Thailand Must Learn The Lessons Of Greek Debacle

[webfact]

EDITORIAL

Thailand must learn the lessons of Greek debacle

The Nation

BANGKOK: -- Populist policies led the Greek govt into financial ruin; the same fate awaits us if this govt does not curb its extravagant spending plans

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.

-- The Nation 2012-02-09

[cloudhopper]

"Nonetheless, Greece has no other choice but to go ahead with restructuring." Nonsense.

Greece gave up it's sovereignty when it abolished the Drachma for the Euro, which they cannot print. They will default, go back to a very devalued Drachma and slowly rebuild just like Argentina.

The BOT can print as much Baht as they want to. That has its own risks but is an entirely different problem than that Greece is facing now.

[Reasonableman]

Let's hope then that the BOT is too big to fail. Amassing further huge amounts of public debt (much of which we've been carrying since 1997) will land the country in a similar situation as Greece, and many other countries around the world. As we saw with Iceland, countries can go bankrupt if they do not have sufficiently strong economies to finance their debt.

"Nonetheless, Greece has no other choice but to go ahead with restructuring." Nonsense.

Greece gave up it's sovereignty when it abolished the Drachma for the Euro, which they cannot print. They will default, go back to a very devalued Drachma and slowly rebuild just like Argentina.

The BOT can print as much Baht as they want to. That has its own risks but is an entirely different problem than that Greece is facing now.

Edited February 9, 2012 by Reasonableman

[Soi Sauce]

Seems my prediction on a former thread may come true. Gov policies cause the baht to collapse leading to austerity measures and privatisation of the Country's nationalised industries. With the baht low, these will cost very little to those having cash abroad.

I wonder who the buyer would be.

The populist policies combined with the debt transfer from gov to BOT, and the emergency decrees issued to borrow money it dies not need to borrow support this.

[BigJohnnyBKK]

Thailand isn't in anywhere near the kind of dire straits facing GIIPS and even the US, they've been relatively conservative in handling government finances, as are most Asian countries.

I think the point of this editorial was more along the lines of warning against letting the population get used to government subsidies, as the tax base is much too thin to allow any kind of real safety net like more developed countries have.

Government handouts here are more like the old-fashioned "handing out turkeys at Thanksgiving" or the feudal lord hosting a feast for the village - random and arbitrary, and therefore more effective in generating the appropriate gratitude and feelings of obligation upstream.

If only increased government spending here was actually targetted at long-term policies that actually benefited the common people, like decent education and reducing corruption. Ah I can see the pigs flying over the frozen lakes of hell. . .

[dplast]

Not sure of the point of the editorial - it's as comparing mangos to potatoes. Woops, not sure of the analogy but my point is that Thailand and Greece are very different economies. Thailand’s 2010 ranking by the IMF (international monetary fund) is 24 with a GDP (gross domestic product) of $589,005 nearly twice that of Greece at # 37 with a GDP of $318,670.

Furthermore, here is the real problem stuff - Greece’s per capita income is $27,875 approximately 5 times Thailand’s per capita income of $5,281. So at this juncture it’s not that Thailand’s policies will place it in economic jeopardy but Thailand has the kind of economic balance that would have kept Greece solvent. With that in mind debt restructuring is not the only answer for Greece. Also needed is the continuation of the very unpopular negotiations with unions and government employees to bring its per capita income in line with GDP giving debt restructuring a chance of lasting results.

[Reasonableman]

A counter-argument/model may be gaining some traction; that is that economic stringency/belt-tightening reduces much-needed economic growth, so that it becomes the disease rather than the cure. It reduces employment and demand for goods and services, reduces incomes and much-needed spending by consumers, and reduces government tax incomes, resulting in lowered production and turnover, with concurrent reductions in social services (health, education among them), which feeds upon itself to further reduce economic growth, perpetuating an ever-shrinking economy.

Edited February 9, 2012 by Reasonableman

[wxyz]

it should be ILLEGAL for govts to borrow money,

it is a scam by banksters, wall stealers & politicians to enslave the citizens,

they all get rich and the citizens get bent over and screwed,,,

Edited February 9, 2012 by wxyz

[wxyz]

"Nonetheless, Greece has no other choice but to go ahead with restructuring." Nonsense.

Greece gave up it's sovereignty when it abolished the Drachma for the Euro, which they cannot print. They will default, go back to a very devalued Drachma and slowly rebuild just like Argentina.

The BOT can print as much Baht as they want to. That has its own risks but is an entirely different problem than that Greece is facing now.

Yes please do, print lots and lots of baht,

and hopefully BOT will lower their peg to the secret basket of securities.

Edited February 9, 2012 by wxyz

[BlackJack]

more reasons to buy gold

[belg]

greek people hardly pay taxes, small percentage here in thailand.... but recently, greece stopped from paying pension for 69.000 dead people, yes, the family did not report anything and continued to cash in the pension of the dead person... nobody wants to pay taxes, but overthere : large amount of tax evasion + corruption + overpaid salaries + fake blinds and disabled people = chaos ...

they should never have been admitted to the eurozone, and all the financial ministers of all involved counries knew this, so they allowed it, for a big "greece" of the corruption wheel

kick them out, take your losses, they will never paid back anyway

[wxyz]

greek people hardly pay taxes, small percentage here in thailand.... but recently, greece stopped from paying pension for 69.000 dead people, yes, the family did not report anything and continued to cash in the pension of the dead person... nobody wants to pay taxes, but overthere : large amount of tax evasion + corruption + overpaid salaries + fake blinds and disabled people = chaos ...

they should never have been admitted to the eurozone, and all the financial ministers of all involved counries knew this, so they allowed it, for a big "greece" of the corruption wheel

kick them out, take your losses, they will never paid back anyway

Same with the rest of the EU Mediterranean countries, the (PIGS) Portugal, Italy, Greece & Spain.

Edited February 9, 2012 by wxyz

[Chris Lawrence]

Again, what a load of bull.

The Govt lied to the international community about their real GDP.

Their pensions which are very generous start at 58.

Their greatest contributors to GDP are Tourism and the Lotteries. They do not have a strong manufacturing industries.

Most Doctors earn't 12,000 euros last year, so they were not taxed at higher rates.

Very generous medical benefits scheme.

No one wants to pay tax. A lot of cash in the economy. Some consider this more to be genetic.

Their rail system makes say 100 million euro, while its wage bill is 400 million euro.

Govt employees are paid 3 times more than other employees.

And the list can go on.

To say that Thailand is heading in the Greek direction, I can only think that the reporter from the Nation is getting it from behind.

Thailand and most other countries have a long way to go before a Greek tragedy occurs again. Their political system has provided and allowed many situations to go unchecked, or delivered a lifestyle that is hard to give back.

The reporter does not display any knowledge of international affairs and economic reality. However, the reporter does display a bias that does not help the story or the realities that are occuring.

[wxyz]

As bad as Greece is, buying Greek bonds would be a better investment, than Thailand.

Edited February 9, 2012 by wxyz

[housepainter]

Thailand would be wise to learn good from bad first. Things like honesty, decency etc.

You never know. Most of think it a good place to start but then we were under fives at the time.

Next.

[geriatrickid]

Greece has reneged on is agreement to enforce tax collection and to cut its bloated civil service. Unlike Greece, Thailand's tax evasion is reflected in the limited amount of social program spending. Nor does Thailand have the over inflated cvil service payroll of Greece. Thailand's social spending comes in the form of largesse following a disaster. It is much easier to turn the tap off with that approach than it is if there are existing bloated payrolls, pension and welfare schemes as is the case of Greece.

As much as I think Greece should be left to sink or swim, the over exposure of German lenders could very well cause a financial meltdown in the rest of Europe. I believe the concern for Greece is more about the risk to German lenders.

Edited February 9, 2012 by geriatrickid

[wxyz]

The difference is, Thailand has its OWN currency, Greece does not.

Edited February 9, 2012 by wxyz

[Keith2704]

The baht is already on the slide. Anyone on this forum here in 1996 ? Do you have a feeling of deja-vu too ?

[Chris Lawrence]

Greece has reneged on is agreement to enforce tax collection and to cut its bloated civil service. Unlike Greece, Thailand's tax evasion is reflected in the limited amount of social program spending. Nor does Thailand have the over inflated cvil service payroll of Greece. Thailand's social spending comes in the form of largesse following a disaster. It is much easier to turn the tap off with that approach than it is if there are existing bloated payrolls, pension and welfare schemes as is the case of Greece.

As much as I think Greece should be left to sink or swim, the over exposure of German lenders could very well cause a financial meltdown in the rest of Europe. I believe the concern for Greece is more about the risk to German lenders.

The biggest problem is debt to GDP. The Greek Govt. lied to borrow money. Now the lenders want it back. Because the Greek's have higher outgoings, the ability to repay is affected. The Greeks although did a good job on screwing themselves, thinking they wont get caught, are now trying to reduce the amount they have to repay. The other factor is that only recent they were a socialist run/led govt.

These issues, being very important were not mentioned in the article?

[z12]

We're turning into GREECE

I think we're turning into GREECE

I really think so

Turning into GREECE

I think we're turning into GREECE

I really think so

Edited February 11, 2012 by z12

[MaiChai]

You cant compare Thailand and Greece like this. Example: when was the last time you bought something with Made in Greece on it? Greece has had an almost non existant economy for a long time, while Thailand has a strong, export led economy. In fact the only thing you can compare is that they are both popular holiday destinations?

Edited February 11, 2012 by MaiChai

[nurofiend]

as people have already said...the greek problem is more down to widespread tax evasion than government overspending

i mean to not even mention tax evasion when referring to greece's problem.. this author really should do some homework next time