweeping generality that uninformed journalists (I prefer to call them reporters) employ, out of their pathetic ignorance. In a healthy self-regulatory economy, the national financial institutions and the government decide on what to do with their economy in order to promote growth, by encouraging economic activities based on their competitive advantage and by monitoring the financial and monetary markets. What Greece should do now is:

a) Cut back on spendings that impede or do not promote growth. Continue spending on things that do, like efficient transport system, functional health care, vibrant education system. No point having a ten-person town hall for a village of a hundred inhabitants just to have that sort of heavy bureaucracy.

b) Tax collection needs to be digitalized and rendered more effective. If you do not know how to collect money, of course you do not have money. The Greeks should really stop blaming past politicians on corruption because corruption does not happen only at the highest level. Stop the blaming and get your country back into shape. For this period of time, taxes should be based on consumption, not wealth, because of the following point.

c) Promote SME. Incentivize direct and indirect export-based economic activities. Do it in such a way that ensures more people are involved in bringing in the money than the people simply passing it on.

d) Invest in your competitive advantages. What are those now? Tourism and service. Maybe Greece needs to look hard at itself and think what it can sell that the rest of the world wants.

Stop moaning and get on with it.

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