In the aftermath of the Greek debt crisis, there is a hunt on to find the next country that lives beyond its means. The business news media tries to connect the dots and extrapolate from the existing. The sovereign debt crisis story needs its sequels and there must also be some nondescript lessons learnt. After all, a pattern cannot be tagged to be so without repetition. So it is that Hungary has emerged as a suitor. But strangely enough the unwanted attention on its economy is of its own doing to a great extent.
Hungary has gone the way so many countries have gone before it by mixing economics with politics. A new government in place with new promises of tax cuts to keep has met its old enemy - reality. In such cases the only logical way out is to blame the outgoing government and make it known widely that the economy inherited is the weak link. But when this message gets too loud, then there is a danger of people outside the target audience listening in. And that according to Goldman Sachs is the reason for the mini run-on-the-economy that was triggered by the Hungarian government officials comparing themselves to the Greeks.
These messages of subtlety which are supposed to mean different things to different people are hard to pull off. It is especially difficult when the same message has to convey diametrically opposite views. So a comparison with Greece was supposed to alert and lower domestic expectations in Hungary but all it did was heighten international suspicions. The first lesson the Hungarian government might have learnt here is in the use of the double entendre. But the more important lesson has to do with scaring citizens into opting for policies that weren't in the campaign manifesto and how it all can backfire.
"For domestic consumption only" is tricky to achieve when the commodity is communication. In India this was a target of the austerity drive after the 2009 general elections and it involved a train journey for the Congress General Secretary Rahul Gandhi, no less! The message of tightening the belt was sent out through the exercise but the significance of it was lost on the outsider - mission accomplished. It is another matter that the grinding reality of poverty in India made these austerity measures a source of great amusement for the man with no belt or pants.
Hungary has gone the way so many countries have gone before it by mixing economics with politics. A new government in place with new promises of tax cuts to keep has met its old enemy - reality. In such cases the only logical way out is to blame the outgoing government and make it known widely that the economy inherited is the weak link. But when this message gets too loud, then there is a danger of people outside the target audience listening in. And that according to Goldman Sachs is the reason for the mini run-on-the-economy that was triggered by the Hungarian government officials comparing themselves to the Greeks.
These messages of subtlety which are supposed to mean different things to different people are hard to pull off. It is especially difficult when the same message has to convey diametrically opposite views. So a comparison with Greece was supposed to alert and lower domestic expectations in Hungary but all it did was heighten international suspicions. The first lesson the Hungarian government might have learnt here is in the use of the double entendre. But the more important lesson has to do with scaring citizens into opting for policies that weren't in the campaign manifesto and how it all can backfire.
"For domestic consumption only" is tricky to achieve when the commodity is communication. In India this was a target of the austerity drive after the 2009 general elections and it involved a train journey for the Congress General Secretary Rahul Gandhi, no less! The message of tightening the belt was sent out through the exercise but the significance of it was lost on the outsider - mission accomplished. It is another matter that the grinding reality of poverty in India made these austerity measures a source of great amusement for the man with no belt or pants.
More Links:
http://www.ft.com/cms/s/0/b6d5ad48-726b-11df-9f82-00144feabdc0.html
http://www.moneycontrol.com/news/world-news/will-aim-to-meet-deficit-goal-hungary-_462372.html
http://news.bbc.co.uk/2/hi/business/10254462.stm
http://www.google.com/hostednews/afp/article/ALeqM5il4ORqz4woTzfBKJ4ziqsFyPr2wA
http://timesofindia.indiatimes.com/india/Rahul-Gandhi-joins-austerity-drive-travels-by-Shatabdi-Express/articleshow/5012898.cms
4 comments:
i think Inclusion of such weak european nations(in terms of economy)into the euro zone made the currency "Euro" suffer and weakened its competition with the dollar(in replacing it).. Imbalance in the greek economy is from few months, but the seeds are sown nearly a decade ago...
what is your say on the statement that socialist regime (PASOK party,2004)in Greece hampered the growth and led to rise in national debt?
My interest is more on how these complex issues get reported. eg: Take the Bhopal Gas Incident's reactions going on now..Govt needs to be seen to be acting domestically and it needs to be soft-pedaling internationally to keep the +ve investment outlook going.
On the Greek crisis: I read that they get paid 13 months salary for 12 months work and they have enmass plans of retiring at around 50. So they say that Greece having the euro cushion, went bust by trying to live off its neighbours . Again these may be exaggerated by the German and French so they may not be asked to post bail.
But socialism and unionism are present in all of europe - France has massive strikes going on now right now it seems. So if Greeks fail because of their socialist commitments and US fails because of neo-liberal economics..then where is it getting done right?
Wish I had some basic Eco know how though. All we hear through the papers and the news are simplifications of generalizations of assumptions.
Post a Comment