19Feb 2010 (New York Times). After weeks of denial, the European Union has begun grappling with Greece’s debt crisis and the dangers it poses for the 15 other nations using the euro.
Last week, Europe’s political leaders reassured panicky bond markets that they would — in some way — ensure that Greece doesn’t default. This week, finance ministers gave Athens a month to show whether the draconian measures it has announced — increasing taxes, freezing public sector hiring and raising the retirement age — are enough to meet its target of slashing the deficit from 12.7 percent of its gross domestic product to 8.7 percent by the end of this year.
Prime Minister George Papandreou’s Socialist government inherited this debt crisis. Over the previous five years, the conservative government recklessly expanded public payrolls. That kept unemployment down but ruined public finances and forced Athens to borrow more and more to pay the rising wage and pension costs.
We have long said – and our clients long ago discovered – that dealing with Greece is different.
Were many of us surprised to find out that the government had ‘cooked the books’ to conceal half of its real deficit?
Before you feel too smug remember, if you are British, that our debt is probably bigger in percentage terms than that of Greece!
But, if you do business in Greece – or you are thinking of moving there or buying a holiday home – how should you react to this crisis?
Well, in my view, it depends.
If you are already doing business, you will (I hope) have begun to understand the local culture and you will have found ways to deal with it. Depending upon your business, the inevitable and substantial cuts in public expenditure may or may not hurt you badly. You will be able to work out what to do next and, probably, you will try to steer away from ‘public’ contracts.
This is probably not a good time to start to do business in Greece. New ventures are always tricky and this adds an extra and avoidable level of complexity.
If you a thinking of retiring to Greece, you will know what you want and you will have already decided that you love everything about the country. Expect things to get more expensive!
If you are thinking of buying a holiday home, I suggest you think long and hard. A lot of money is going to have to come out of the Greek economy – and that is likely to impact first and hardest on life’s luxuries, such as a villa by the sea. Prices are likely to fall. You will, probably, get a much better deal in a year’s time.