THEY’RE cheap; they’re pretty; they’re conversation-starters; they’re useful.
In other years the iPod was the cool Christmas present but this year it’s worry beads.
If you’re given a set of worry beads, your grandmother will probably sneer that it’d suit you better to buy a rosary and say a few prayers.
Most worry bead users pray as they roll each bead between thumb and forefinger. But even the displacement activity of fingering the beads has been a coping mechanism of some cultures – including the Greeks – since ancient times.
This week, metal worry beads surfaced in the hands of the new socialist finance minister in Greece, George Papaconstantinou. Understandably.
Athens this week was not one of the most beautiful cities in Europe. It was more like a landfill. Everywhere you looked, you saw garbage. Newspapers flailed their way out of plastic sacks and blew across roads, flattening themselves against the windscreens of the city’s ever-present cars.
People thanked God it was winter, because the cold, relative to the summer heat of Athens, kept the organic rubbish from putrefying too quickly. Sanitation workers had been on strike for a fortnight.
This week, the strike is over and the clean-up will begin. One day last week though, pensioners had to plough their way through the debris in order to protest against government budgetary plans.
The following day it was the turn of the students. Everywhere is fear of what the government – elected with a comfortable margin in October – may choose to do in order to dig Greece out of its dire economic situation.
Papaconstantinou, the finance minister with the worry beads, was quick to point out that a lot of countries (he didn’t name Ireland) face the same problems of stimulating growth while paying off debt. Greece would do it, he promised. Greece wasn’t Iceland. Or Dubai.
Precisely how they’ll do it is the question. Greece, like Ireland, faces a major public service challenge.
Every fourth person in Greece works for the state in some way, and they don’t like the prospect of wage freezes, pay cuts or reduction in numbers employed.
All three options are likely to manifest themselves in Greece’s 2010 budget as the socialists try to prove to their citizens and to the EU that they can halt the country’s slide from success to disaster.
After a decade and a half of constant economic growth, not to mention hosting the Olympic Games, the country’s taken such a nosedive that its government bonds are now regarded as risky. Greece is more than €400 billion in deficit, and while the new government can – with justification – blame its predecessors in office for writing “finis” to a success story by conservatism and apathy, that won’t make the austerity measures welcome to a population which not only doesn’t welcome change but is accustomed to taking to the streets to protest when change is imposed upon it.
Although Greece is answerable to the EU, in common with other dodgy European economies, it must also satisfy three ratings agencies that have become frighteningly powerful in recent times: Standard & Poor’s, Moody’s and Fitch. They’re the private organisations that stripped Ireland of its triple A credit-rating this year.
They are dreaded by sovereign governments worldwide, because if any of the three decide a country isn’t a good risk, investment flows to that country slow to a trickle, borrowing becomes more difficult and the interest rate on such borrowing rises. It’s not just a vicious circle. It’s a set of concentric vicious circles.
As the Daily Telegraph put it this week, “the greater the perceived risk of sovereign default (collapse of a state’s economy, in other words, not simply collapse of a bank) the more that has to be paid for borrowings and the less there will be for spending on hospitals, schools and public services”.
Teams of economists and other financial experts talk to the three agencies all the time on behalf of individual states to persuade them that all is well and that the country’s credit rating should under no circumstances be downgraded.
Standard & Poor’s, Moody’s and Fitch, in other words, have to be lobbied by countries just as commercial firms lobby governments. That’s because, of all of the ratings agencies set up over the past century, these three were the ones to achieve pre-eminence and “reach”.
“Rating the world’s debt is an expensive business, requiring thousands of analysts around the globe,” says the Telegraph.
“Only three agencies have attained the critical mass necessary for a comprehensive service.”
“Critical mass” is a posh way of saying that these agencies have a lot of bodies on the ground in a lot of countries. Not necessarily bodies of great experience or insight. Just number-crunchers and temperature-takers.
Yet the fate of nations, quite literally, sits in the hands of these anonymous, invisible but opinionated folk.
They decide a country isn’t ticking their boxes; they mark that country down. Which is why admirers of Brian Lenihan particularly value what they see as his capacity to persuade international credit- raters that Ireland has turned the corner, seen the light, taken the tough actions and faced up to its problems.
One of the agencies – Fitch – clearly doesn’t believe the same can be said about Greece, where the national debt is 110% of GDP. Fitch last week downgraded the Greek risk-rating as a result of that statistic.
Shares in Greek companies promptly went down the tubes. A second agency – Standard & Poor’s – says it’s going to wait until January, when the government of prime minister George Papandreou will tell the world what it’s going to do about the financial problems it inherited. Then, and only then, say Standard & Poor’s, will they issue their judgment on the policy announcements.
Meanwhile, the civil service union is warning that if the government gets any ideas related to the public service along the lines adopted in our own budget last week, they’ll bring the workforce out on strike and bring the country to its knees. Since the government has announced that it’s going to hire only one public servant for every five retiring next year, that strike could happen sooner rather than later.
IN ONE respect, Papandreou’s new Greek government has an advantage over Brian Cowen’s Cabinet. The very fact that they’re two months in office allows them to dump on their predecessors. The Irish cabinet, however, represents a continuum, with all of the baggage implied therein. On the other hand, Papandreou came to office on a promise that there would be no reduction in social spend, which would seem to rule out knocking the corners off the pension for Greek widows or the benefits paid to families with children.
The Greeks are making noises about cracking down on welfare fraud, and indeed on other fraud in a country where low salaries are supplemented by activities within the thriving black economy
The head of one economic research group in Europe has suggested that the task facing the Greeks is so huge that a fiscal crisis is almost an inevitability.
The minister for finance may be needing more than worry beads to sort out this one.
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