Viewing Greece as a Turnaround

So I spent some time clicking around the Interweb Tubes and learning about the Greek economy. Here's the scoop.

Greece has two cash cows - tourism and shipping, both of which have been crushed in the current global recession. They've got an agricultural sector which probably is just muddling along as well, but the two big cash earners are tourism and shipping. They've got a smattering of other industries, but the real problem is that they created a nation designed to react wildly to economic cycles. When things are good, they're better, when things are bad, they're worse.

If I was viewing Greece as a turnaround, I'd be hard-pressed to do anything other than slash overhead spending. The government accounts for around 50% of all spending in Greece. That's totally unsupportable when your two major product lines are susceptible to dramatic swings in performance. Recurring overhead spending needs to be based on your minimum expected profit so that when bad times like this happen, you don't run a deficit. In good times, you can spend lavishly on one-time investments. Right about now, they can look at their tax receipts and have a pretty good idea of what their recurring government costs ought to be. If I recall correctly, they need to cut their government by at least a third in order to make the thing sustainable.

Cutting overhead would have to be done on a priority basis. Those cuts are not going to come back. Basic services, national defense, debt servicing and care for the disabled and elderly might be all you could afford. Able-bodied people would be on their own. This is where borrowing money just kills you. Because they're so deeply in debt, your cutoff line for basic services has to be much lower than it would had you not been borrowing all along.

In the long run, they will eventually see good times again. When those good times returned, you would have to pay off their massive debt first so you didn't get hurt so badly in the next downturn. After the debt was paid off, I'd be finding a third industry to invest in, something that wasn't so sensitive to recessions.

So how does this compare to what they're actually doing? Lousy. They're borrowing more money and resisting any cuts in government spending. Good luck with that.

Greek shipping has run aground.
Note: There's a very good blog called Greece Economy Watch for those of you interested in more on this topic.