Is Greece the other Atlantis???

Greece, the mother of democracy is in the danger of extinction. Greeks, infamous for asking why should we follow Rules, Honey?, are now pondering whether following rules could have saved their falling face .Whether they could have averted this financial turmoil they are into?

The public sector accounts for about 40% of GDP. The service sector contributes 75.8% of the total GDP, industry 20.8% and agriculture 3.4%. Greece's main industries are tourism and shipping.

Some facts about Greek Economy.

·         For the year 2008, according to IMF, Greece is the 27^th largest economy in the world by GDP while thirty third by PPP.

·         22^nd highest standard of living in the world

·         24^th most globalized country in the world

·         Its a high income economy country

·         25^th in HDI

·         22^nd in high quality of life by the Economist.

In spite of such scar free statistics mentioned above Greek had loopholes. Because of which it has fallen in a deep pit and neither any hand nor a stick is long enough to get them out .That’s what the present situation looks like. Greek has always suffered from inefficient bureaucracy, tax evasion and corruption in each and every system put in place. This is not limited to government level but the everyday person is more adept at evading taxes than anywhere in the world. In 2004, Eurostat, the statistical arm of the European Commission, after an audit performed by the New Democracy government, revealed that the budgetary statistics on the basis of which Greece joined the European monetary union (budget deficit was one of four key criteria for entry), had been massively under-reported by the previous Greek government .

The main reason for the financial debt of the Greece is years of unrestrained and careless spending by the government, cheap lending ,subsidiaries and failure to implement financial reforms. Moreover this financial turmoil the world was facing also added to their agony, intensifying and magnifying their crisis. The country’s deficit is 12.7%. It has a national debt of about €300 billion ($413.6 billion), is bigger than the country's economy [$343 billion (nominal, 2008 est.)]; with some estimates predicting it will reach 120 percent of gross domestic product in 2010. 

What does it means. Will anyone invest in such country that is unable to meet its debts?  Will anyone lend money or loan to such a country that has fallen to the lowest level? The answer is clearly NO. Due to which, Greece is struggling to pay its bills as interest rates on existing debt rise. The problem does not hover on Greece alone but the entire Europe. This has affected the euro.

Thus to protect the EURO value, Euro Zone led by Germany and IMF have decided to bailout Greece by Bailout package may be worth around 20 billion euro (US$26.8 billion). This has not ended Greece agony. The government has implemented harsh measures to curb their spending and hiked all taxes, raised retirement age by 2 years, pay cuts and new tough tax evasion regulations. Of course, this has not gone down well with Greek citizens causing unrest in the country. There has been strong resistance from the citizens. Also there is a fear that maybe this may lead the economy into a recessionary spiral that will spin downward faster than Sisyphus' lost boulder.

Mr. Jared M. Diamond would now say this is the classic example of economic collapse of the society. "A company can go bankrupt. Individuals go bankrupt. But sovereigns don't," explains Jan Randolph, head of the sovereign risk group at IHS Global Insight. "They stop paying and don't service their debt obligations like they're supposed to. But people still grow carrots, people go to school, traffic lights work."  In December 2001, Argentina defaulted too. After its debt debacle, and the eventual devaluation of the peso, which made its agricultural exports cheaper, Argentina recovered too, growing 9% in 2004. Despite the years of negative publicity, it also became a tourist hotspot-the cheap cost of living and a favorable exchange rate made it a favorite for American tourists and it experienced double-digit increases in incoming visitors. Ditto in the case of Uruguay and Russia.

 Thus it means there’s hope for Greece too? Certainly Yes!!! But there’s a need for drastic change of the attitude ‘why should we follow Rules, Honey?’ They have to let go their luxuries and the pride for little while and accept the fact that they in deep shit. I wonder what they are agitating and protesting for. What is it that they want? To not take the package and continue? 

Also the government has to take drastic step to change its economic revenue. How long can it sustain on Tourism? Not for a long time. It has to invest in other sectors heavily. Moreover private sector should also be brought into the picture. This would reduce the pressure on the Greek Government. Most importantly, a proper system for taxation is the need of the hour. 

All this will take a long time to settle in. Till then what we can hope is that Greek does not disappear as Atlantis.