Economic Dilemma of Greek

Posted on Leave a commentPosted in Economics

“Baggers are not choosers”

A quote, very unfortunate, less then polite, derogatory and full of hubris.

But, when it comes to mob mentality, it sound truism, if we look at what will happen to Greek.

The referendum on whether to accept Austerity Measure ( aka cut in pension fund, public spending etc.) put by the creditors are rejected by 60% of Greek Population by Saying No. This may imminently lead to Grexit. The referendum means, public WILL prevails over the decisive political will. The collective decision by public┬ácan never trump the sound, rational and logical economic policy. Human mind desires to reduce complex problem into very simplistic formula to arrive at solution. When one looks at the larger problems, in life, a YES/No, can never be a simple solution. Politicians across the World believes in passing the buck. Very few exception could be witnessed in History, lime Henry S. Truman, US President, who kept a plaque on this desk at Oval Office : “Buck Stops Here”. Firstly, a complex problem is reduced to Simple Answer without any alternative is farce.

What Greek P.M. did, passed the buck, and put entire nation on the further down hill.

Once greek defaults, they will be forced out of Euro. What option do they have to bargain with creditor, None. What will happen, next. No one knows, What could have happened?

If the PM would have shown little gut and spine, he could have negotiated little bit. Unfortunately, by leaving the table, the doors on negotiations are closed. The country will live on Hope and Prayer, assuming that other Nation would lend them some support. Its worse than being put on ventilator. Atleast, they could have salvaged some pride.

In negotiations, unless between equals, dominant party always…get away with what it wants. IMF and other European Lenders, only hopes to loose their money. Unlike, commercial bankers, they are not driven by profit or to recover their funds. They simple follow the policy, and if they amend policy for one, they will have to do it for every one.

Even, India had the similar position in 1991, when our Forex Reserved could only finance 3 weeks of Import. Mr Narsimha Rao, P.M. along with Mr. Manmohan Singh, then Finance Minister, shown wisdom and accepted lot of austerity measures, devaluation of rupee etc..They did not took easy path, by absolving themselves from the responsibilities.

Jury is still out as to whether action by Greek Public is sensible or not. To me, its not public, but leaders at top, who failed in taking decision. One view still prevails that Austerity measures offered by Lenders were too harsh and only option available with public is to reject any further conditions. Unemployment is nearly 25%, average income is very low, thus Greek’s don’t find it acceptable to further cut the social welfare. Thus, referendum was very clear, if poor have to choose between starving today or starving for tomorrow, one would choose to starve today. Thats what happened.

Ultimately, Greeks will have to bite the bullet and accept much harsher measures, than they would have or ought to have in first instances.

This way some time Democracy Fails.