According to an article on Bloomberg, the EU is offering a ten-point plan to Greek voters on the June 26 bailout offer. Being curious, I took a look at the plan and I can see a few problems right away without having read the whole thing.
The first problem is that the Poindexters in the EU know almost nothing about marketing. If this list of 10 points is intended to be distributed to voters, the offer will be rejected at the ballot box because the first several points concern budgeting and the income side of the ledger (tax increases). Now maybe if the voters have it in their minds that the choice is either the taxes, the EU and the euro, or going it alone, the EU might get a better result. But I wouldn’t count on it. Greece has a 25% unemployment rate and they are likely feeling pretty pessimistic and impoverished right now after years of demand side recession. Here in the US, we’ve not had the depth of recession that Greece has experienced and at least I’ve noticed what the amount of it we’ve had does for the public mood. The possibility of Greek voters voting themselves tax increases they doubt they can pay is probably pretty slim.
Next, this 10 point plan is too detailed and too technical. It will encounter problems being understood. If voters don’t at least think they understand what they are voting for they won’t vote for it.
But in addition to potential understandability problems, it is an inappropriately detailed approach to a sovereign society. If I apply for a loan, the bank doesn’t tell me that I have to allow them to manage my budget until I pay it off. But with this plan, Greek voters are being asked to approve micromanagement of their government from afar and to give up nearly every choice they have regarding use of national resources for now and in the distant future. I am not sure what the problem would be in giving Greeks budgetary targets as a condition for aid and then let them decide how to meet them: This is the size of the box, and they have fit all their wants inside of it. However Greeks might meet those targets shouldn’t be of concern to anyone but the Greeks; and it would be a much easier sell than the hardline, ideological micromanagement approach.
Really, I expect this plan to fail regardless of whether it happens in the referendum or not because of how Greece got to this point now instead of some other future point in time- income expectations that simply have not been managed. And there is nothing in this plan about reform of the EU/Euro Zone that would allow for that. Sure enough, Greece has its own set of economic inefficiencies. But they pale in comparison to the structural inefficiencies (monetary policy) inherent to the euro zone. They won’t be overcome with a hardcore inflation ceiling of just under 2%. The EU, IMF and Eurogroup can demand as many tax increases as they will, the revenue just isn’t going to show up and the targets will be missed. One need not resort to the Laffer Curve theory as an explanation of why the revenue won’t show up because the demand side is a mess and will remain that way.