Panagiotis Farmakis and Ioannis Papoutsas are two businessmen and Greek MBA students from ALBA Graduate Business School in Athens, Greece. This summer, they are taking MBA courses here at USD as part of an exchange program. The following are their insights, in their own words, into the Greek financial crisis and the important decisions to be made by EU leaders…
Panagiotis Farmakis, Incoming MBA Exchange Student, Summer 2015
Simple “negotiation thoughts” in a Greek’s mind…
There is no doubt that the Greek financial crisis is one of the main topics on worldwide media. Indeed, Greece faces a very difficult situation regarding its debt management. Since January, the newly elected government of SYRIZA, has been involved in a continuous negotiation process with the aim to bail out the enormous debt and put an end to the tight fiscal policy that has been taking place since 2009. Consequently, Alexis Tsipras (the new elected prime minister of Greece), had only one plan…the one that he PERCEIVED as the only viable plan for the country. However, it takes two to tango…
Unfortunately, a series of wrong decisions, along with bad judgement of the position of the other E.U. partners (about the management of the Greek debt), led the country to the threshold of bankruptcy. And there are so many critical questions to ask as the Greek situation unfolds…
1. Does Alexis Tsipras have the capacity to bargain hard with the rest of the E.U. partners?
2. Did he frame well enough the position of the other side?
3. Does he have the legitimacy to “steer” the country on the rocks? (Outside the E.U.)
4. Do the other European members have the will to approve a bail-out (and thus haircuts of their money). Even worse, will they approve a new financial program?
Only time (and the results) will give answers…
Ioannis Papoutsas, Incoming MBA Exchange Student, Summer 2015
What impressed me a lot during my stay in California is that although Greece is located on the other side of the planet, American people are well informed and aware of the financial situation there. In a few discussions I had, almost by chance, compassion and sympathy were present, even concern about what is going wrong in Greece or what is wrong with the Eurozone. To my understanding, the recent crisis in the US economy in 2008 has sensitized the people, and they feel that the Greek crisis is a similar situation or even connected as a consequence of the same crisis. And I fully share this concern.
In my point of view, big private and governmental debts and extreme leveraging of the economy, as characteristic of the western capitalistic system, has overcome the limits. Countries with huge debt become vulnerable against the international markets. In our specific case, Greece is trapped in a vicious cycle, due to the austerity measures applied in the economy. These austerity measures, imposed by the European authorities, drive to strangle the market and consequently result in even lower income for the government and less sustainable debt.
Greece cannot apply monetary policy, as the US did successfully, to get out of the crisis. This is because the Euro is the common currency in different countries with different interests, or even conflict of interests. Therefore, on one hand, measurements that could help Greece are creating problems for Germany and vice versa. On the other hand, Greece must not get out of Eurozone (Grexit) because this would be a catastrophe for the country, leading to uncontrolled default of the country with unknown consequences, even in the global economy.
This means that in parallel with reforming the Greek economy in order to be more competitive (the Greek governments should work more on this), radical solutions should be applied to reduce the Greek debt (haircut) and revamp the market. We must not forget that similar problems are facing the whole South of Europe, even in countries with strong industrial bases. Therefore, a solution is crucial and of utmost importance to all the western society, not only Greece.
Read more on our exchange students and their experiences!
For more information on exchange programs coordinated by the Ahlers Center, visit our semester exchange website.