Dr Paroutis tells ABC Greece needs a growth plan

21 June 2013

Sotirios Paroutis

Associate Professor of Strategic Management Sotirios Paroutis told ABC radio in Australia how Greece has to keep its Government together if it is to build growth back into its economy.

Greece has been thrown into fresh turmoil over plans to shut down its national broadcaster Hellenic Broadcasting Corporation (ERT), with the Democratic Left party pulling out of the coalition. The withdrawal of the party will fuel fears of political instability hampering Greece's ability to manage its debt crisis as the troika looks for the country to meet austerity measures before it hands over the next tranche of bailout funds. 

The Greek Government needs to convince the European Union and the International Monetary Fund that they have the broad support needed to pass the structural reforms and budget cuts that are a condition for the country’s 240 billion Euros (£204 billion) of bailout loans.

Dr Paroutis, who is Greek, said: "Greece desperately needs its coalition Government to stay together during this crisis, a political meltdown could cut off the green shoots that were starting to emerge in Greece

"With unemployment at 27 per cent, there was a feeling that Greece had hit the bottom of the curve and was on the way up with banks like Fairfax Holdings announcing it is investing 164 million Euros in the country’s property, while State Oil Company of Azerbaijan Republic SOCAR has reached a fundamental agreement to acquire a 66 percent stake of Greece?s gas transportation system operator DESFA.

"But the shutdown of the Hellenic Broadcasting Corporation (ERT) by the Greek government has sparked strong reactions and a political crisis, with the Democratic Left party eventually withdrawing its support from the government.

"What a difference a day makes. On Wednesday night, the indicators were that the three political leaders whose parties comprise the Greek government were close to an agreement with all of them agreeing that ERT needed to reform. Twenty-four hours later one of the parties withdraws its support from the Greek government - yet with all parties still agreeing on ERT’s reform. So while the principal target was common (reforming ERT), disagreement over the way the new national broadcaster would emerge caused the crisis.  Of course, politics is not as straightforward as management – we don’t expect it to be – yet managing change in public organisations is not an area where politics is known to excel.

"Before the crisis, in 2009, ERT had 4,553 staff and until a few days ago there were 2,907 ERT employees. It cost about 300 million Euros (£256 million) a year to run and was primarily funded by a monthly fee added to the electricity bill of each Greek household. Despite efforts in the past few years to restructure the corporation and redesign its business model, no significant change of strategic direction has taken place, with employees strongly resisting and often going on strike over any restructuring efforts. Critics of ERT’s business model point to a slow-to-adapt organisation where political parties were able to satisfy their electorate by offering them employment. Also, they argue that ERT did not change its internal processes, as other private media have done, resulting in over-staffing in areas that are no longer in demand, while having to rely on outside suppliers for new services.

"Beyond ERT, the Greek government, in order to secure its next trance of funding from its creditors, the troika, has committed to dismissing 15,000 public servants by the end of 2014 (of which it needs to shed 2,000 by the end of July and 4,000 by the end of 2013).

"Greek officials have confirmed that the troika asked them for “game-changing” reforms in the public sector. One of these measures is about changing the perceptions that a public sector job is ‘for-life’ by actively reducing the public sector work force. Yet, the 2,907 ERT employees represent only a very small proportion of the 650,000-strong public work force and ERT was actually profitable in recent years. It now appears that this decision was aimed at signalling further future radical reforms across the Greek public sector.

"Radical reforms, though, are increasingly challenging to implement in austerity-hit countries. With unemployment levels at high levels, the issue is not so much about political instability but also for maintaining an acceptable level of societal well-being. Going forward, two key dimensions will be increasingly important for Greece: the pain associated with the reforms needs to be shared in a fair and just way, an issue of paramount importance for societal coherence, and there should be more concentrated efforts to foster and grow the ‘green shoots’ in particular industries – these ‘green shoots’ will actually help reduce unemployment - and Greece to revive its economy."

Listen to Dr Paroutis on ABC radio here.

Dr Sotirios Paroutis teaches Strategy & Practice on the Warwick MBA by distance learning, the Warwick Executive MBA and MSc Marketing & Strategy.

 

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