Nothing will be the same after this crisis

According to a recent article by Costas Simitis, former Prime Minister of Greece, the global financial crisis is dealt in a different way in Greece; suggesting that Greeks have special features, which will allow them to avoid problems and to find their own solutions.

Simitis argues that this view is dangerous because it creates illusions.

Reasons for crisis in Greece

- Strong and negative influence from the global financial crisis and falling demand in the United States, China, Europe and other countries.

- Disadvantages of Greek economy: Lack of competitiveness, excessive debt, low public and private investment.

- Social unrest and political instability.

Highlights

- Changes in the U.S. economy need to come first. Restored financial stability, increase of consumption and decrease of unemployment are some of the core issues. Increased demand in the U.S. will benefit China and the developed countries of the E.U.

- The decade of continuous growth in the U.S. took place through an extensive lending to consumers and businesses. Borrowing in the future will be much more limited. Governments and their banks will operate under stricter rules from the fear of a new financial crisis.

- Recovery plans of developed countries should not only include banks, but also help to rebuild the industrial and productive players who destroyed from the crisis and global competition. The recovery is a goal that requires money and time.

- An additional concern is that U.S. imports are higher from their exports. The recent crisis requires an increase of domestic production in both the U.S. and elsewhere. Millions of unemployed should be absorbed, new jobs and new opportunities to be created for economic activity's shake.

- China is currently buying U.S. bonds and has invested enormous surplus of foreign exchange in dollars. If a trade war will appear there is always an option to press the U.S. by investing in Euros or other currencies and causing the collapse of dollar value. This is not an unrealistic scenario. Mr. Obama asked China to revalue its currency to protect the production of other countries by Chinese competition. China responded that if this happen it should revise its policy of dollar support.

- Under the new conditions established, Americans and Europeans will not buy Chinese products with a same pace as before. Chinese exports, and hence growth of China will be affected negatively as a result. A wave of protectionism and devaluation of currency for competitive reasons is likely.

- Consequences from the crisis in Balkan countries have not yet occurred in full extent. Currency devaluations and bank insolvencies can not be excluded; that might have an impact on Greek Economy.

- Greece will face the peak of the crisis in the autumn, when tourist season will end with significantly fewer tourists than in previous years.

- Countries such as Germany and the Netherlands carry a lot of concern whether they will agree on rescue moves of other states. Greece presents one of the highest public debt in the EU, has already undergone a same procedure just two years ago and so is considered as a relapse. However, a revised Stability Program for the Greek government will come soon.

- In the end, neither U.S. nor Europe alone can save the world economy. The earthquake that shocked the world markets requires a consensus formulation of international economic relations. Greece should find the strength within the E.U. to defend its interests.