For a man whose countrys wobbly finances have kept the world on edge for months,the Greek prime minister,George Papandreou,evinces an Obama-Zen-like calm. He is just back from meeting fellow European Union leaders,who decided to try to stave off a Greek meltdown and an EU crackup with a show of overwhelming force committing nearly $1 trillion to support the economy of any ailing member state. But over a lunch of Greek salad and grilled fish,Papandreou makes clear that he knows that the deal with the EU was not your garden-variety bailout-for-budget-cuts. No,if you really look closely at what it will take for Greece to mend its economy,this is actually a bailout-for-a-revolution. Greeces entire economic and political system will have to change for Greeks to deliver their side of this bargain.
Papandreou says he is ready and so,too,he insists,is his country: People are saying to me,change this country go ahead and change it. People realise
that it needs change. You dont want to miss this
opportunity.
How Greece performs will not only affect Greeks,but the value of the euro and the whole 27-nation European Union. Yes,I know,the EU is the worlds most opaque and boring organisation. But it is actually Americas not-so-identical twin and the worlds largest economy. It is,in fact,the United States of Europe, and,in my view,two United States are better than one. If this one over here fractures,it will affect everything from how many exports America has in the next year to how many allies America has in the next war.
Sitting in a rooftop restaurant with a view of the Acropolis,I ask Papandreou to put on his safari hat and tell me what it was like to be hunted by the electronic bond herd for six months.
Because of the 2008 crisis,all the market players have become much more risk-averse,so they are on a hair trigger, explains the centre-left prime minister,who was voted in by a large majority in October to fix this mess. Todays market players are like an animal that has been wounded,and so it recoils at the slightest motion. So any rumour about you can become a self-fulfilling prophecy.
Comparing bond players to some kind of living beasts may be unfair to beasts,he suggests. These
markets are not even human anymore. Some of these things are computerised,and they just go into
automatic mode when they see a hint
of trouble.
Because of their profligacy,Greeks have been living under this market scrutiny for so many months,he added,that today every Greek from age three to 93 knows what a bond spread means. Whats the spread today? Are they widening? People had never heard about this before, and it created a paralysing uncertainty. Should I buy,consume,save,invest,take my money out of the country?
The only way for Greece to end this uncertainty was with an unprecedented commitment by the European Union to backstop Greek debts and with an unprecedented commitment by Greece to put its economy on a strict diet set by the International Monetary Fund with quarterly budget targets that Athens has to meet to receive additional support. Now we will have a respite, said Papandreou not to relax,but so the Greek government can begin the deep changes … the small revolution in how this country is governed,with particular emphasis on changing the incentive system here from one that focused way too many Greeks on getting a lifetime government job to one focused on stimulating private initiative.
The cabinet has already approved increasing the average retirement age for public sector workers from 61 to 65. Average public sector wages have been cut 20 per cent,and pensions by 10 per cent. The value-added tax was raised from 19 per cent to 23 per cent,and theres been an excise tax increase of about 30 per cent on gas,alcohol and tobacco. So far,the deficit is down 40 per cent from last year.
But Papandreou,whose official car is a Prius hybrid,says that to sustain these wrenching reforms requires Greeks to become stakeholders in the process. That will only happen,he argues,if there is a sense of justice Greeks want to see big tax cheaters and corrupt officials prosecuted and if the people feel their leaders have a vision. We need to give this country a dream where we are going, so the sacrifices make sense. Were going to bring in best practices from Europe and around the world to reform this country, says Papandreou. It is difficult,and there will be protests,and people will feel bitter,but it will be one of the most creative times Greece has gone through.
Can Greece have a civic revolution? The odds are long,but you wont need to consult the IMF to determine the answer. Just watch Greek young people. In six months,if you see them migrating,then short Greece. If you see them sticking it out here,though,it means they think there is something worth staying for,and you might even want to buy a Greek bond or two.
