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EDITORIAL - A Greek message to Portia

Published:Wednesday | June 20, 2012 | 12:00 AM

The outcome of last Sunday's parliamentary elections in Greece won't, of itself, solve that country's economic crisis. It is, however, an acknowledgement by the majority of Greek voters of the limited options faced by their country.

The best of these, the Greeks have concluded, will demand taking tough, unpopular actions and enduring, for now, difficult times.

There are lessons in this for Jamaica, in particular the advocates of a kind of fantasy frolic for dealing with this country's problems. They call for stimulus spending and quantitative easing.

This, of course, is either to misunderstand, or to be genuinely ignorant of, Jamaica's circumstance. Or both.

Jamaica, after all, is no United States. Nor does it have the advantages of Greece, despite that country's current circumstances.

High premiums

At 140 per cent of gross domestic product, the Jamaican government debt is, in comparative terms, about 10 percentage points shy of Greece's. It is, however, substantially worse than the other troubled Eurozone countries that now have to pay historically high premiums on their bonds.

What the Eurozone countries have, which Greek voters want to maintain, are the fiscal/economic stability and psychological support arrangements afforded by Europe's monetary union.

Since 2010, that mechanism has allowed Greece €240 billion in bailout money, helping to keep Athens' creditors at bay and preventing a chaotic debt default. This does not suggest that the Greeks escaped the past fiscal recklessness of their governments without pain. They now pay higher taxes, receive fewer public services; public-sector employees have lower wages and lower pensions.

Most analysts believe that the Greek situation would be worse without the European cushion. Jamaica has no similar support.

Its best bet is a programme with the International Monetary Fund (IMF). But having squandered the Fund's confidence with the failure at fiscal prudence promised in a 2010 standby agreement, the IMF - as the former financial secretary, Colin Bullock, pointed out - won't enter formal negotiations for a successor pact "till Jamaica begins an effective and irreversible implementation of the changes necessary to make our public finances viable".


In the absence of an agreement with the IMF, any borrowing by Jamaica will have to be on the private money markets at penal rates. Whatever delusions the advocates of counter-cyclical measures may contrive about Jamaica, it can't be that the Jamaican dollar is a reserve currency. Unlike the United States, no one is rushing to lend us at negative interest rates. Or to lend us at all. Greek voters receive the same thing about a return to the drachma, their currency before joining the euro.

Or, as Peter Phillips, the finance minister, put it during the recent Budget Debate, while the notion of stimulus spending to kick-start the economy is "seductive", it is, in the context of Jamaica's circumstance, "a mirage".

We do not suggest that there are no policy actions to help stimulate economic activity, but the need for sustained fiscal discipline over the medium term is the fundamental message that the Government must take to the people.

So far, it has been carried primarily by Dr Phillips. Yet the person with the greatest political capital, emotional intelligence and capacity to creditably deliver the message is Prime Minister Portia Simpson Miller.

She is not in the swing of the party. The Greeks have shown she need not fear joining.

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