By Hugo Dixon, The New York Times
Most Greeks know the term vicious cycle — or favlos kyklos. But when you ask them the Greek phrase for virtuous cycle, they often struggle to find the term or even deny it exists.
After six years of recession, which have shrunk the Greek economy by a quarter and left the country with an unemployment rate of 27 percent, it is not surprising that vicious cycles loom large in the Greek psyche. But there is also a Greek expression for virtuous cycle — enaretos kyklos — and the country may be beginning to enjoy one.
Athens returned to the bond market last week with the issue of €3 billion, or about $4.2 billion, worth of five-year paper. The country’s banks are also now able to sell shares.
The challenge is to take this positive momentum in financial markets and use it to build on the tentative signs of an economic recovery. Confidence can be infectious. It is not just financial investors who are giving Athens the thumbs up. So are Greece’s euro zone partners, led by the German chancellor, Angela Merkel, who was in Athens on Friday.
The main channel through which a virtuous cycle could operate is investment, which will create badly needed jobs.
As Greek banks find it easier to fund themselves, they will start supplying more credit to local companies, which have been starved of cash. Foreigners are also starting to invest, now that Greece has lower wages and cheaper property.
Prime Minister Antonis Samaras plans to present the country’s “growth model” this month to build on this potential.
The idea is that the Greek economy of the future will be less focused on consumption and more on investment and exports. It will seek to position itself as a supplier of higher-end tourism, logistics, transport and food.
But the emergence of such a virtuous cycle is not guaranteed. As ever, the main risk is political: either that Mr. Samaras’s fragile center-right coalition government will fall, or that it will lack the will to push through the further structural overhauls that are needed to change the country for good.
Unfortunately, the possibility that the government will fall cannot be discounted, given Mr. Samaras’s habit of damaging himself. The latest self-inflicted wound was sustained this month, when his chief of staff was caught on video telling the spokesman of Golden Dawn, a far-right political party, that the government had intervened with the judiciary to put the leadership of Golden Dawn behind bars. At the very least, this incident shows Mr. Samaras lacked judgment in keeping such a man so close to him for so long.
That said, the government will probably survive this particular wound. There is even a chance that it will continue in power until June 2016, the latest a general election can be held.
The main hurdle is the election of a new president in March 2015. Under the Greek Constitution, 60 percent of members of Parliament have to approve the choice; otherwise there must be a new general election. The problem is that Mr. Samaras can count on little more than 50 percent. Fortunately, he seems prepared to propose a center-left candidate in the hope of gathering the extra 10 percent required.
Another piece of good news is that an opposition victory in the next general election would not be as scary as it would have been a couple of years ago. The radical left Syriza party still has populist plans — like rehiring laid-off public sector workers. But some of its lawmakers are moderating their views. What is more, Syriza is unlikely to be able to govern on its own.
A possible partner is an entirely new party, To Potami, which is now third in the opinion polls (after Syriza and Mr. Samaras’s New Democracy) though it did not even exist two months ago. To Potami is a center-left party that is pro-European and pro-market.
Stavros Theodorakis, a former journalist who is To Potami’s leader, says he wants to go after the big and small parasites that have held the country back for decades. There is certainly a lot to tackle, whether the oligarchs who control the news media and inflate oil prices or the anticompetitive practices that keep the cost of things like milk and legal services up — not to mention widespread tax evasion.
In the meantime, the big question is whether Mr. Samaras will implement fully the 300 actions he has agreed to with his euro zone partners and the International Monetary Fund.
These are mainly to do with modernizing the country and liberalizing the economy.
Mr. Samaras himself is not a natural reformer. But Yiannis Stournaras, his finance minister, is.
One concern is that Mr. Stournaras may be moved in a reshuffle. This is not necessarily a bad idea if Mr. Stournaras takes over as head of the central bank and is replaced by Stavros Papastavrou, Mr. Samaras’ pro-market European adviser — as one of the rumors swirling around Greece has it.
But it would be a crying shame if, having come so far, Greece did not finish the job. Or as the Greek expression goes: We’ve eaten the donkey; let’s not leave its tail.
Hugo Dixon is editor at large of Reuters News.
