Precious, pricey gas
Just a few days before Greece’s bailout by the so-called troika of the European Commission, European Central Bank and the International Monetary Fund was confirmed, IMF head Dominique Strauss-Kahn told Athens: «The only effective remedy that remains is deflation… That means falling wages and falling prices. There is no other way for Greece to become competitive.» In order to ascertain to what extent Athens got the message, the chief of the IMF could simply take a brief tour of the Greek countryside and note that the price of unleaded gas remains at 1.70 euros despite the fact that neither the price of Brent crude nor the euro/dollar parity justify it remaining at such levels. This example not only confirms that in Greece, under any circumstances, prices do not drop on products when people can get away with keeping them high; it is also a sign – a small yet important one – that there are many who have failed to understand just how critical the situation is for Greece since it came under the supervision of the troika. Greece’s fiscal woes are but the tip of the iceberg. The most pressing issue is the real economy, which is expensive to maintain and has few of the prerequisites to make it competitive. If this problem is not tackled soon, there is little hope for recovery, even if the deficit is slashed and revenues increase – both are areas that are still lagging significantly. The ballooning of the public sector by virtue of clientelist relationships and the addiction of a large portion of the private sector to cheap money and state subsidies have made the productive process increasingly expensive and noncompetitive. Deflation aims to change this trend. All it takes is for those who contribute to inflating the costs of production to lower their expectations and to ignore the short-term impact it will have on their profit margins. Instead, Greeks prefer to rant against the memorandum and to lament the country’s loss of sovereignty. However, it is not the first time that Greece has had foreign guardians and, after, all, it was we who wanted, even begged, to join the family of developed nations by accepting their rules as a means of ensuring stronger economic and social growth. The fact that we decided to base this growth on shaky ground, on borrowed money, is something we know all too well. Just as was the case when our foreign partners lent us money, it has increased our dependence on them.
