OPINION

In the grip of recession

We didn’t need some famous economist to tell us that the EU/IMF-inspired rescue plan for Greece would push the economy into a self-perpetuating recession. The government’s drive to collect receipts boosted the official economy with a significant amount of revenues that would otherwise have evaded taxation. As a result, the registered economy would have appeared larger even in the case of zero growth. But as the economy is expected to shrink by about 4 percent, real gross domestic product will be significantly lower. This is the main reason for the expected revenue shortfall, without underestimating the problems of the tax collection mechanism. The shrinking of the real economy not only curbs the transaction volumes, it also squeezes businesses and drives them to dodge taxes and social security contributions. For a business that is on the verge of bankruptcy, the prospect of a fine is no deterrent. The memorandum signed between the Greek government and the European Union and the International Monetary Fund does contain a string of measures that should have been imposed a long time ago but, as a whole, the recipe is wrong as it affects only certain sectors of society. Meanwhile, the government should know that it is in a position to negotiate a different regimen, given that a debt moratorium would not just deal a catastrophic blow to Greece but would also harm the entire European banking system. Let us accept the prime minister’s assertion that the memorandum provided the only lifeline for Greece. However, this is no reason for the government to embrace it so completely, for it to expend all of its energy on its implementation. Why can’t the government, in parallel, draw up a drastic national action plan of its own, one that is tailored to the particularities of Greece, and one with more targeted policies? The end of politics as we knew it in Greece has stoked the idea that the country can only get back on its feet under foreign supervision. As such, the EU and the IMF are seen not as a necessary evil but as a blessing too. The champions of the memorandum need only to look at the hard data for their answer. They should also see how, under pressure from the recession and society’s despair, officials who were once staunch supporters of the memorandum are now beginning to sing a different tune.