Accounting vs real solutions

Finance Minister Yannis Stournaras recently said that he sees Greece being able to tap international markets soon and assured that it will not need a new restructuring of its debt or new austerity measures.

He has been emphatically refuted since.

Just two days ago, the head of the Eurogroup, Jeroen Dijsselbloem, and the president of the European Central Bank, Mario Draghi, said that Greece will need a new bailout package as well as a new memorandum of fiscal reform.

So who are the people of Greece to believe?

Obviously German Finance Minister Wolfgang Schaeuble, who was the first to say that Greece will face a fiscal shortfall once the current program ends and who went on to promise additional funding.

Therefore, for Greece, which is shut out of the markets, to continue receiving funding, it must continue to cut costs and reduce its expense account until it achieves a primary surplus.

And let’s say this does happen. What then? Will it mark an end to the crisis? Will investors come flocking in, bringing growth and a reduction in unemployment?

For its part, the Federation of Greek Enterprises (SEV) has said that a primary surplus, on the books at least, is mostly symbolic in significance. SEV says that it cannot alone attract foreign investment and is also irrelevant to local investors. It will not boost consumption, nor will it create jobs. A primary surplus alone, SEV says, cannot bring growth.

“By waging an accounting war over the deficit, we have left the target of growth to fall by the wayside,” SEV said.

SEV poses the big question, which the political and the banking system – both in tatters – are reluctant to answer: What is Greece’s position in the global division of labor?

“Deindustrialization is neither a reality nor an inescapable fact of life, as it is systematically presented. It is a matter of choice, a matter of policy. Have we really accepted the idea of a Greece without a modern industrial base?” says SEV.

I can’t but agree with the organization on this particular point. In fact I think that its insistence for growth in the real economy and for measures boosting demand is akin to the analyses of the Labor Institute of GSEE, the country’s biggest public sector umbrella union.

The fact is that the vicious cycle of recession and fleeing investment poses a real threat to Greece’s very existence.

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