Rebuilding Greece And Europe

|
Includes: EPV, EZU, IEV, VGK
by: The Financialist

samaras

Greece's crisis is fiscal, monetary, and structural, exacerbated by political and social volatility, stresses on European unity, and now, a large influx of refugees. Despite this "nightmare" and major near-term concerns, former Greek Prime Minister Antonis Samaras believes that "we can and will make it".

The Greeks have faced a unique and debilitating confluence of challenges - excessive deficits and debt, diminishing competitiveness, increasing non-performing loans, political upheaval, a breakdown of social cohesion and further destabilization and security concerns due to the arrival of hundreds of thousands of migrants seeking access to the rest of Europe. "In the last five years, all these crises have converged," Samaras said in a keynote address at the Credit Suisse 2016 Asian Investment Conference (AIC). "All of them together could be lethal for any society."

According to the former prime minister, the Greek economy was beginning to emerge from intensive care in 2014 and had returned to positive growth one year ahead of the schedule set in the rescue plan his government had negotiated, when snap elections resulted in a new coalition government led by a populist party, which won the support of voters exhausted by austerity. This led to the halt or undoing of structural reforms and a return to recession, he explained. Greece lost 25% of GDP and youth unemployment is now at 60%. The migrant crisis has made matters worse.

What are the lessons from this tragedy for Greece, Europe, and the rest of the world? Samaras offered these:

Greece's underlying problem is competitiveness. "Europe is losing competitiveness against the rest of the world," Samaras reckoned. "We have to fight against market inefficiencies. If Europe can't compete, then Europe will be doomed, and the rest of the world will suffer." Specifically, Greece and Europe have to tackle bureaucracy - "the red tape is all over the place."

Europe needs deeper and faster integration.

Besides paying attention to its internal problems, Europe should also keep its eyes open to the international environment and the global competitiveness landscape. "Nobody can survive in a world falling apart," Samaras remarked. "Commercial and exchange-rate wars will make everyone worse off."

Europe has to focus on its internal stability. It cannot promote stability worldwide if it is unstable inside, he noted. Populism and extremism, especially when combined, as they are in the current Greek government, can lead to instability and stagnation simultaneously, Samaras warned. He accused the government in Athens of "aborting change, undoing reforms, and derailing the economy by making false promises and outright lies."

Fighting populism requires more democracy.

Regarding Greece's prospects, "I am very skeptical in the short run," Samaras said. "But at the same time, I am optimistic in the long term." Greece, he said, is rich in talent and natural resources, including its untapped sources of energy, beautiful landscapes, and renowned culture. The country could become prosperous and strong again, "a beacon of growth, hope and stability for its neighbors," he concluded.