The Greek state has gained a temporary reprieve through the current debt guarantees it has secured from the EU and the IMF. It also managed to gain a 53% write-off from current private debt and convince the ECB not to profit on Greek debt it holds. Not bad for a country that was dismissed the last few months as a basket case.
Of course there is a price to pay. Austerity, the prescribed medicine, is not going to offer a way out for the Greek economy. The growth projections in the models used appear fanciful.
But what has been gained? The EU and the high debt states in particular have gained 6 to 12 months to get their house in order. Expect to see banks signalling improved capitalisation. Expect other highly indebted states to offer improved growth forecasts and positive market news.
For Greece there exists an opportunity over the next few months to improve on its public relations disasters of the last three years by concentrating on the positive stories (not the tired marbles and lovely islands variety) that do exist. There are many positive stories on entrepreneurship, innovation, resilience, ability and hard work.
Unfortunately the Greeks cannot get rid of the parasitic political elite or the entrenched byzantine bureaucracy. But hopefully a long overdue process of modernising the state will finally commence. A good departure would be if citizens were suddenly presumed innocent in their dealings with the state and not the reverse! Taxes can be simplified. The state suffers from ‘polynomia’ (a plethora of laws). The legislative process can focus on eradicating and simplifying this regulatory nightmare. Each new law should eliminate five from the statute books.
And finally, on top of projecting a positive message to the international markets the Greeks need to rebuild their social fabric. Populism has found root in the mainstream political debate. Trash media dominate the airwaves and political polarisation result in persistent conflict. The left cannot escape its knee-jerk protest platforms and the populist right its xenophobic propaganda.
Greeks need to recognise that their sense of entitlement cannot be divorced from the obligations of citizenship. The Greek nation will survive if social capital increases. This depends on rebuilding trust and renegotiating the ‘social contract’ between different social groups. There are those that appear to be doing well in spite of the crisis (roughly 1/5th of the population) and those who are not. Doing well is presumed associated to political ties (corrupt and clientelistic) or the product of tax evasion. More than half of the population have seen their living standards seriously deteriorate,while the bottom 1/3 are unemployed or underemployed and in poverty. And this picture ignores the great number of immigrants who lack political voice and are often illegal residents. If this is an accurate assessment of social demarcation, the potential for the disintegration of the social fabric between presumed winners and losers is the gravest problem contemporary Greece is facing.
The real challenge is not ECB funding but sourcing the social capital to fill the Greek social deficit.