Thailand must learn the lessons of Greek debacle

As of press time, Greek coalition leaders were discussing a deal to rescue the country from financial collapse. The country’s economic troubles have been prolonged because of a lack of decisive action to tackle the issues.

This time around, the talks have been no easier. But it is imperative that the Greek leaders strike a deal to save the economy. 

Of course, the Greek people will not want to swallow another bitter pill prescribed by the European Union. Angry Greeks took to the streets once again this week to protest against the government’s latest austerity plan, which will mean yet further cuts in jobs and spending. Mass strikes, which halted public services including trains and ferries, were designed to express public resistance against the austerity measures. 

But the latest measures seem to be inevitable if Greece is to turn the situation around. In spite of the public pressure, the coalition leaders do not seem to have any other option but to accept the new round of austerity measures in exchange for 130 billion euros (or US$171 billion) to bail out the economy. 

The new bailout package is imperative for Greece. Athens faces a 14.4 billion euro bond redemption in March. Without the bailout from its partners in the euro zone and the International Monetary Fund (IMF), Greece could default on its massive debts and consequently put even more pressure on the euro currency. There has been speculation that if Greece goes bankrupt, it will have a domino effect on other euro-zone countries such as Portugal, Ireland and Italy.

In spite of the urgency, the deal had not been struck yesterday. The three leaders from the Socialist, New Democracy and nationalist LAOS parties will simply have to face up to the strong resistance from the Greek public. Among the details of the proposed deal are a one-fifth cut to Greece’s minimum wage level, massive cuts in government spending, a massive layoff of some 15,000 state workers, and cuts in pensions for retirees.

It is no surprise that the proposed plan has been met with such anger and resistance. The popular reaction has made some lawmakers reluctant to back the measures.

Nonetheless, Greece has no other choice but to go ahead with restructuring. If it does not, the beleaguered nation is unlikely to secure any further loans, and this could have economic repercussions across Europe.

The Greek tragedy has demonstrated to other countries the result of indiscreet public spending as a result of populist policies. Thailand is heading down the same policy path and should be among the first countries to take serious note of this. What has happened in Greece shows that a country with no fiscal discipline will easily fall. 

Greek politicians won elections by promising populist policies, then spent massive sums without sufficient fiscal discipline. When the economy under-performed, the government could not cut its spending because politicians were afraid of incurring the anger of voters who elected them based on these promises. 

Meanwhile, here in Thailand, the government of Prime Minister Yingluck Shinawatra is considering 15 main populist policies that the ruling Pheu Thai Party promised voters during the general election last year. This is despite the fact that some of these promises are extremely difficult to implement, such as a reduction in fuel prices and a nationwide increase in the minimum wage. Politically, the government is now finding it hard to satisfy even its own supporters. There have been a series of protests from voters, including taxi-drivers who felt betrayed after a rise in gas prices.

Thailand managed to recover from the economic crisis that struck in 1997 because the Thai public agreed to take a bitter pill in exchange for IMF standby loans. Austerity policies at that time also included cuts in public expenditure and job losses. That crisis happened before Thais became addicted to the populist policies that were introduced during the subsequent government of Thaksin Shinawatra. 

The Greek tragedy should serve as a lesson for Thailand that populist policies are a hard habit to break, especially after people become addicted to handouts.