(February 17, 2012) A deregulated free-market Greece — in tourism, energy, transportation — could transform the broken country.
Greece is a basket case today. It could be a powerhouse tomorrow by acting on three now-evident truths. One, Greeks are neither Germans nor French. They don’t belong in the EU, let alone the eurozone. Two, Greeks don’t need never-ending EU bailouts that can only heighten their despair and diminish their pride. They need to acknowledge that the lion’s share of their debt is unrepayable, as do their creditors, and reset the economy after a formal default. Three, socialism and nepotism have bred corruption and brought Greece to ruin. A deregulated free-market Greece that tapped its immense natural resources would return Greece to glory.
How would deregulation and free markets liberate Greece? Take tourism, a notoriously underperforming industry despite unrivalled attractions such as the Parthenon and some 3,000 islands in the Mediterranean, only 140 of which are populated. Because of a plethora of byzantine rules — resorts could only be built adjacent to major hotels, new golf courses were effectively banned, cruises couldn’t start or end at a Greek port without Greek sailors aboard — Greece has attracted just 3% of Europe’s tourist industry — far less than, say, either Ukraine or Austria. If Greece upped its game to become a travel destination merely as popular as its Mediterranean neighbour, Turkey, the Greek GDP would rise by more than 10%. If Greece became as popular as Spain, the Greek GDP would soar by 37%. Both of these Mediterranean neighbours have far less coastline than Greece and its islands.
Other Greek economic sectors have also suffered from stifling rules. Because no new trucking licences were issued for over 40 years, the cost of transporting goods within the country became a standing joke. It cost less to import a tomato from the Netherlands than to buy one from a Greek farm, less to rent party goods from Italy than from a neighbouring Greek town. The inefficiency associated with the trucking industry thus hobbled the rest of the economy as well. And trucking is only one of some 70 industries that have stagnated under monopolistic rules.
Although Greece’s economic ills have forced it to begin making modest free-market reforms, and although most Greeks favour deregulation in principle, Greeks are not yet ready to abandon the socialistic devil they know, despite a GDP that has already fallen 13% and some believe could fall another 25% to 30%. Neither are many Greeks prepared to abandon the EU or the euro, for fear of the economic unknown. Greeks had another fear, too, in leaving the EU — that the world would then see Greece as a backward Balkan state, rather than progressive as are Northern European countries. This fear, that it would lose status if it lost EU membership, has faded under the withering scorn and humiliation Greece has borne as a result of its EU association.
But Greeks have never been fearful for long, and Greek timidity can become Greek temerity as the country musters the courage to develop what should be one of its very biggest industries — offshore oil and gas. Why courage? Because Turkey, its bitter rival and former conqueror, has since the 1980s threatened Greece with war should it dare develop the Greek Mediterranean. As a result, Greece spends more per capita on the military than any other European country. Even so, Greece with its 400,000-strong armed forces is no match for its better equipped million-man Turkish rival. At a conference earlier this week, former Greek prime minister Kostas Simitis argued that Greece should stay in the EU to guarantee its safety and ward off what many see as an inevitable war, warning that Turkey would win a war in “two to three hours.”
That estimate, perhaps realistic when Simitis was in power a decade ago, may soon be outdated. Greece’s emerging partner and ally in developing Mediterranean oil and gas resources is Israel, which is also helping to develop the massive gas finds off Cyprus, an island nation closely allied with Greece. Israeli jets now patrol the waters between Turkey and Greece and Israel may be establishing an air base on Cyprus to counter Turkey’s increasing military threats in the Mediterranean. With Israel as an ally, Greece may not need the EU’s presumed protection, which in any case may have been illusory. As a Wikileaks cable from the U.S. embassy in Turkey revealed, Turkey in 2003 had plotted to invade Greece — so much for EU immunity.
The Greeks have never been a subservient people. As subjects of the Turkish Ottomans, they repeatedly rebelled against all odds despite brutal repercussions they knew would follow failure, finally becoming in 1832 the first of the Ottomans’ subject nations to win independence. Their rallying cry then — “Freedom or death” — still resonates in Greece. Many Greeks today want freedom from the neo-Turkish domination and freedom from the EU domination.
Should a war with Turkey ensue, and Greeks rise to the challenge to throw off their oppressors, a new chapter in the story of Greece would be written, one in which economic as well as political freedom could well reign.
This article first appeared in the Financial Post.