While the Olympians of high politics clash with the Titans of international finance over the mega-million deals necessary to keep Greece in the euro, is anyone actually interested in what happens to Greece?
The top priority for Greece is to build a modern economy. Bailouts and austerity packages of themselves build nothing. While it is true that Greece, like America, Britain, and practically every other Western economy, needs to sort out its public sector debt, that in itself is not enough. Teaching a government to stand on its own two feet is a necessary precondition, but no more than that – a first step.
The important part, and the really hard part, is generating private sector business that adds value to the GDP. Those protesting about cuts in public services ignore the fact that, without viable businesses making money to pay taxes, there can be no public sector services. Fresh injections of German money are not the answer – it is reliance on easy money from eurozone partners that led the Greeks to ignore private sector competitiveness in the first place: there was no need to encourage enterprise when the government could borrow more without negative consequences.
That was never going to last forever. Some day the bills must be paid. Now that day has come, but the Greeks’ neglect of the private sector means they have nothing on which they can fall back.
Greek business is unprepared for reality. It is reported that Greek VAT revenue has fallen by almost 20% since January last year in spite of a 10% increase in rates. Of course, tax revenues in general tend to decline not “in spite of” rate increases but because of them. Faced with a choice between passing the rate increase on to their customers or taking it from their own profit margins – which may have been less than the percentage rate increase even before the recession – many small businesses become unviable. No wonder 60,000 Greek businesses have closed since the summer.
At the same time the Greek government learns to live within its means, it must learn to love Greek business. Certainly it must pay more attention to its needs. Higher taxes are not helpful in this context.
If the government can become more business-friendly, there may actually be hope for Greece, whether inside the euro or out. There is no need for the country to remain on international welfare forever. It has a lot going for it – landscapes and history that attract visitors, an outward-looking view of the world that dates back to Homer and Herodotus, and an outstanding tradition of entrepreneurship. In sectors from catering to shipping, Greek entrepreneurs have flourished all over the world. What will it take to let them flourish in their native land?