The fear of repercussions
The major hits sustained by international markets in recent days – and which, as is often the case, are being amplified on the Athens Stock Exchange (ASE) – is worrying Greek businessmen greatly. They confide that they feel at a loss over recent developments and in gauging their potential implications. Above all, businessmen fear that a continued fall in world markets will have multiple repercussions, hurting investments and profits and wiping out jobs, which would lead to sharply lower levels of consumption and a full-blown worldwide recession. Some have already plotted their defensive moves: Put initiatives on hold, cut spending and possibly proceed with layoffs. Others, however, do not agree: they feel that cutting back on activity would only hasten a recession. Greece can be consoled by the fact it can count on huge inflows of EU aid as part of the Third Community Support Framework. These sums could well be a real lifesaver for the national economy, but will not prevent many Greek enterprises from having to swim or sink. Most businessmen already believe a chaotic situation is developing. Orders are being canceled, agreements reconsidered, and payments postponed. Many of them believe that the sharp decline in international markets reflects a high level of uncertainty about the depth of the present crisis. And this crisis is far different from other recent ones. First of all, both markets and economies are much more interdependent than in previous slowdowns. Second, the Asian crisis of 1997 and Russia’s default on its debt payments in 1998 found the US and EU economies growing at a 3-4 percent annual rate, which made it much easier to overcome those crises. This time, however, Western economies have all slowed substantially, plus they must somehow cope with the aftershocks of the terrorist attack on the US on September 11. If the developed economies do enter a recession, it will not be overcome in the next three to four months. The consequences on economic indicators could be profound and painful. The strategy attempted by central banks, especially the US’s Federal Reserve, to boost the economy through successive interest rate cuts, has not worked so far. Many local analysts believe that Greece can ride out the recession if the government proceeds boldly with structural changes; that is, more privatizations, more market deregulation and deep labor market and social security reforms. Within the Cabinet, the main proponent of this strategy is Development Minister Nikos Christodoulakis. His views are shared by Commercial Bank chairman Yiannis Stournaras, a former adviser to National Economy and Finance Minister Yiannos Papantoniou.
