One cannot argue that there is such a thing as a painless adjustment! When things get out of whack financially, be that a company or a country, an adjustment is necessary and that causes pain. Steve Jobs is the genius who created Apple and thousands of jobs with it. However, when he started with Apple’s turn-around, he first had to fire thousands of people. A country cannot fire its citizens; a country must adjust otherwise.
A cause-and-effect approach can make the pain more acceptable. In other words, if pain is required to clean out a mess, one should inflict the pain primarily upon those who caused the mess. If there were beneficiaries of the mess, it is wise to have them give up some of their benefits to clean out the mess.
I can only guess that the Greek political leadership opted for the opposite approach (i. e. pain was inflicted upon those where were least responsible for the mess) because that was politically the more comfortable approach: anonymous masses remain anonymous regardless how much they pain. Cronies and other clienteles, on the other hand, are not anonymous (and they can even endanger party leaders).
Only at election time do anonymous masses have their say and they have now spoken loudly and clearly in Greece. I fear, however, that they have been misled. My sense is that the so-called anti-Memorandum voters were led to believe that the Memorandum is the cause of all pains and that, without it, all pains will cease. Nothing is further from the truth!
Pain can only be mitigated if the recession is brought to a halt and relief will only occur when growth returns. When an inefficient and corrupt public sector has eroded a country’s wealth over the years, it must be shrunk (be that direct government expenses or indirect public sector waste). However, when a public sector shrinks, there must be an offsetting growth in the private sector to maintain some form of equilibrium. Growth in the private sector requires private investment. Private investment requires business conditions which make the risk/return-ratio interesting for the investor.
So far, the Greek political establishment has enormously focused on shrinking government expenses but I am not aware of any significant measures which would improve private sector business conditions such that the risk/return-ratio becomes more interesting for the investor. A country which is so far behind as Greece is in many respects today has enormous future potential. It doesn’t need to come up with a new revolution like Apple. It suffices to straighten out the public administration and to establish a level playing field which encourages private investment and fair and competitive economic activity.
The anti-Memorandum voters and their elected representatives are well advised to devote their energies less to the details of a Memorandum and much more to the question how Greece’s public administration can be modernized and how a level playing field for value-creating economic activity can be established. That will get them re-elected the next time around and not the tearing up of a Memorandum!