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Tuesday 8 December 2009

Greeks Bearing No Gifts

I’ve enjoyed some excellent holidays in Greece. The people are on the whole welcoming and laid back, and it tends to be sunny and warm there. Yes, things don’t always work, and service might not come when you’d like it – or even the next day – but you can’t help liking the country and its people.

But successive Greek Governments have never got on top of the country’s economy. In the days of the Drachma, there was always inflation, and a lot more than in the UK: in 1990 a pound bought about 290 drachmae, by 1992 that had gone up to 340, then in the mid 90s it had gone over 400. By the end of that decade it had reached over 500.

So I did wonder how the country would manage to get its currency in line with the Eurozone, and adopt the Euro. The short answer is that they never really managed it, and thereby hangs the problem. The idea of just marking up prices and then blaming the resulting problems on the Euro failed to address the problem: now their sovereign debt has been downgraded, an event which the Cicero’s Songs blog had considered a while back.

This is, as far as is known, a first for a Eurozone country. And Greece not only has a stubbornly high level of debt, but has not displayed the will to tackle it. How the ECB and other Eurozone countries tackle this one is uncharted territory, as the Beeb’s Stephanie Flanders has shown on her blog.

One to watch.

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