The IMF has conceded that mistakes were made in the way the first Greek bailout in May 2010 was handled. Its report suggests the need to refine the fund’s lending policies to accommodate for conditions in monetary unions.
Fair enough. But right now, admissions of mistakes are not what Greece needs. Though unemployment is still terrible, some positive economic signs are emerging, and Greece is increasingly looking like a promising investment destination. Global bodies like the IMF should be focused on planning for the future growth of Greece, not its past.
Positive mistakes
A public recognition of mistakes by the IMF has positives, as it shows willingness to be more transparent about the fund’s processes. In the short term, this admission has sparked the reaction of the two other institutions that comprise the Troika – the European Union and the European Central Bank - with EU officials openly questioning the plausibility of parts of the IMF report.
One of the issues where there are differences in the Troika is around whether there could have been an upfront debt restructuring in 2010, with private holders of Greek bonds asked to cut the bonds much earlier. On paper, such evaluation would seem reasonable – but would it have been possible?
If we cast our mind back to the conditions in 2010, with the lack of investor confidence and the drainage of funds in the Greek banking sector, a move to involve private bond holders might have sparked a systemic contagion to other countries, the precise scenario European member states were trying to avoid. In the “heat of the battle” in dealing with the Greek crisis in 2010, such a bold move was simply a step too far for European institutions to take.
Bad timing
Another issue in the IMF report is around its timing: is raising these issues at this point actually detracting from efforts to deal with the issues the Greek economy is still facing? Looking back at past actions might be helpful for technocrats, as they can learn from their mistakes and avoid repeating them in the future. However, it is less helpful for the efforts needed to restore confidence in the Greek economy.
One of the key issues the Greek economy and the Greek people face daily, after years of austerity, is unemployment. The official rate of unemployment was 26.8% for March 2013 compared to 11.5% three years ago, with 58.3% of 15-24 year olds out of work, up from 31.2% in March 2010. Combined with the unemployment figures, the latest GDP data show a contraction of 5.6% (1st quarter of 2012) compared to a forecast of 5.3%. All this data point to what looks like a fragile economic recovery.
Invest in green shoots
Despite these figures, there are signs of optimism, with tangible “green shoots” across the country. The IMF report, for instance, refers to the restarting of key infrastructure projects and the increased tourist activity (tourist arrivals are expected to reach 17 million in 2013).
This will be welcome news to international investors seeking new growth opportunities, particularly in transport and tourism-related industries. In fact, the challenging conditions that the Greek economy and its people have been dealing with over the past few years actually point to plausible opportunities for investors.
High unemployment levels, point to opportunities to tap into a large and diverse work-force. Taking into consideration that the Greek youth is also well educated, we are talking about a highly skilled employment base, ready to be deployed in the country and the region.
The Greek diaspora is also large in numbers and influence, and is now looking to invest more actively in the country. Beyond its own funding, the Greek diaspora can help provide valuable marketing exposure for the country.
And international companies (particularly from China, Russia and the US) have been attracted by recent initiatives to reduce red tape, provide long-term visas to non-EU managers and fast-track investment decisions. For example, an agreement between Hewlett-Packard and Cosco Pacific to ship goods through Piraeus port near Athens shows the potential to develop the country’s cargo industry.
It will take concentrated efforts to bring Greece back to the global business map, but if planned carefully, these new investments could make a real difference to the Greek economy, as the country now needs more growth-enhancing initiatives rather than one-dimensional deficit reduction efforts.
Greek people have been shown to be entrepreneurial and resilient in facing such a prolonged crisis. Maybe it is time for the institutions called upon to help Greece to also focus on the future rather than keep debating the past.