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Editorial: Jamaica must remain adult

Published:Wednesday | July 8, 2015 | 7:00 AM

The remnants of Jamaica's infantile Left and their populist, or politically opportunistic, allies will revel in last Sunday's vote by Greeks to reject the demand for prudence and responsibility that accompanied the latest bailout offer by Europe for Greece's limping economy. Already, they are parading the recourse of the Greek government, and its outcome, as democratic ideals that the Simpson Miller administration should emulate.

There is, however, in Jamaica's case, an immediately obvious and compellingly contrarian response. Such an action would be, at best, a flaccid and empty gesture. Or, more to the point, Jamaica should be thankful that, in the past three years, it has been blessed with an economically far more astute and political mature leadership than has Greece since this year's election of Prime Minister Alexis Tsipras and Syriza, his radical, Leftist Syriza party.

Indeed, we are grateful that neither Prime Minister Portia Simpson Miller nor her finance minister, Peter Phillips, seems to believe that mass political rallies in Half-Way Tree or hastily called, sentiment-driven plebiscites are good ways to negotiate complex matters of economics. Both have a decent idea of the consequences of any such approach to policymaking: not good.

poor alternative?

In 1980, the then socialist People's National Party convened a session of its National Executive Council at the headquarters of its affiliated National Workers' Union and voted that Jamaica abandon its economic support agreement with the International Monetary Fund in favour of some nebulous scheme they called an alternative plan. The economy went into free fall, exacerbating a crisis from which the country never fully recovered.

The current administration, unlike Mr Tsipras' government, has been disciplined and pragmatic in its approach to economic management. It appreciates that achieving a primary balance of 7.5 per cent of GDP is critical to reducing a government debt that was close to 150 per cent of annual national output and, over time, freeing capital for productive investment.

not out of the woods

Such efforts are not without pain, but the returns are beginning to show in the macroeconomic indicators. The island's current account deficit, as a percentage of GDP, has declined nearly 60 per cent in three years; inflation is at its lowest in nearly half a century; and, unlike Greece, financial markets' confidence in Jamaica has improved.

Yet Jamaica is not out of the woods. Nor does it have Greece's space within which to be irresponsible. It is part of no rich club which it can blackmail into support, and geopolitical circumstances are not in its favour.

For instance, Greece is part of the monetary union. Fiscal misalignment, much more full-blown crisis, in one member, will potentially impact all others. It is not without reason that, as part of their €240-billion bailout of Greece in 2011, those EU leaders muscled banks into accepting a 53 per cent haircut on their Greek debt. Even at that, Greece's overall debt of approximately €320 billion, including the €39 billion owed to private lenders, dwarfs Jamaica's overall debt of US$17.6 billion, US$8.7 billion of which is externally held. As limited as it is, there are still prospects for eurozone contagion in the event of a Greek collapse.

For some Europeans, too, the euro is as much a symbol of a European political entity as an economic arrangement, in which Greece's membership is vital. Its collapse would be traumatic. Then there is the geopolitical fear of Greece's left-wing Syriza government deepening its alliance with Putin's Russia.

Jamaica has no such options.