In the summer of 1997, a crisis of confidence broke out in Southeast Asia, which put the pressure on the local currency, the so-called “Asian tigers”.
That crisis quickly spread to Russia and beyond, and appeared to affect Greece at the time, when it was implementing a stabilization program in order to achieve the goals set out in Maastricht so that it could join the Eurozone in time.
This sounded an alarm, as the implementation of the program was starting to show signs of stress and Athens felt threatened by the possibility of pressure on the economy and the potential domination of a climate of suspicion regarding Greek financial pursuits.
That is why the necessary actions were taken so that the drachma was inducted in the Exchange Rate Mechanism in order to safeguard the Greek economy against any possible exchange rate dangers.
Intensive secret negotiations followed, between then-governor of the Bank of Greece Lucas Papadimos with Brussels and the ECB. Uncertainty dominated for nine months/
On the 15th of March 1998, at one of the summits, the drachma was inducted in the Exchange Rate Mechanism, the currency’s parity was established, uncertainty magically disappeared, interest rates dropped and the Greek economy enjoyed an unprecedented stability in its financial history.
That day on the 15th of March in 1998 was that era’s milestone and created the conditions for huge growth, irrespective of how things turned out after the drachma was inducted in the ERM.
The historical overview has value. All things considered, we are living through a similar era of great down and international suspicion.
The delay of confirming the results of the financial policy and recognizing the primary surpluses means that the issue of settlement remains unresolved, while the debt viability situation allows every official EU or troika officer to cultivate uncertainty over Greece’s efforts to exit the great crisis.
The statements of EU officials, such as Olli Rehn last week, cast a doubt over Greek estimations and the international financial community.
In this respect it is especially important to complete negotiations with the troika in order to confirm the results of the financial policy in time.
That is why the 23rd of April is deadline. That is when Eurostat is supposed to publicized Greek divs and confirm whether they are accurate or not.
If that occurs and the supreme statistics authority in Europe confirms that the 2013 primary surplus is what the Greek government says it is, then the 23rd of April may turn out to be a milestone for a new, post-crisis, financial period for Greece.
In this case the markets will consider that the path for a new settlement of the Greece is paved, which will put an end to the question of whether the Greek debt is viable or not, once and for all.
In conjunction with the huge primary surpluses and debt settlement, they will prove to the markets that the Greek debt is manageable again.
This will mean that the Greek economy can attract funding once more.
If the markets stop being fearful of Greece then the crisis will have been managed to a great extent, since the Greek economy will essentially have been reinstated in the Eurozone and thus returned to international financial system
Antonis Karakousis
