Structural change

IMF Managing Director Christine Lagarde on Thursday sought to quell fears of imminent cuts to pensions and wages to cover a funding gap of 6.6 billion euros projected by the Washington-based organization. Instead, Lagarde said, the money will come from structural changes to the Greek economy.

But how can these structural changes generate 6.6 billion euros for the public coffers? Will it be with a new wave of – direct and indirect – taxes? Will it be through further cuts to the country’s minimum wage? It is exactly the structural reforms of this kind that have driven to the reduction in the real incomes of Greeks (those who still have jobs that is) by up to 50 percent.

Unfortunately, words seem to have lost their meaning. For how can one have trust in the word of IMF officials and their projections when they have been off-target so many times? How can one have confidence in IMF officials when several of them a posteriori reveal that they were aware of the weaknesses of Greece’s bailout program and that they were basing their estimates on assumptions that they knew to be misguided.

At the same time, the bitter experience of the past few years suggests that cuts is the only thing that we will see: blind, horizontal, painful cuts.

Back in the summer, Greek Finance Minister Yannis Stournaras pledged that the government would hammer out a national regeneration plan. But there has been no follow-up ever since.

Meanwhile, the country’s investment incentives law is still waiting for an update from Development Minister Costis Hatzidakis. A range of funds aimed at financing small and medium-sized businesses are not being put to use while the number of shops and firms that are going out of business as a result of the crisis is growing.

The one structural change that has been put forward by the government does little to ignite growth or give relief to the poor. Authorities have introduced a number of taxes on farmland, buildings without electricity, and ruins – i.e. on assets that generate no profit for their owners.

The government is not exactly slashing wages and pensions here. Rather, it has chosen to punish anyone who owns some form of property – in other words every Greek. Too bad for anyone who borrowed money to build a house, too bad for anyone who inherited some dilapidated shed back in the village of his forefathers, too bad for anyone who inherited a bunch of olive trees or fallow fields once cultivated by some distant relative. The structural changes will bring them to their knees, even if their wages or pensions stay the same.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.