EDITORIAL - Lessons from PIIGS

All of a sudden, the PIIGS don't seem omnipresent. Or, they are not spoken of as often, or with the same sense of depredation of a few years ago.

It is not that the economies of Portugal, Ireland, Italy, Greece or Spain are fully returned to health, but they are clearly on the mend.

Recently, for instance, Ireland emerged from the €35-billion European Union-backed bail-out, necessitated by the collapse of its banking sector, and Spain and Portugal are following suit with their €41-billion and €78-billion programmes, respectively.

Greece, the most poor of the lot, still has a significant way to recovery, but, like the others, is obviously on the right track. Its debt remains at a staggering 127 per cent of gross domestic product (GDP) and the government's deficit is over 12 per cent of gross domestic product, yet Greece will, in 2014, record growth after seven years of recession, during which its economy shrank by a quarter and unemployment rose to more than 27 per cent.

But the prospect for growth is because the Greek economy is becoming more competitive and the government is getting out of the way of business and beginning to curb its appetite for debt by streamlining the size of the State. Last year, for instance, the government ran a primary surplus, against a deficit of 10 per cent at the onset of its crisis in 2009. The surplus was achieved ahead of target. Over the same period, a current account deficit of 12 per cent of GDP has been transformed to a surplus of around one per cent.

Expectedly, the country's exports are up, as is tourism, which, allied with a sustainable primary surplus and economic growth, will affect the country's debt dynamics and, ultimately, impact investor confidence, the expansion of the economy, and job creation.

The money markets have taken note. Not long ago, few lenders would consider Greek bonds, except with a long pole that fished a yield of 30 per cent. Greek banks were recently in the market raising capital and the country's bonds now yield under eight per cent.

Arriving at this place has not been easy for Greece, or, for that matter, Ireland, Portugal or Spain. Their governments have had to slash expenditure, which has meant slashing social services, freezing wages, and cutting public-sector jobs. In Greece and Portugal and Italy, governments have collapsed, or have grown unpopular, in the face of painful reforms.

staying the course

In those countries with signs of recovery, the important thing is that they have stayed the course. In that are important lessons as much for the PIIGS as for Jamaica.

We, too, faced a Greek-style crisis, marked particularly by a debt that neared 150 per cent of GDP, that required more than half of the Government's annual Budget to service an economy that for four decades averaged annual growth of less than one per cent. The Government's penchant for debt inhibited growth, steering investable capital away from the private sector.

In the past year, with lenders being unwelcoming to Jamaica, our Government, under the tutelage of the International Monetary Fund, has begun some tough economic reforms, including strategies for reducing the debt and consolidating the fiscal accounts. The Government is being forced to live within its means. It is important that Jamaica stay the course if we are to reap the gains.

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