You could almost hear the collective sigh of relief Monday when news broke that the Greek government and its European creditors had reached an agreement. The tough 17-hour negotiations resulted in a reform program that will secure the €82-€86 billion needed. To stay in the euro zone, Greece had to agree to considerable economic supervision.
The negotiations had become all the more complicated since a majority of Greek voters, following the advice of their political leadership, voted “no” in the recent referendum to what they see as the continuation of unfair austerity measures imposed on their country.
But the question was not whether Greece should agree to more or less austerity. It looks like Greece has found a way to solve its short-term liquidity and debt issues, and now must find a way to live within its means. Some debt relief is clearly part of the solution. However, what Greece needs is a long-term strategy to tackle the underlying reasons for its current economic malaise.
The future of its economy and its ability to provide high and rising living standards to its citizens depend on growth-enhancing reforms, not simply reining in spending or obtaining debt relief. Beyond all the recent brinkmanship and short-term politicking, it is high time to recognize that Greece’s economic challenges are rooted in its problems of competitiveness, productivity and social inclusion. The power to address these issues really does lie with Greece.
The good news is that, with serious conviction, the structural challenges Greece faces can be tackled. The World Economic Forum’s research shows that we can be cautiously optimistic.