July 30, 2010
'Corporatism' and the fight to open the Greek economy
A long article at the Financial Times by David Gardner and Kerin Hope gives the case for judging Papandreou's efforts thus far as a success, but with the most important reforms still ahead and blocked by 'vested interests.' The article describes an economy held captive by various protected special interest groups, particularly trade groups like doctors, truckers, etc., who defy any changes and are able to manipulate an economic system that still has roots in practices from the Ottoman era.
" The score card on structural reform is good so far. The number of municipalities has been cut; the public sector payroll has been centralised. A financial stability fund for the banks is nearly in place. But the flagship reform is pensions – on which even the military junta that ruled from 1967 to 1974 backed down.
The era of retiring at 50 on full pension is over; people will need to work until 65, with 40 years’ full contributions, and the rate at which pensions accrue has been halved.
...The tentacles of corporatism reach deep into the bureaucracy and political elites. “Within all parties you have organised vested interests that try to ensure nothing happens and no reform is ever implemented,” says Mr Mitsotakis.
...Notwithstanding the sound and fury of the wave of strikes and demonstrations, the public mood is sullen rather than incendiary. “What is striking at the moment is the lack of real resistance to what we are doing, which is very harsh. This is because people do appreciate the real need for change,” argues the finance minister. In the ruling party, the old guard – attached to leftwing nationalism but rather more to sinecures and business opportunities – is resentful.
“There is a deep Pasok still there, and it’s not sleeping, just watching,” warns one party official. But discipline is holding, for now, with the party voting as a bloc on pensions. That is partly because of Theodoros Pangalos, the deputy prime minister and a Pasok bruiser from the days the party (and country) was led by Mr Papandreou’s late father, Andreas. “He does what Papandreou cannot do,” the official says. “He acts as the enforcer.”"
An astounding aspect of this story of modern Greece is that these reforms are being carried off under PASOK, and led by the son of Andreas Papandreou, something which would have been thought of as impossible a scant few years ago. If Greece can complete its journey from the 19th century into the 21st, it will have enough factors on its side to create a booming economy based upon earnings and growth, versus the easy credit practices of the european banking system from a few years ago. Most commentary seems to indicate the choice in Greece is truly stark: default, implosion, and a slide back into 3rd world status, or a complete overhaul of the current caged system.
Greece's Golden Visa program
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