<nettime> From Greece to Goa: The Anatomy of Debt Traps

[V M <vmingoa@gmail.com>]

http://timesofindia.indiatimes.com/city/goa/From-Greece-to-Goa-The-anatomy-of-debt-traps/articleshow/47931800.cms

The entire world is watching Greece with bated breath this week, as
its new socialist government attempts to navigate through a thorny
economic crisis that poses unprecedented threats to the nascent
Euro-zone, the imprimatur of the international banking system led by
the International Monetary Fund (IMF) and the European Central Bank,
as well as the fragile recovery that has followed the global financial
crisis of 2007-08. But Greece is not alone in drowning in huge public
debtâmany other countries are nearly as badly situated, and several
states in Indiaâincluding Goaânow carry similarly worrying burdens.

How did Greeceâa developed country integrated into the very wealthy
European Unionâmanage to slide into such a grave predicament? The
short answer is simple enough: The country kept spending more than it
collected in tax revenues, mainly to keep investing in grandiose and
unnecessary infrastructure (such as the lavish stadia for the 2004
Olympic Games), and to distribute as sops to government cronies. Greek
political and economic elites were addicted to cheap borrowing from
(mainly German and French) banks, taking out ever-increasing loans to
settle ever-increasing interest payments. That party ended in 2009
when the possibility of default became clear. Since that point, Greece
has struggled to borrow money to service existing debt, and has been
forced to pay market-level interest rates that dug its economic hole
so deep that IMF now says there is no possibility of repayment for at
least 20 years.

While there are many similarities between the position Greece finds
itself and the predicament of other countries and statesâincluding
Goaâthe inadequate political integration of Europe over the past 15
years is a complicating factor.

It was Greek membership in the European Union that gave the country
the credibility to borrow vast sums of money from EU institutions, but
when the crisis exploded, the decision-makers in Brussels, Paris and
Berlin chose to rescue their own banks and taxpayers with "bailout"
packages, while imposing severe austerity measures on the Greeks. The
result has been comprehensive economic collapse, 25% reduction in
national GDP, and crippling unemployment rising above 50% for young
people.

Tiny Goa is cushioned by the vast Indian Union, a much more effective
support system than the Europeans have managed to create. Budget
shortfalls engineered in Porvorim are highly unlikely to set off the
kind of chain reaction feared if Greece is forced to leave the EU,
'Grexit', and returns to the drachma as its currency standard.

But the same economic principles playing out in Europe apply to
India's smallest state's burgeoning debt trap, which features
identically irresponsible borrowing, spending on scam infrastructure,
and sops to government cronies.

Despite large hikes in Goa's share of cash from the Central fund (this
year up a whopping 10%), Goa's public debt is heading upward of 10,000
crore and the state is reduced to the fatal strategy of borrowing at
market rates to service interest payments. No less than Greece, this
is the definition of unsustainable economic policy.

Ironically, it was the current chief minister of Goa who most aptly
summarized the impending crisis when he was in opposition in 2010. He
said thenâ"reckless expenditure by the government has led to
liabilities exceeding 7,000 crore, an increase of 100% in the last
five years... (it is) reckless expenditure on the creation of
redundant assets, most of which are of a non-welfare nature and turn
out to be liabilities which incur high capital costs and recurring
maintenance and operational costs".

That highly reasonable analysis by (Laxmikant) Parsekar has been
turned on its head by his own BJP government's outsized spending spree
of a scale never seen before in Goa. A third Mandovi bridge for more
than 600 crore, the controversial bridge to Tiracol (home to exactly
300 Goans) for more than 80 crore, extraordinarily dubious
road-building and road-widening exercises for additional hundreds of
millions of rupees.

While the outrageously expensive Lusofonia Games stadia lie empty and
increasingly derelict, another series of giant white elephants are in
the planning stages and being tendered. The spectre of Mopa airport
comes ever closer, another unwanted money pit of thousands of crores.

Just as the hated 'troika' of lenders and finance ministers imposed on
Greece, Goa's political elites are now also talking of selective
"austerity" which does not allow increased spending on the inadequate
healthcare system, or on the state's woefully mediocre education
infrastructure.

Pay close attention to Greece by all means, because much the same is
happening in Goa too.


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