Tue | Aug 22, 2017

Editorial: Greece and Jamaica after mañana

Published:Tuesday | July 14, 2015 | 7:00 AM

Those who berate Peter Phillips for adhering to the terms of the International Monetary Fund bailout agreement, basked in the outcome of Greece's referendum, and urged Jamaica to hold its own plebiscite on economic reforms need to take a cold, hard look at the events that unfolded in Brussels and Athens this past weekend.

Greece will get a new three-year bailout deal, worth up to €86 billion. So, the Greek economy is being pulled from the brink of bankruptcy. There will be, at least for now, no Grexit. Perhaps Alexis Tsipras, Greece's left-wing prime minister, will fashion these outcomes from the summit of eurozone leaders into a narrative of victory for his anti-austerity stance.

But on the face of it - and in the absence of undisclosed understandings with his European benefactors - Mr Tsipras has now embraced the same, if repackaged, austerity programme against which he has railed and which, at his urging, the Greek people overwhelmingly rejected in the referendum of nine days ago. Except that he has now conceded more.

Greece will have to streamline its value added tax (VAT), including widening its net and increasing rates. It will also reduce state pensions and raise the retirement age for government workers, as well as reform its labour and product markets to enhance competition. Further, Mr Tsipras' government will have to set up an institution roughly akin Jamaica's FINSAC, a €50-billion fund that will oversee the privatisation of state assets, half of whose proceeds will go towards refloating the country's tottering banks and the remainder for paying debt. Significantly, the agreement makes clear there will be no haircut on the €240 billion that Greece currently owes its troika of lenders - the European Community, the European Central Bank and the IMF - although they might consider, if necessary, other forms of rescheduling, such as lengthening maturities and lowering rates.

Not unlike when Jamaica negotiated its existing IMF agreement in 2013, Greece will have to undertake prior actions, some requiring parliamentary approval as early as tomorrow, before it gets its hand on any cash. And going forward, its economic performance will be subject to period reviews by the troika, just as Jamaica has had to meet quarterly performance targets set by the IMF. Additionally, economic-reform legislation developed by the Greek government will have to be vetted by the troika before being sent to Parliament for a vote or are open to public debate.

There are lessons here for Jamaica in this Greek tragedy. One rests in the word used a lot in Brussels in recent weeks: trust. None one trusts the Greeks to do what they commit to undertake. As Lithuania's president, Dalia Grybauskaite, complained last week: "With the Greeks, it is every time manana. It can't always be manana every day."

Indeed, it was that sense of exasperation with Jamaica, over the management and eventual derailing of the 2010 deal with the IMF, that, in part, influenced the preconditions and the terms of current pact. The former administration's manana meant there was more to do in a shorter time. Another lesson is that only fiscal prudence is the real barrier to such intrusiveness.

The eurozone is economically and politically invested in Greece, but in the end took what they deemed to be pragmatic decisions to protect their investment. Imagine Jamaica, to which no rich group is beholden.