Sunday through into Monday morning, Euro zone officials sat down for seventeen (17 hours), to demand measures necessary for Greece’s request for over 96,billion bailout; mind you, this is after two bailouts already, totaling 266billion. On Monday, an agreement had been reached for a third bailout. Albeit with some heavy conditions!
Greece has to put down some heavy assets that may me sold if it doesn’t honor its part of the deal in the end. Massive reforms are demanded and some tough legislation has to be passed in 3 days, and then negotiations on the loans will begin. In the lead up to the agreement, the talk was heavy on deeper austerity measures. Greece has a tough road ahead to get this through its legislature, and there is talk that there will be reshuffles as the government struggles to find consensus; as already, the government has faced tough opposition within its own party and had to previously fall on the opposition for votes. Such are the demands being made by the Eurozone, that some feel it has inbuilt failure.
Others floated around the possibilities of Greece’s exit from the union, in fact, Greece itself played with this idea up to a point. Many in the Zone, including private persons I engaged with, seemed to be exasperated at Greece and actually would prefer it. Even though Germany says it was never an option, this was used as a threat. In the end, as a French minister put it ‘it is Europe that won.’ Throughout the negotiations, the one phrase bandied around was ‘the lack of trust’ the most important currency did not take a seat at the table! It had been murdered on its way to the negotiation table.
I’d like to look at some of the actions that brought Greece to this point and juxtapose it against the situation my country finds itself.
In the lead up to the downturn, Greece had engaged in what some call a ‘credit binge’, the country had borrowed money it didn’t have and spent it on plush jobs for political supporters from the two major political parties. Anyone who knows the basic principles of business knows that spending more than one makes is a sure path to disaster. Off course, borrowing money to reinvest in activities that generate income is a good thing, but borrowing money to pay salaries, etc. is not sustainable!
As we speak, the Ghana government is the largest borrower from banks in the country. Leading to the point of ‘lazy banks’ starving out the private sector, preferring to put their money in the security of treasury bills. The country’s deficit skyrockets by the day, presently at about 9%, as we continuously look for new ways to borrow. In the past couple of years, our credit rating has actually dropped, leading to higher interest rates on the international money market.
One may question what exactly the borrowed money is used for? The payment of salaries to the public sector takes a huge chunk. Some of that money surely goes to sustaining political activity, a heavy chunk goes in between the cracks, but most importantly, we are borrowing and spending way more than we make. When deficits are extremely high, and economic activity is not the focus of expenditure, trouble looms ahead and it may not be a pretty fall, as Greece is finding out!
In the lead up to its crisis, Greece became a very expensive place to do business. Not too long ago in the past, Ghana was spoken of as the gateway to Africa. This phrase has long died on the lips of politicians. Coupled with high inflation rates, the weak currency, power crises, high cost of money, poor infrastructure, doing business in the country has become quite the task. Not surprisingly, businesses are bypassing the gateway and jumping over walls to enter other countries. Internally, businesses have been cutting down on hands and there has been quite a bit of employees’ unrest, a minor symptom of a problem that is unfolding. Within all of this mess, unemployment rates exceed 60%. This may correlate somewhat directly with the rise in crime, ultimately making Ghana an even un-safer place to do business.
Tax nightmares were a major factor in Greece’s problems. The tax net in Ghana is very small. What this means is that a few companies are over burdened and over taxed, whiles the majority of businesses are totally out of the net. Sustainable measures to broaden the net are not obvious. What is obvious, is an over taxation of the few within the net. Companies that are already struggling to stay afloat. The majority of small-scale businesses and even some medium businesses are both unbanked and untaxed.
And oh, let me just say that corruption is not just the case of Ghana or other African countries! Interesting that a country deep in the Eurozone such as Greece, had such high corruption levels. We could certainly learn a thing or two from them.
As the Eurozone struggles to keep Greece afloat, Ghana has again gone to the IMF for help. First of all, unlike Greece that exists in a union that sees the common interest of keeping the one country afloat to help the collective, we are completely alone, at the mercy of an agency that has very little to loose quite frankly, if it all goes wrong.
We have already began to feel some of the measures that will have to be put in place to activate our bailout, but most importantly, how committed are we to get ourselves out of the conditions that got us here in the first place. The recent election in ‘Talensi’ and the alleged use of money (money that we don’t have), to motivate voting, reeks of our poor resolve and a lack of recognition of the depth of the hole we have dug ourselves into.
It is not really about one party or about a change of government really, if the resolve is not national. As Greece teeters on making history, whether it stays within or exits the Eurozone and what may follow, its many lessons are out there for us to potentially learn from. Unlike the urgency that characterizes attempts to lift itself out of this doldrums; in many ways, it is business as usual in Ghana. What will it take for African countries and its leaders to become more responsible to its people?
Juliet Yaa Asantewa Asante