Last month we examined the Auckland blues. This month we will look at the act of stepping up from a different perspective – being that required by the citizens of challenged EU nations.
Although Europe is struggling under a mountain of debt and unemployment across the 17-member region sits at a record high of 11.2 percent, France and Germany offer a glimmer of hope to international markets. However, as economists have reminded us for decades, one of the key issues that inevitably inhibits economic growth is investor (and consumer) confidence (mind-set). If confidence is a prerequisite to growth, what do EU ministers need to do to facilitate a return to confidence?
To understand the problem the EU’s 500 million residents are facing, I would like to examine it at a micro (individual) level. It is in some ways only by viewing a scenario at this level that we can appreciate both the challenges and changes required to precipitate a new chapter in the EU’s history. To do this let’s consider the life many Greeks, citizens of one of the most deeply troubled states in the EU, are currently facing; but first a quick recap of their history.
What we know is that Greece’s economy, at least in the later stages of the 19th century, was sound however it was devastated by the Second World War. After the years that followed they accrued enormous debt but were unable to generate enough to get back on their feet. That was up until the 1950s, after which time the national economy not only rebounded but grew impressively for the next two decades. It was this period that economists dubbed the ‘Greek Miracle’ (1950s to 1970s). Even after the miracle period, Greece continued to outperform the Eurozone growth average, peaking at 5.9% in 2003 and 5.5% in 2006 – namely through shipping and tourism. As a result of the GFC (and the European sovereign debt crisis) however, the Greek economy contracted 6.9% in 2011 and a further 6.2% this year. As a consequence of their dire circumstances, unemployment has skyrocketed to an unprecedented 23.1%. Their public debt-to-GDP ratio stood at 165.3% in 2011 but after the single biggest debt restructuring in history earlier this year, that was reduced to 132.4%. Nevertheless, their ability to not only service their enormous debt but to earn their way out continues to plague them.
For a Mr and Mrs Smith and their 2.5 children, the state of their economy offers little hope. Their prospects are grim and their ability to pay their way, under the imposed austerity measures, will in many instances prove unmanageable. So what do they do? Do they (as one would hope) engage in a debate in order to improve their and their children’s prospects over time or do they refuse to engage (given most will assume they were not the cause of their nations failure) and instead cling to what little they have left? As the media has informed us, most Greeks have contributed little to their nation by way of taxes; however this is perhaps understandable (albeit entirely inappropriate) given they knew their own ministers were forever rorting the system.
It is clear Greece needs to overhaul its system. It needs to restructure its entire economic and regulatory functions but perhaps most of all it needs to provide its citizens with a sense that if they are prepared to endure further pain, they could create a future. The problem I believe the Greeks will need to overcome from a mind-set perspective is their history. Regrettably many in the political system entered politics because it offered a means by which to get ahead, rather than as a way to contribute back; and although there must be some who honoured the purpose of such a role they were so few and far between the constituents they were supposedly there to serve lost so much faith in the system following the fall-out, they may be unwilling to trust it now.
Although IMF Chief Christine Largarde has praised Greek efforts to address their problems, it is at a micro level where the trauma will be felt and thus at a micro level where the future may well be determined. To this end, I believe the key to a Greek recovery (while extremely reliant on a wider EU recovery) will be to sort out the corruption in order to give the citizens of their nation a reason to endure more pain. If people can see that a period of hardship (even an extended one) will precipitate something greater, most will take it on the chin. However, if people believe they are the ones who are suffering while those who caused it continue unaffected, they are likely to buck the system. For this reason, Prime Minister Samaras’s job will not be to convince the EU that they are prepared to do what needs to be done, but that he has the capacity and mana to change his nation’s mind-set to bring about a change in their ways. If he can do this, then Greece may once again prosper, however, if he can’t get his nation across the line, there is only one way it will go.
For this reason, Mr and Mrs Smith will need to make a decision. Will they choose to trust their Prime Minister on the assumption he could provide an answer or will they assume the pain they know they will suffer will not make an iota of difference? If they believe their fellow citizens will share their pain, they will be more inclined to support such an effort, however, if they believe they will suffer alone, they will be unlikely to accept the conditions.
In order to engineer the change required, Prime Minister Samaras must convince those he is there to serve that not only can he be trusted, but that if he is trusted and supported, things will start to improve. In order to get his nation to engage, however, he needs to state that corruption and self-gain will no longer be tolerated and that from this day forward, the Greek population will be appropriately served by those in the public sector. To achieve this he needs to ensure those employed by the state understand they are there to serve their fellow citizens, not to help themselves (1 out of every 4 working Greeks is employed by the state and more than 80% of public expenditure in Greece goes towards wages, salaries, and pensions of public sector workers). If he can do this Mr and Mrs Smith will be more inclined to accept their predicament and take what responsibility they can (in the knowledge all are affected), and while they may not like what they presume they will have to endure, they know they have little choice if they are to have any chance of a future.
To this end, and in light of the fact that this is about exploring the concept of a ‘step-change’, I would suggest the changes the Greek population will need to create as a nation are twofold. Firstly they will need to have faith in themselves in order to engage in a deeper and more proactive manner to identify where and how they can add value to their country and secondly, they will need to have faith in each other. If they can make a conscious decision to choose to believe they are all in this together - and have the strength and courage as a people to create something fundamentally different – that will go a long way to bringing about an end to their trauma. If on the other hand, they fail to reach such a point, not only will it negate their ability as a nation to work together, it will perpetuate the dishonesty and greed that has been the cause of so much of their recent failure.
Summary
Engineering a ‘step-change’ in mind-set requires conscious effort. It does not come about as a consequence of external stimulus (although stimulus can be a vital catalyst) but rather requires a high degree of conscious activity in order for it to be realised. If the Greeks are to experience a new era in terms of their economy and well-being, they will have to take responsibility for their own attitude and approach in order to bring about the desired change. Because of the behaviour of so many of the nation’s state sector employees, however, their faith in their fellow countryman will no doubt be severely tested.
In other words, breaking through a barrier or ceiling (which is exactly what is needed in Greece and the EU today; accepting of course that major structural changes etc will also be required for investor and consumer confidence to recover) or reaching a new level of performance; whether it be on the sports field, within a business or indeed across an entire nation, requires extraordinary wisdom and foresight from its leaders to give their people (athletes, employees and/or citizens) a reason to believe they are capable of experiencing something better, providing they are prepared to commit to a plan and take personal responsibility for their actions.
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