Greece too far behind to copy Irish bailout model

Reuters, Wednesday 11 Jul 2012

Ireland's seemingly successful adoption of EU and IMF help provides little guide for helping the debt-stricken Greeks, say experts

Ireland has become the poster boy of international lenders, held up as a model of European austerity to problem child Greece.

But when the two countries sought financial help from the European Union and International Monetary Fund within six months of each other in 2010, they were starting from different points.
Ireland had an efficient public administration, a modern open economy and not much culture of protest in contrast to Greece, making it very difficult to catch up.
"I think our situation was always more manageable than the Greeks', there's no doubt about that," Ireland's energy minister Pat Rabbitte told Reuters.
"That is not to say the cliff off which we fell wasn't very steep but we always had the bureaucracy and the experience to make the adjustments if the political will was there."
Rabbitte and his colleagues are set for another glowing report from their so-called troika of EU, European Central Bank and IMF lenders on Thursday, just as the same group visits Athens for the first time since tumultuous elections.
Dublin has so far easily passed every quarterly review of its programme while Greece has stumbled through, frequently missing targets that resulted in delayed aid payments.
But Ireland's success has as much to do with an austerity programme that predates its bailout by over two years and other advantages taken for granted such as an efficient tax system.
While not quick enough to ultimately avoid the humiliation of having to ask for help, Ireland began to reverse a decade of reckless policy decisions in mid 2008 and had already dished out three austerity budgets by the time the troika came to town.
In fact, the memorandum of understanding Ireland signed in November 2010 was in large part an extension of the four-year austerity plan the then government published just days earlier.
For Greece, in contrast, austerity came as a nasty surprise. In October 2009, just eight months before its first international rescue, the opposition Socialists swept to power on promises of boosting social spending and public sector wages.
Greece's memorandum - which like Ireland's calls for fiscal and structural reforms - was also more challenging in a country that nationalised, rather than liberalised, large swathes of its economy upon joining the European Community in 1981.
Bankrolled by EU subsidies, it never shed its consumption and import-led economic model while Ireland used a decade-long recession in the 1980s to implement much needed structural reforms and to open up a number of sectors in economy.
A property boom fuelled Ireland's "Celtic Tiger" economy but when prices crashed in the last five years, the foundations of the 1980s and early 90s meant it could fall back on a strong export sector when the financial crisis and resulting austerity crippled domestic demand.
Alongside a low corporate tax rate that has attracted big employers such as Google and IBM, this explains why Ireland's economy is forecast to grow modestly for a second year in a row while Greece's may fall by 7 per cent.
"When companies invest money here, they're pretty sure they are going to get product out the other end," said Paul Duff, Vice President at Pfizer which employs around 4,000 people in Ireland.
"Everybody's got to do their own bit. For us (Ireland), it's making sure that we have a proposition that works. Then you put yourself in the best possible place to either shield yourself from the downside or try and benefit from any of the upside."
That differs from the experience of Dimitrios Lakasas, an exporter who ships electronic security systems to 72 countries and has long lamented Greece's political turmoil.
"Greece has acquired a bad name abroad and that is one more thing making life difficult for exporters," said Lakasas, who is also chairman of the Northern Greek Exporters' Association.
"When potential business partners come to visit us, the first thing on their menu is to ask about the country's political situation: I have to make macroeconomic presentations before I get to talk about business."
One of many multinationals that successfully backed May's referendum on Europe's new fiscal treaty, Pfizer was joined on the campaign trail by Ireland's largest parties - both those in government and leading the opposition - in a demonstration of the cross-party political backing austerity enjoys in Ireland.
Compare that to Greece where anti-bailout parties got half the vote in June 17 elections. The main Syriza opposition party, which rejects privatisations, wants Athens to renege on part of its debt and came within a whisker of power.
It counts much of its support among a vibrant, left-leaning protest culture, a heritage of the country's 1967-1974 military junta that is a far cry from the stoic Irish, who keep quiet partly because of a promise not to cut public sector wages and an understanding that their pain is Ireland's gain.
"I'm proud of our record because I feel I've been a part of it," said Anton Mazer, a 70-year-old pensioner from Dublin.
The noisier Greeks may also feel more aggrieved at having suffered an adjustment far deeper than any other country in reducing its budget deficit from 15.8 per cent of GDP in 2009 to 9.3 per cent in 2011.
More pessimistic as a result, with over 80 per cent believing their lot will deteriorate in the years ahead, it's little surprise Greece has been unable to keep pace with an Irish programme showered with praise throughout Europe.
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