Bailout does nothing for supply chain risk in Europe

I’m not an economist, but it seemed to me last week that the positivity around the Greek bailout was overdone. Stock markets responded well – but remember, Greece is irrelevant for 99.9% of the quoted firms in the larger markets.

But the risk management issues for Europe haven’t gone away. Here are my not-an-economist questions.

  • Does the bailout do anything to get Greece out of its death spiral of a shrinking economy, lower tax revenues, increasing deficit, leading to lower public spending leading to a shrinking economy, lower tax revenues... etc?
  • Can a country maintain civil order when half its young people are without jobs (unemployment is at almost 50% now in Greece AND Spain for the under 25s)?
  • Will the population of an ancient and proud European country accept defeat and (economic) occupation by another European power?
  • If you were a business in Greece, or an individual with flexible assets, would you invest in the country, pay all your taxes promptly and willingly? Or would you look to move as much as possible beyond the reach of what you might perceive as a foreign occupying power?

Greece cannot get out of this while in the Euro – the necessary cuts in wages and public spending will cause a revolution long before the economy recovers and the debt starts declining. And I can’t see how the economy can recover without some seismic change of circumstances given question 4 above – who on earth would invest?

So either confidence has to return, by reversion to the Drachma and perhaps a charismatic leader who can appeal to the Greek sense of nationhood, history and destiny, and bring a “we can get out of this together" spirit.   Or there will be a non-democratic answer, probably the Military rather than a Communist solution I would think.

Keep your supply chain risk management index high for supply to – or from - Greece we would suggest, and southern Europe more generally is no better off or stable really than it was a week ago.

On a related but different note, if you want to know why Sun journalists are hugely respected by their peers everywhere, read Trevor Kavanagh’s piece on Europe here.  Communicating complex ideas and news clearly and succinctly, expressing opinions in a way that is powerful but easy to understand – these are skills that not many writers possess.  This is a great example of how it can be done.

(ps I drafted this yesterday before I read of the Greek referendum...)

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