After this crisis, what does Greece have to build on?
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New data reported by CNN Money shows that Greece’s economic output — known as GDP — has fallen 25 percent since the global financial crisis in 2008. That’s a nearly unprecedented decline for a developed country in peace time. Before Greece’s high unemployment, budget cuts, and austerity negotiations, Greece was on the upswing.
“They were a good emerging market with lots of strengths,” Harvard economist Ken Rogoff says.
Among those strengths were a booming tourism industry. Greece has some of the most beautiful coastal resorts in Europe, and there’s that little structure called the Parthenon. Those assets, notes Rogoff, are still there.
“Tourism surely is eventually going to be a bright spot, because at some point the price of the currency and costs are going to collapse,” he says
Going forward, Rogoff says, Greece could take better advantage of its limited assets if it could devalue its currency, thus becoming more competitive to other countries.
“They could bail themselves out more easily if they weren’t on the euro right now, there is no doubt about that,” Rogoff says.
Unfortunately for Greece, tourism is primarily a summer industry. Northwestern University economist George Georgiadis says the country’s biggest asset might be its unemployed doctors, engineers, lawyers and other highly educated workers.
“If Greece were to provide the right conditions for international companies to invest, they would be able to tap into a highly educated population,” Georgiadis says.
Georgiadis points out that in addition to devaluing its currency, Greece needs to address a host of other issues that are bad for business — things like corruption and tax evasion.
Otherwise, devaluation is “just going to hurt the economy because the buying power of Greeks would collapse,” he says.
Georgiadis points out that if Greece does exit the euro, it won’t be able to wait long to implement reforms, or it will risk losing the job skills that are currently languishing in its underemployed work force.
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