Operating on the edge

Some time ago, a bank commercial on TV showed a couple enjoying a romantic boat trip. Suddenly, the boat sprang a leak. Alarmed, the man tried to plug the hole, but his efforts were in vain. Soon, the boat was taking in water everywhere. This advertisement reflects the Greek economy. While we were busy stopping the deficit leak, the National Statistics Service bore another hole into the proverbial boat by reporting that oil is sending inflation sky-high. It will reach 3.8-4 percent in July. Every economy faces problems caused by high oil prices. But some economies have room to maneuver in the new environment while others do not. Some learned their lesson from earlier oil crises and reduced their dependence on oil while others didn’t bother. The public finances of some countries allowed some room for corrective intervention, but that wasn’t the case with everyone. The Greek economy falls in the latter category. It is vulnerable because it operates close to the edge, with little leeway to react to international economic changes. And it is not just the economy. Greece has lived on the edge for years in many aspects. For instance, life is only tolerable if it doesn’t rain or snow and isn’t hot or damp. The temperature comfort zone for most Greeks is between 20-27 degrees Celsius. Anything outside that means a crisis. That is what is happening with the economy. We have been going in the wrong direction for decades. As we try to patch up the leaks in the boat, problems continue to fester and grow, causing more leaks. The problems will just get worse as long as the government conceals them under half-measures out of fear of the political cost. The longer structural changes are delayed, the greater and the more pressing the challenges of the international environment will become. And, meanwhile, our responses will become less effective.