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We are part of the Greek tragedy

By OWEI Lakemfa
GREECE for many of us is far away from our shores. Except for the Europeans, the rest of us do not belong to the European Union (EU), the club Greece belongs .

So the Greek economic  crisis, the attempts to bail it out and the huge anti-austerity demonstrations that have claimed some lives may be of no concern to us. Therefore, to many Africans, raising the issue is like talking Greek. But the reality is that the Greek gift to the international economy is as contagious as  the bird flu.

The Greek tragedy began to unfold last October when a new government found that the country’s  budget deficit was actually 12.7 percent of the GDP and not the six percent the old government had claimed. This figure is triple the 3.7 percent promised to the EU at the beginning of 2009.

It was also discovered that one third of the Greek  borrowings were indirectly from the European Central Bank (ECB) through emergency lending to Greek banks.

The Greek situation was capable of sinking the Euro and contaminating other economies. To stop this, the EU last month resolved to give Greece a 110  billion Euro bail out and in return, Athens was to embark on stringent IMF -imposed austerity measures which by 2014 is to see the deficit down to three percent.

The Greek government immediately went into action cutting salaries of public sector workers by about 30 percent, reducing the pension of public and private sector  pensioners by between 15 to 30 percent while young workers are to be paid less than the minimum wage.

First, the austerity measures would not lead to an economic recovery as spending power will reduce, and even if  the measures were to be successful,  the  debt will increase from its current 115 percent of the GDP to 150 percent by 2014.

In other words, the primary purpose is an attempt to contain the Greek virus and stop its spread.
Understandably, the Greek masses, especially the workers were very angry; they had not been responsible for the crisis, yet they were to bear the burden of the measures. After some grumbling, they exploded into the streets.

The May 5 protests turned out to be bloody as some anarchists threw petrol bombs into the Marfin Bank and the fire got out of control. Unfortunately, the bank had locked the building and there was no fire exit. Three of the bank staff died in the fire.

It was an indefensible and regrettable incident which the government tried to capitalise on. This in itself did not stop the protests as the next day, the protesters stormed the parliament.

Watching the massive protests, it is unlikely that the Greek government can ride the storm, so the government may collapse. But there is nothing to indicate that a new administration will deliver on the measures, which implies that Greece will default.

Although the country represents less than three percent of the EU GDP, it is part of the 27-member EU and its 16-nation Eurozone, so it will seriously affect the Union. Already, the Euro has lost 12 percent of its value to the Greek crisis.

There are two other Eurozone  countries, Italy and Belgium with  bloated debts. Portugal, Ireland and Spain are, like Greece, addicted to  over-reliance on foreign debts.  Three EU members outside the Eurozone; Romania, Latvia and Hungary have shown signs of  distress.

To stop the economic floods washing the continent away, Germany’s Angela Merkel and Nicolas Sarkozy of France egged on by worried American president, Barack Obama came up with a trillion dollar  rescue package to which the Eurozone is contributing  $570 million, the IMF $320 million and the rest of Europe, including increasingly Euro sceptic Britain, contributing the balance. The latter is liable to contribute  15 billion Euros.

While the Greek crisis helped the campaign of the British conservatives in the elections that has produced a hung parliament, Britain, like the United States  cannot escape the adverse consequences. Africa which thinks it is a spectator in the Greek tragedy may be one of the worst affected.

First, the Europeans were our colonial masters and many of our countries are still tied to their apron strings. For instance, the Francophone countries run the Franc currency which is tied to France; once France is in distress, it cannot be well with the Franc.

Secondly, most countries,  including the United States  run budget deficits and since they have common international lenders, especially the banks; once there is a major default, it will affect the lenders who will have to fall back on borrowers.

For instance they may become sceptical releasing more funds and be over protective. Investors are essentially fair weather friends; once they  sense trouble somewhere or in any country, they flee. They do not just flee from the particular place, but also from all places that  show similar threats to their investment. For instance, if they flee from Greece, they are unlikely to stay with Portugal or Spain.

Also, Europe is Africa’s major trading partner, its members provide loans and grants, and we all belong to the same capitalist system which is liable to collapsing periodically like a pack of cards . All these would be adversely affected by a Europe in distress.

Clearly, the Western European  model of development which makes Africa completely dependent on it,  and assigns us the role of raw material providers and they, the manufacturers, is a disastrous one for the continent. With our resources, availability of new knowledge  and population, Africa is capable of charting a new course very much like China has done.

Otherwise, we will remain on the margins of world politics and development; we would euphemistically be called a developing continent when in reality we will remain under developed. Africa will remain a door mat on which other continents wipe their feet. In conclusion, as a Nigerian watching the Greek tragedy; if I have shares in our stock exchange, I will start off loading. That is the logic of the capitalist investor.


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