Greece’s Problems Are Far From Over, by Daniel Lacalle

Perhaps some of Greece’s problems have been caused by Greeks and their government. Somebody borrowed all that money. From Daniel Lacalle at dlacalle.com:

Greece has exited bailout territory and the European Union is making a strong case of the success of the program.

While Greece has obviously ended its bailout process, the real issues of the Greek economy remain largely intact.

The real drama is that none of the measures implemented have solved Greece’s real problems. No, it’s not the euro or the austerity plans. It’s not the cost or maturity of its debt. Greece pays less than 2.3% of GDP in interest expenses and has 16.5 years of average maturity in its bonds. In fact, Greece already enjoys much better debt terms than any sovereign re-structuring seen in recent history.

Greece´s problem is not one of solidarity either. Greece has received the equivalent of 214% of its GDP in aid from the Eurozone, ten times more, relative to the gross domestic product, than Germany after the Second World War.

Greece’s challenge is and has always been one of competitiveness and bureaucratic impediments to create businesses and jobs.

Greece ranks number 81 in the Global Competitiveness Index, compared to Spain (35), Portugal (36) or Italy (49). In fact, it has the levels of competitiveness of Algeria or Iran, not of an OECD country. On top of that, Greece has one of the worst fiscal systems, with a very high tax wedge that limits job creation with a combination of agressive taxation on SMEs and high bureaucracy. Greece ranks among the worst countries of the OECD in ease of doing business (Doing Business, World Bank) at number 61, well below Spain, Italy or Portugal.

No, it’s not the euro. Greece’s average annual déficit in the decade before it entered the euro was already 6%, and in the period it still grew significantly below the average of the EU countries and peripheral Europe.

To continue reading: Greece’s Problems Are Far From Over

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