http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.69Change: -0.05
R/$ = 12.32Change: -0.01
Au 1168.78 $/ozChange: -0.02
Pt 1083.00 $/ozChange: 1.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Oct 08, 2010

Crisis in Greece provides important lessons

Back
Africa|Building|Industrial|Resources|Africa
Africa|Building|Industrial|Resources|Africa
africa-company|building|industrial|resources|africa
© Reuse this



There are many internal problems in Greece that contributed to the country’s relatively high level of debt, which led the sovereign debt crisis.

There was corruption by powerful government and business interests, which meant that government turned a blind eye to tax avoidance and other illegal activities, and there were some unsustainable spending programmes by government. At the same time, the Greek economy was the victim of economic imbalances in the European region and the global economy and the profligacy endemic to global financial markets, which caused the recent global financial crisis. Greece’s inclusion in the European Union (EU) has some advantages in terms of increasing access to resources and a larger market. However, there are important economic lessons about regional and global integration that South Africa can learn from the problems experienced by Greece and other relatively poor countries in Europe, such as Portugal and Spain.

Firms have different levels of technological proficiency and countries have different levels of industrialisation. Therefore, different countries and firms will have different levels of success in regional and global markets. For example, countries like Greece, Spain, Ireland and Portugal face a distinct disadvantage relative to Germany and other more technologically and industrially advanced countries. Even the increase in direct foreign investment that may result in the transfer of skills and technology from more-advanced economies to less- advanced countries has not reduced the big gaps between these countries within the EU. Therefore, the less-advanced countries in the EU have deindustrialised and a situation has emerged where there is a long-running structural economic imbalance between the advanced industrial countries, which run trade surpluses, and the less-advanced countries, which run trade deficits.

When global liquidity increased with widespread financial liberalisation during the 1980s and 1990s, countries such as Greece had access to increased foreign capital. This increased capital allowed the government of Greece to increase debt rather than collect taxes that the rich had to pay. The Greeks could also continue spending on unsustainable public programmes. Greece’s private sector had access to more foreign borrowing, which was not directed to the country’s struggling industrial sector, but to consumption and speculation in financial and real-estate asset markets. At the same time, careless global financiers treated the increasingly indebted Greek economy as if it had similar risks to those of richer countries, such as Germany. The views on risk in the less-advanced countries of Europe abruptly ended when financial markets crashed and the price of credit default swaps, which were used to mitigate the lending risks of the global financiers, drastically increased. The government of Greece ended up taking responsibility for not only public debt but also high levels of private debt when debt markets collapsed. The sovereign debt problem in Greece resulted not only from wasteful and corrupt practices on the part of the country’s public sector, but also from the fact that Greece, like the US and other European governments, bailed out wasteful and corrupt private- sector financial institutions.

The poorer countries of Europe lack macro- economic sovereignty because they have to follow EU monetary policy rules and are part of the euro currency zone. In other words, countries like Greece were unable to use macroeconomic policies to support and further build their industries.

Further, the strength of the euro, mostly owing to the economic activities of advanced industrial countries like Germany, had a negative impact on industry in Greece. The deindustrialisation resulting from long- running structural economic imbalances within the EU played a big role in creating the debt problems now confronted by the Greek economy. The profligacy in deregulated global financial markets allowed the government of Greece and the country’s private sector to continue building unsustainable levels of debt. Economic integration that causes less-advanced countries to lose economic policy sovereignty with regard to traded protection for industry and the use of macroeconomic policy and exchange rate management can lead to devastating economic consequences.

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Seeraj Mohamed News
The Corporate Strategy and Industrial Development Research Programme (CSID) - the University of the Witwatersrand's (Wits') economics policy research unit of which I am director – hosted a launch of the Department of Trade and Industry’s (DTI's) capacity building...
We enter 2011 with much global economic uncertainty. South Africans should consider the country's economic policies and activities within the context of an uncertain and volatile global economy.
Article contains comments
Article contains comments
More
 
 
Latest News
An end to wage negotiations within the local government sector could be in sight as a conciliator’s proposal, setting out a number of settlement suggestions to resolve the deadlock, was expected on Monday. The Independent Municipal and Allied Trade Union (Imatu)...
Development financier Eastern Cape Development Corporation (ECDC) executive Noludwe Ncokazi on Friday said the organisation had the “huge responsibility of ensuring business continuity”, following the resignation of ECDC subsidiary Automotive Industry Development...
South Africa’s second-largest oil refinery, Engen Refinery (Enref), is set to undergo a three-day planned maintenance outage from July 9 as part of an ongoing maintenance programme to ensure that the facility, which delivers a significant portion of South Africa’s...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
NHLANHLA NENE The main constraints to economic growth are domestic
Finance Minister Nhlanhla Nene earlier this month stated that, while South Africa’s 2015 economic growth target of 2% was achievable, it was not enough to deliver the tax revenue needed to combat the country’s challenges.
The World Steel Association has published the 2015 edition of the World Steel in Figures report, which shows an increase in steel production as well as provides an overview of steel industry activities from crude steel production to apparent steel use.
The 25-year master plan for Gauteng’s Aerotropolis project will go through a process of approval and adoption during June and July, says Aerotroplis project manager Jack van der Merwe. “We are also in the process of putting together a special purpose vehicle (SPV) to...
SOLAR PANELS The existing buildings in the Coega Industrial Development Zone lent themselves well to rooftop solar panel installations
The Coega Development Corporation (CDC) plans to fit 15 of its buildings, totalling 127 000 m2 of roof space, in the Coega Industrial Development Zone (IDZ), in the Eastern Cape, with solar panels.
The Supreme Court of Appeal’s (SCA’s) November 2014 judgment, ordering steel producer ArcelorMittal South Africa (AMSA) to hand over the 2003 Environmental Master Plan for its Vanderbijlpark steel plant to environmental pressure groups, confirmed the right of civil...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96