Lessons from Greece

This week, after long-drawn-out negotiations in Brussels, eurozone finance ministers have clinched an agreement on a second bailout for Greece. The financial package is worth a staggering €130 billion.

Sound governance is the key to stability…- David Casa

This will, hopefully, put Greece back on the long and winding road to recovery. At the very least, however, it will offer some measure of financial stability after months of turmoil and uncertainty that have brought the country closer to financial collapse, a situation that would have spelt disaster not only for Greece but for the eurozone and the broader European Union.

Now that EU and eurozone member states have played their part, it is up to the Greek government to keep its side of the deal. The task will be arduous. Many predict failure. And the fiscal crunch will be felt by all sectors of Greek society, including public sector workers.

Failure is a distinct possibility but Greece has little choice but to make good on the agreement. All other options have long since run out. The stakes are high and, in order to keep up with the terms of the accord, the Greeks have to brace themselves for more austerity measures and sacrifices for the foreseeable future.

The target of lowering the Greek debt to 120.5 per cent of the country’s gross domestic product by 2020 hardly seems a worthy goal. Even if this were to be reached, Greece’s debt to GDP ratio would remain double the eurozone limit. But without further measures EU experts forecast that Greece’s debt could balloon to a staggering 160 per cent of GDP by 2020.

With full cooperation from all stakeholders the country may get close to achieving the set goal. The Greek government cannot do this alone, without the backing of wider society.

Bailouts are necessarily temporary in their stabilising effects. In order to solve the country’s problems in the medium to long run, strong and sound structural reforms are necessary. Reducing the debt, though, is not the only problem the Greek government faces.

The economy has reached its nadir and businesses need all the reassurance and support that they can get to continue operating in such an unpromising climate. The European Union would be making a grave mistake if this is not taken into consideration. We cannot afford to neglect the role of economic activity in propping up sinking public finances and tackling unemployment.

A balance between fiscal consolidation and creating an economic climate in which businesses can grow has to be found. This can, however, only be achieved if Greece wins over the confidence of markets by instituting the necessary reforms.

While ensuring that the bailout package is put to good use, we must also be careful to see that the measures applied are not too harsh to the point where Greece would be pushed back into the same corner. We cannot afford any more mistakes and I think it would be wiser to have a long-term plan than to try and patch things up as we go along with potentially catastrophic consequences down the line.

Many might argue that the Greek government’s own lack of budgetary discipline and poor public investment decisions have brought the country to its knees. While there is merit in this argument, it is now beside the point. We have to learn from these mistakes and ensure that no other eurozone member finds itself in the same fiscal mess for, after all, Greece was hardly an exception.

While we must ensure the right of every EU member state to draw up its own fiscal policies according to its particular needs, it is nevertheless important to etch guidelines in order to safeguard the majority of members from the excesses of a minority. We just cannot put our minds at rest with only impromptu EU bailouts standing in the way of a eurozone default.

As EU and, more specifically, as eurozone members, we must adopt a system of fiscal morality. Furthermore, we must be responsible towards our citizens and show them the true picture of the worldwide economic situation. We must be more open and explain why certain decisions are taken and why certain austerity measures need to be applied.

I am inclined to think that this was one of the problems that the Greeks had. They knew they were overspending but they never thought they would live to face the problem. We need politicians who know how to adapt to the difficult situations that the world is facing. We need people who know when and how to take a decision.

We cannot rely on gimmicks. Sound governance is the key to stability and no country should risk that stability for the sake of change.

Mr Casa is a Nationalist member of the European Parliament.