The Economist - USA (2019-10-05)

(Antfer) #1

12 Leaders The EconomistOctober 5th 2019


1

T

enyearsagothismonthGeorgePapandreou,thenthenewly
electedprimeministerofGreece,announcedtotheworld
thatthegovernment’sbookshadbeencookedandthatthebud-
getdeficitin 2009 wasinfactdoublepreviousestimates.Inves-
torspanickedandGreecelostaccesstocapitalmarkets,eventu-
allyforcingit toseekhelpfromtheEuropeanUnionandtheimf.
A severefinancialcrisis,togetherwithswingeingspendingcuts
demandedbythecreditors,plungedGreeceintooneofthedeep-
estdownturnsexperiencedbya richcountrysincethesecond
worldwar.
Nowanothernewprimeminister,KyriakosMitsotakis,istry-
ingtogetGreecebackonitsfeet(seeFinancesection).Though
theeconomyhasbegunexpandingagain,growthislacklustre
andoutputisnearlya quarterbelowitslevelin
2007.Thecountryleftitsthirdbail-outlastyear
witha publicdebtof180%ofgdp. Itisnowsub-
jecttothetermsofa debt-reliefdealstruckwith
itsEuropeancreditors.Thisdealwasdesigned
tolooktoughinordertobepalatabletoelector-
atesinthenorthofEurope,whohatetheideaof
bailingoutsoutherners,butexpertsagreethatit
iswildlyunrealistic.Thetimehascometostop
pretendingandsettleGreece’sfinancesonceandforall.
Theagreementof 2018 extends thematuritiesofsomeof
Greece’sloansandofferssomeinterest-raterelief.Inreturn,as
wellascontinuingreforms,Greecemusthitdraconianfiscaltar-
gets.It mustruna primarysurplus(ie,beforeinterestpayments)
of3.5%ofgdpa yearuntil2022,andof2.2%,onaverage,until
2060.Thequestionofdebtreliefisnottoberevisiteduntil2032.
Thatthesetargetsarefancifulisanopensecret.Onlya hand-
fulofcountrieshavepulledoffsucha feat—mostwereresource-
richandthriving.ToexpectGreecetocommittosuchfiscalmas-
ochismforfourdecadesisnotsensible.Astheimfpointsout,it
willeventuallyneedrealdebtrelief.Andastheeconomyisstill
depressed,thereisa strongcaseforsomefiscallooseningnow.

Thepenaltermsofthedealof 2018 reflectmistrust.Northern
politicianscouldnotsella dealathomethatappearedtolet
Greeceoffthehook.AsrecentattacksinGermanyonthedoveish
policiesoftheEuropeanCentralBankillustrate,suspicionsin
thenorththattheyareunderwritingthesoutharestillalive.
ForitspartGreecehasshirkedthereformsneededifitisto
startgrowingfastenoughtocatchupwiththerestoftheeuro
area.Thepreviousgovernment,ledbySyriza,a left-wingparty,
hititsfiscaltargetsbutslidbackonreform.Banksarestuffed
withdudloansandtheframeworkfordealingwiththemisin-
complete.Taxrevenuesrelyontoonarrowa base,inturnrequir-
inghighratesthatdeterhiring.Inregisteringpropertyorresolv-
ingbusinessdisputes,theWorldBank’s“DoingBusiness”report
ranksGreeceinthebottomthirdofcountries.
Thereisa wayout.WhenGreeksvotedinJuly
forMrMitsotakis,whostoodona platformof
reform,they turnedtheirbackonpopulism.
Creditors shouldtakethat as asignofgood
faith.Theyshouldalsosetouta newgoal—that,
inexchangeformorereforms,Greeceshould
geta debtwrite-downthatisbigenoughtoallow
ittoserviceitsdebtssustainablywithoutrun-
ningaprimarysurplus. Duringthisperiod,providedGreece
passesmilestonesonreforms,itsfiscal-surplustargetsshould
graduallyberelaxed.Asa goodwillgesture,theeucouldmean-
whilereleaseover€1bnayearofprofitsfromabond-buying
schemetogiveGreeceextrafiscalspace.
YetMrMitsotakishasbeenslowtohonourhispromiseofre-
form.Heneedstorolluphissleeves.Hehaswonpublicsupport
andimpressedthemarkets—thepremiumofGreekten-year
governmentbondyieldsoverGermanoneshasfallenbyhalfthis
year.HemustpersuadenorthernersthatGreecehasearnedsome
flexibility.Thismeansfacinguptotheproblemsthatholdback
theeconomy.For tenyearsgovernmentsandcreditorshave
muddledthrough.Greeksdeservebetter. 7

Time to end extend and pretend


Greece
Generalgovernmentgrossdebt,%ofGDP

0

50

100

150

200

2004 10 15 18

Greece wants freedom. Its creditors don’t want it to have a free lunch. A new grand bargain is required

Greece’s debt odyssey

I

t is two months now since India’s parliament abruptly
amended the constitution to downgrade Jammu & Kashmir
from a partly autonomous state to a territory administered by
the central government. That means it is also two months since
the Indian authorities detained some 2,000 prominent Kashmi-
ris—politicians, businessmen, activists, journalists—to prevent
them from protesting. They continue to be held without charge,
many in unknown places. Meanwhile the 7m-odd residents of
the Kashmir valley, the state’s main population centre, are under
a lockdown of a different sort. Mobile phones and the internet
remain cut off; getting around is hard and getting in or out is pos-

sible only on the authorities’ say-so. In theory the ruling Bhara-
tiya Janata Party (bjp) is integrating Kashmir into the rest of In-
dia. In practice it has turned the valley into a vast open-air
detention centre.
That the bjphas it in for Kashmiris is hardly news. The mani-
festo the party put out before it won its thumping victory in na-
tional elections earlier this year called for the scrapping of Jam-
mu & Kashmir’s special status. The state is the only one in India
with a Muslim majority, and the Hindu-nationalist bjpdislikes
anything that smacks of privileges for Muslims. The bjpalso
likes to parade its defiance of Pakistan, which controls a slice of

Vale of tears


The courts’ refusal to curb repression in Kashmir should alarm all Indians

Kashmir
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