Greece's crisis today could well be our crisis tomorrow
Published 25/06/2015 | 02:30
Greece will default on its €324bn sovereign debt for a third time. What's at stake this week in Brussels is whether this is done by agreement or disagreement. Greece's first bailout - when only private investors got burned - left its debt/GDP ratio at 120pc. After five years of austerity displacing one-fifth of its economy, it hovers unsustainably at 180pc. You can't solve debt distress by piling on more indebtedness. Rolling over loans without write-offs only postpones the inevitable ultimate settlement, while putting Greece deeper in the mire.
The Coalition's best economic initiative was the reduction of VAT for the hospitality sector from 13.5pc to 9pc. Since 2011, this notionally cost €644m; yet tourist numbers increased from 5.9 to 7.3 million, while 24,000 jobs were created directly in the restaurant and hotel industries, along with 11,000 indirect jobs. Meanwhile, our Government, along with the rest of Europe, insists Greece should immediately raise its compatible VAT rate from 13 to 23pc immediately (irrespective of holiday contracts).
Tourism is Greece's largest indigenous industry. Economic recovery is impossible if their tourism product is uncompetitive, relative to other European sun destinations. Greece can't repay debts without a vibrant holiday sector. Nobody cares about their vital national interests.