When the first memorandum was voted through Parliament, George Papandreou?s government promised the country?s creditors that by the end of 2011 or early 2012, Greece would have returned to the markets and to a positive growth rate.
Instead, the economy is being dragged down in the whirlpool of recession, multiplying the social and economic wreckage. This was the anticipated effect of the kind of policies that have been applied over the past two years, and the troika, from the advantageous position of the one that issues orders, now claims that it was not the terms of the agreement that caused the chaos, but the manner in which they were applied. The most recent example of the troika?s effort to exonerate itself of all blame is the speech given by the IMF?s mission chief to Greece, Poul Thomsen.
Let us note that the ease with which the Papandreou government took orders pleased Greece?s creditors, but they were also enraged by its inconsistency. These two conflicting sentiments are two sides of the same coin. Moreover, the recession is not the result only of the previous government?s mistakes, because the aim of the troika was not just to drastically reduce the deficit; it also wanted to achieve an internal devaluation, which, ostensibly, would make the Greek economy competitive. An internal devaluation, however, can only be achieved through a recession. In other words, the recession was the aim and not an unexpected side effect of the shock therapy that was applied to the Greek economy. The recession simply took on much-greater-than-expected dimensions, just as many had predicted.
The entrapment of the Greek economy in the vicious cycle of recession has more than a socioeconomic cost; it also puts in jeopardy the entire fiscal reform program. The recession has caused a drop in revenues and an increase in spending. It also heightens our sense of financial insecurity, which leads to fewer exports and investments, deepening the whirlpool. Greece right now is like a dog chasing its own tail.
The country?s creditors are trying to make Greece attractive to foreign capital by selling off its public assets on the one hand and reducing the cost of labor on the other. Such a Greece may be the vision of the troika, but not of the Greeks.
Greece can only become competitive if it starts making use of its significant comparative advantages.
Its creditors applied the usual IMF strategy to Greece, but it was the duty of its politicians to design and apply a national strategy for growth that would suit the characteristics of the Greek economy.