Myth focus and green shoots in Greece

As Europe struggles through an anaemic recovery, its structurally challenged South is trying to mend itself.

As Europe struggles through an anaemic recovery, its structurally challenged South is trying to mend itself.


Michael G Jacobides

It is a fascinating, and still undecided turnaround story, best illustrated by the Eurozone’s former bête noire - Greece. Exacerbating the problem, the media often do a poor job of helping explain both the current situation and its prospects - as a panel in London’s Southbank Centre will discuss on 19 October 2013.

Current media attention is on the political drama of the arrests of extreme-right Golden Dawn party leaders charged, among others, with encouraging the murder of rapper P. Fyssas. On the economic front, the government is trying its best to play up Greece’s “success story”- its return to stability, the achievement of a primary surplus, and the increasing interest of global investors such as John Paulson. The opposition is pointing out the human suffering and roaring unemployment (over 60% for youth). As any party in want of votes, SYRIZA denounces austerity and promises a return to a happier past. As for Greek media, it is split between the squawking of the artificially constructed “pro-MOU” and “anti-MOU” camps. It rarely ventures into an examination of the viable courses of action to get us out of this morass.

In this rather fruitless exchange of propaganda, some important structural transformations may be easy to overlook. Over the last year, a culture of entrepreneurial development is increasingly on the rise. Entrepreneurial meeting points, such as Open Coffee, which started with a handful of people, now fill auditoriums of over 2,000 people. Successful Greek ventures such as TaxiBeat have inspired budding entrepreneurs. Initiatives of expats wishing to support entrepreneurship, such as ReloadGreece or Greek efforts such as TEDxAcademy’s RisingStars, have been added to offshoots of international organisations like Endeavor. Funding support has also emerged: the Hellenic Initiative, based in New York, has pledged $100M to support new ventures.

If Greece is to recover, then these green shoots need to grow and flourish. To do so, they need to find a way of interacting with the Greek state, which is notorious for slowing down businesses, imposing a mountain of regulation and protecting incumbents by discouraging innovators. So Greece needs to help reform its own administration, to make it more effective and user friendly. Alas, the EU Task Force has done a poor job so far, having neither the mandate nor the skill for the massive change management project required to allow the administration’s more progressive and capable civil servants to push aside the antiquated mentalities that still define Greek public service. Some glimmer of hopes might exist. The current Redesign Minister seems more determined to shake the status quo. He is supporting a bottom-up initiative, RedesignGreece, to help this change process by way of a set of prizes for Greek civil servants with innovative ideas on how to change the administration for the better. It will take more determination and consistent effort (and more effective reporting and media pressure) to ensure that the public sector helps Greece transform itself.

The second thing that is needed for the green shoots to grow is to find funding. The contraction in the Greek banking system, brought about by the crisis, the restructuring of Greek banks, and the imposition of Basel III regulations, has only been made worse by a warrant scheme aimed to support investing in banks more than the creation of aggregate credit. Also, Greek banks, which had made generous loans to large Greek corporates, will, in today’s market environment, never be paid back at par. Yet banks hesitate to restructure, hoping that rolling debt over will allow them to restrict their write-offs. They want to avoid the painful choices of dealing with the turnaround and the ousting of previous managers and owners who have led to this mess. So, potentially healthy parts of the Greek economy are turning into zombies, losing productivity, and locking up scarce banking funds in an exercise of blind hope. For all the creation of schemes to support liquidity, improvement on the ground is limited. Blueprints, such as Spain’s creation of corporate bonds tailored to SME’s, exist, and should be urgent priorities- yet get little media (and government) attention.

Greece isn’t only suffering from the results of its past fiscal profligacy. It’s suffering as a result of its gradual loss of competitiveness, and of the structural inefficiencies built up both in the private, and the public sector. And it now needs the hand of selection to start working again. What Greece, and Southern Europe in general, need, is to ensure that we find a way to help the healthy, export-driven and competitive part of the economy to grow and replace the declining, introvert side of the economy that is dwindling. It also needs more accurate reporting from the media- and a better use of the media’s weight to disrupt the status quo to the benefit of not only Greeks, but of Europeans at large. So, time for us all to think how we can identify and encourage these green shoots to take hold, and push up the decaying, parasitic vegetation that is still holding it back.

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