Greece's problems put ours in the ha'penny place
INSIDE POLITICS:In the week in which another Labour TD left the fold over the budget, the big news on the European front was that the way was finally cleared for Greece to receive its massive second bailout. A visit to Athens this week, organised by the European Commission to inform journalists from other EU countries about the state of affairs in Greece, helped put our local difficulties into context.
While the Irish people have to contend with the impact of a €3.5 billion adjustment package for next year the Greeks will have to endure €13.5 billion in spending cuts and extra taxes over the next two years. Coming on top of five years of deep austerity it puts our problems in the ha’penny place.
By the end of next year the Greek economy will have shrunk by one-quarter in the period since 2009. As prime minister Antonis Samaras pointed out, that is more than any other European country has endured in peacetime.
Public sector salaries have been cut by between 35 per cent and 50 per cent since the start of the crisis, as have pensions. Other entitlements, many small to begin with, have been slashed to the bone.
Greeks were bemused to hear about the political row in Ireland over the cut in the respite care grant. Not only is there no such thing in Greece but there is no carer’s allowance in the first place.
How the country will cope with another year of economic contraction is anybody’s guess but senior government figures insisted the worst is almost over and a recovery can begin in 2014.
A range of government politicians as well as EU officials involved in the bailout programme stressed the primary task was to remove the uncertainty over Greece’s continuation in the euro zone, or “drachmaphobia”, as Samaras called it.
“This is something that has held us hostage for a long time. Will Greece stay in the euro or go? This story is finished and that will have a spillover effect on the economy and psychology,” he said.
The negative impact on the economy of undue pessimism is something that has a resonance in Ireland. The Cassandras who, two years ago, were loudly proclaiming the inevitability of an Irish sovereign default and an exit from the euro have thankfully been proved wrong, at least for the present, but they came close to undermining international confidence in the country’s ability to recover.
The release of funds from the second Greek bailout has created some confidence in that country’s ability to stay in the euro. If the sweeping forms required to reinforce the process are made quickly then confidence may harden.
One outsider involved in the effort to rebuild the Greek economy made the following observation: “In Ireland the banks ruined the State. In Greece the state ruined the banks.” He went on to say that repairing dysfunctional banks is an achievable if extremely costly goal. Repairing a dysfunctional state is much bigger problem. The EU has established a task force for Greece to help in that process, as distinct from the troika, which supervises the bailout.