Dear Editor,
Prime Minister Portia Simpson Miller once said if Jamaica could ever get a bailout like Greece, we'd see Jamaica prosper! As simplistic as her comments were at the time, we now see that bailouts aren't the answer.
Seven years ago, as Greece plunged deeper and deeper into an economic crisis, they received a bailout with the accompanying austere measures which hampered economic recovery.
Today, Greece is so heavily indebted, they recently defaulted on International Monetary Fund and other financial obligations with creditors. With debt close to a staggering 300 billion euros, the situation in Greece couldn't be worse. But how did they get so broke?
Like most countries, they rely heavily on foreign loans and debt, but successive Greek governments also spent excessively and were guilty of rampant waste, excess and mismanagement. Corruption is so widespread in Greece that offenders often protect each other. Unemployment is now at a high 25 per cent, and unemployment is even higher amongst young people under 25 -- at 50 per cent. High unemployment naturally drives an informal underground economy, which is difficult to control when people are forced to hustle. Many Greeks, including professionals, don't pay income taxes and tax evasion has become a cultural norm. The Government in Greece also spends an unusually high percentage of its revenues on social services such as pension.
Greece is now eager to get some of its massive debt written off, which is an unlikely precedent creditors would agree to. The recent 'no' vote for less austere measures from creditors means one thing: Greece will now enter uncharted territory with status in the European Union and use of the euro currency in limbo. Banking has come to a standstill, with daily withdrawal limits and limited hours of banking operations set to prevent capital flight. Panic, fear, uncertainty, and insecurity will prevail for a long time.
But the referendum saw Greeks coming together in unity to decide their fate. Although Jamaica is far from Greece in terms of size and economy, there are lessons to be learned from the crises there. We see what happens when Government spending isn't controlled and debt soars. We also see what happens if we import far more than we produce, resulting in currency devaluation and driving up foreign debt. Greece does not have a big economy; their population is only three times that of Jamaica, but their foreign debt is close to 20 times ours and per capita debt is approxmately 10 times that of Jamaica's. In the Caribbean region, Jamaica's per capita debt ratio is among the highest, so the warning signs are there. Another indicator, the debt-to-GDP ratio, suggests how debt measures up to what is produced and gives insight into ability to pay. Greece's debt-to-GDP is close to 200 per cent, while ours is close to 100 per cent.
Greece, a country which once inspired and led ancient civilisation through technology, science, philosophy, art, culture, and democracy, now faces an economic crisis of epic proportions. Our financial leaders must take note and learn from their predicament, and ensure we do not fall into similar trap.
P Chin
chin_p@yahoo.com
PM wanted a bailout like Greece
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Prime Minister Portia Simpson Miller once said if Jamaica could ever get a bailout like Greece, we'd see Jamaica prosper! As simplistic as her comments were at the time, we now see that bailouts aren't the answer.
Seven years ago, as Greece plunged deeper and deeper into an economic crisis, they received a bailout with the accompanying austere measures which hampered economic recovery.
Today, Greece is so heavily indebted, they recently defaulted on International Monetary Fund and other financial obligations with creditors. With debt close to a staggering 300 billion euros, the situation in Greece couldn't be worse. But how did they get so broke?
Like most countries, they rely heavily on foreign loans and debt, but successive Greek governments also spent excessively and were guilty of rampant waste, excess and mismanagement. Corruption is so widespread in Greece that offenders often protect each other. Unemployment is now at a high 25 per cent, and unemployment is even higher amongst young people under 25 -- at 50 per cent. High unemployment naturally drives an informal underground economy, which is difficult to control when people are forced to hustle. Many Greeks, including professionals, don't pay income taxes and tax evasion has become a cultural norm. The Government in Greece also spends an unusually high percentage of its revenues on social services such as pension.
Greece is now eager to get some of its massive debt written off, which is an unlikely precedent creditors would agree to. The recent 'no' vote for less austere measures from creditors means one thing: Greece will now enter uncharted territory with status in the European Union and use of the euro currency in limbo. Banking has come to a standstill, with daily withdrawal limits and limited hours of banking operations set to prevent capital flight. Panic, fear, uncertainty, and insecurity will prevail for a long time.
But the referendum saw Greeks coming together in unity to decide their fate. Although Jamaica is far from Greece in terms of size and economy, there are lessons to be learned from the crises there. We see what happens when Government spending isn't controlled and debt soars. We also see what happens if we import far more than we produce, resulting in currency devaluation and driving up foreign debt. Greece does not have a big economy; their population is only three times that of Jamaica, but their foreign debt is close to 20 times ours and per capita debt is approxmately 10 times that of Jamaica's. In the Caribbean region, Jamaica's per capita debt ratio is among the highest, so the warning signs are there. Another indicator, the debt-to-GDP ratio, suggests how debt measures up to what is produced and gives insight into ability to pay. Greece's debt-to-GDP is close to 200 per cent, while ours is close to 100 per cent.
Greece, a country which once inspired and led ancient civilisation through technology, science, philosophy, art, culture, and democracy, now faces an economic crisis of epic proportions. Our financial leaders must take note and learn from their predicament, and ensure we do not fall into similar trap.
P Chin
chin_p@yahoo.com
PM wanted a bailout like Greece
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