Greece Surrenders – Basically External Bodies Will Run the Economy

Greece has surrendered to global finance and the forces of the European “project” and has agreed to give up national sovereignty, control over their own economy and even decisions about detailed regulatory issues within the country. Greece will now be run not by their democratically elected government, but by administrators from Brussels and other international organisations like the IMF. That is the country’s choice of course – a decision taken because they are even more terrified of the prospect of facing an uncertain future outside the EuroZone.

But the citizens of Greece must be confused and angry. Only 10 days ago, they voted against a bail-out proposal because of the terms offered, and now they find that a collection of measures which look in aggregate to be even more onerous than those they rejected are going to be imposed. It wouldn’t be surprising if we saw some civil unrest in Greece, although you get the feeling that the country and the population feels defeated after recent events.

As the excellent Paul Mason put in on the Channel 4 News website:

“Last night the eurozone leaders presented Greece with an ultimatum that shredded all vestiges of control the government has over the economy going forward, and reversed every law it has put through parliament since being elected with 36 per cent of the vote in January... The big powers of Europe demonstrated an appetite to change the micro-laws of a smaller country: its bakery regulations, the funding of its state TV service, what can be privatised and how.”

We suspect that history will judge the Greek Syriza government badly for their disastrous performance over the past few months. Certainly, their negotiation strategy has proved to be dreadful. We’ve written an article about this on our Public Spend Matters Europe site today – you can read it here. We comment on how the relative strength of the BATNAs (the best alternative to a negotiated agreement) for both parties in the negotiation have proved key in determining the outcome.

So what happens next and what are the implications for Europe – and, more parochially, for procurement practitioners? Well, the Greek economy is not going to get back to normality quickly, even after this agreement. So anyone with suppliers in Greece may see continuing issues for some time around shortages of raw materials, lack of funding to simply keep the business open and similar problems. If you don’t have a contingency plan yet, it may be a bit late now, but that’s what you need.

The Euro itself will continue to be weak, we would expect, with uncertainty about the cost of further bailouts, and indeed the vulnerability of other high-debt countries within the Community. A weak currency is good news of course to the high-exporting countries within the group, particularly Germany. But heavily indebted countries such as Portugal, Spain and Italy will look nervously at what Greece has been forced into through this process. An economic downturn now, perhaps caused by external shocks (keep an eye on China in that regard) could make the debt position of other countries look rather serious too.

There are also questions about the role public sector procurement can play in helping get the Greek economy back on its feet. That will require addressing some issues around corruption, for instance. We touched on that in another article here; but it's a topic we'll return to in the future I'm sure.

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