Saturday, November 5, 2011

Looking in Greek mirror and seeing Jamaica

jamaica-gleaner editorial

Jamaica, West Indies

Yesterday, Greece's prime minister, George Papandreou, shelved his proposed referendum on the austerity package that is to accompany the European Union's (EU) latest €$100-billion bailout for his debt-riddled country.

According to Mr Papandreou, he did so because the opposition has given its tacit support to the programme. He, therefore, has authority to push through the measures, against which Greeks have, for months, engaged in street protests.

The Greek case, including, if it holds, the opposition's support for reform, has especial relevance to Jamaica - not the least that the economies of both countries are gravely ill and attendance on which has for far too long been tardy. Their survival demands invasive surgery.

A few economic facts about Greece are worth recollecting: for instance, its €350-billion (US$485 billion) debt, which represents around 152 per cent of gross domestic product (GDP). Last year, the Greek government paid out 12 per cent more than all revenue it collected to service its debt.

Borrowing to provide basics

The government, therefore, had to borrow to meet its other expenses, the effect of which is to push up the cost of borrowing - not only to the state, but also the private sector. A consequence of this debt crisis is the collapse of the Greek economy. It declined 15 per cent in three years; unemployment is 16 per cent.

Greece's crisis has been building for years, but the Greeks paid little attention. Luckily for them, the eurozone has a stake in giving Athens a lifeline. But the Greeks still have to take the bitter medicine, including public-sector wage cuts, the lowering of state pensions, lowering the threshold at which workers have to pay income tax, and a rise in the value-added tax, among others.

Peel away Jamaica's façade and it reveals an economic situation similar to Greece's. For instance, our debt-to-GDP ratio of around 130 per cent appears lower, but doesn't capture many off-book obligations. For years, the revenue collected by the Jamaican Government has been insufficient to service its debt. Our Government borrows for basic housekeeping.

Jamaica's politicians sometimes allude to the problem, but not often in tones that invoke the depth of the crisis and the magnitude and toughness of the decisions to be taken. On the hustings, they, essentially, are Greeks bearing gifts.

engage middle class

Now, though, the crisis is upon us and the politicians must not be allowed to distract people with rhetoric and campaign razzmatazz. That, as the country heads into a general election, is the critical responsibility of the thinking middle class, without which either major party, playing to its Pied Piper-led base, can win, but whose support is important for effective government and governance.

While the thinking middle class must insist on having the critical policy issues as a central part of the campaign discourse, it must also demand that implementation start now. It must penalise those who would play fast and loose with the truth and demand a post-election economic agenda from the parties.

It may be that Jamaica's politics is insufficiently mature for a national unity government to manage the onrushing crisis, but the thinking middle class can demand that the parties agree on the framework for enhanced cooperation and consensus, once the people have voted. They should know that if Mr Papandreou falls in Athens, the Greeks are considering a former VP of the European Central Bank, Lucas Papademos, to lead a unity government.

November 4, 2011

jamaica-gleaner editorial