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20 Ιουν 2015

Lack of communication weakens the real economy

Anastasios Retzios

In the first place, I would like to explore the ongoing mistakes of the current government which actually sap the capacity of the country to recover in a speedy manner.“Frozen” by internal contradictions : The government seems to be “frozen in place” because the political organization behind it is split in two opposing and irreconcilable camps: there are those who understand that is high time that the country takes its financial future into its own hands and exits the Eurozone; there are others, including Varufakis and Tsakalotos (the prime negotiators and wealthy members of the Euro-elite) that cannot bring themselves to countenance such a possibility.  I think that Tsakalotos is the most vocal of those.  However “frozen in place” or “frozen in the headlights” is not the appropriate action for the government.  Tsipras may sound sanguine awaiting for a proposal from the Eurogroup (which is not going to come), but in reality he is simply awaiting to see if the Eurogroup will help him exit from the “stasis” that the dilemma has created.

Why uncertainty destroys the economy: The problem with this “stasis” is that the real economy is suffering.  The given “unknowns” moving into the summer will simply undermine the summer tourist period, result in lower income for the Greek state and lower income for the part of the Greek population that earns its living mostly in the summer.  This would then have ripple effects later on in the year and it would accelerate the recession trends.  If tourist operations are not even sure what the VAT is going to be and what would be the social conditions in Greece in the summer if the country exits the Eurozone, they are unlikely to book their customers to Greek destinations.  The same applies to anybody who is contemplating any kind of investment in Greece.  If the immediate future appears very murky, the decision would be postponed until there is clarity; thus, investments will dry up really fast.

Providing Clarity: Another problem is that the government has not enunciated to the Greek people what exactly is going to happen under any possible scenario.  So, the government should provide clarity as to what is going to happen if:

(a)   Its own proposals are accepted (which are all deflationary and recessionary, with a further negative effect on incomes and pensions
(b)   No agreement is reached and the government declares bankruptcy and full or partial stay of payments to the creditors

In the absence of clear information, the majority of the Greeks are behaving as terrorized lemmings, withdrawing the money from the banks increasing the liquidity problem and increasing the leverage of the creditors over the country.  It is important to stop these lemmings from being so scared.  So, information is the key, to combat the fear spread by the Euroelite.  In addition, the country should take strong action against the terrorizing Euroelites; Mr. Stournaras, the governor of the Bank of Greece should have been brought up on charges or asked to resign.  A legal action by a single MP is not really sufficient.  It is unheard of for any governor of a central bank to make political speeches directed against the sitting government.

Thus, without providing clarity to the people, the government accentuates the climate of fear and uncertainty and undermines the key foundations of the economy that it should be protecting