Mon | Jun 14, 2021

Editorial: The martyrs to folly

Published:Thursday | July 16, 2015 | 12:00 AM

Those who perceive in Greece a martyr to be emulated, and propose an overhaul of Jamaica's agreement with the International Monetary Fund (IMF), will now latch on to the Fund's declaration that the Greek debt is unpayable and in need of substantial restructuring.

They, however, would have ignored the full extent of the IMF's narrative, including the context that is likely to have informed the decision of eurozone leaders, in their proposed €86-billion bailout for Athens, to rule out any upfront write-down of Greece's €317-billion debt and insist on tough prior actions by the Greek government before it got its hands on even a penny of the new money. No one trusted Alexis Tsipras' government, with cash in its treasury, to behave with prudence.

Indeed, even in the document that is now the prime exhibit of the anti-austerity crowd, the IMF blames Greece's failure to do the right things for the worsened mess. Greece's debt now hovers at 177 per cent of gross domestic product (GDP) and, by IMF estimates, will be close to 200 per cent of GDP in 2017. On current trends, and even if a primary surplus of 3.5 per cent of GDP could be achieved and sustained over the longer term, it would be insufficient to substantially shift the country's debt trajectory.

According to the Fund's document, that Greece's public debt has become "highly unsustainable" was primarily "due to the easing of policies in the past year". Had the country, it argued, implemented the fiscal and market reforms agreed to in 2012, "no further debt relief" would have been required to reach the initial debt-to-GDP ratio of 124 per cent by 2020 and below 110 per cent by 2022. Instead, the projection is for a debt-to-GDP of 142 per cent by 2022.


There are two lessons here for Jamaica, one of which the Simpson Miller administration appears to have embraced. The first is the effect of the mañana phenomenon, which Lithuania's president, Dalia Grybauskaite, ascribed to the Greeks - their penchant for putting off difficult options. In Greece's case, it undermined trust, leading to the hardened stance by the European leaders this week in fashioning a framework for a new bailout deal for Athens. The mañana attitude contributed to the collapse of Jamaica's 2010 economic support agreement with the IMF and the Fund's insistence on tough prior measures before the one signed in 2013.

But as tough as the eurozone leaders have been, Greece has two aces that don't figure in Jamaica's suit. Athens remains part of the monetary union, with the potential to spread its contagion to the others if its economy collapses. It is also part of a wider European economic and political project - a rich members' group. Europe might have rejected a haircut on the face value of Greece's debt, but indicated a willingness to talk later on about other forms of restructuring.

With an external debt at, by global standards, a minuscule US$8 billion, a Jamaican default would hardly cause a ripple in the world. The Jamaican seas, though, would be squally.