Government Must Be Prepared To Run Banks Efficiently - Opinion
One can practically hear the licking of the chops that is going on in the ranks of the communist party as they eye struggling private banks with the kind of avid appetite they'd normally reserve for watching capitalist private-sector companies like Lehman Brothers fall from grace.
What's better than a collapsing capitalist company to a communist? Why, it's a company that can be bought with public funds and then controlled by the communist party, of course.
There are strong signals that the communist-led government is preparing to take over - through a bailout - those banks like Laiki that have lost billions of euros on their exposure to Greek debt markets. This is a strategy that is publicly supported by the new governor of the Central Bank Panicos Demetriades, who according to his own research, believes that banks that are government-owned are more accountable and reliable than private sector banks which offer sophisticated derivative financial instruments.
There's only one thing to keep in mind.
The public sector's track record on efficient management of its resources leaves much to be desired. One can cite many examples; Eurocypria (out of business), Cyprus Airways (loss making and uncompetitive), the Electricity Authority of Cyprus (charging the highest electricity costs in the EU). The deficit, which quadrupled to 1.6 billion euros between 2007-2009 is another example of spendthrift and short-sighted economic policy from the current government.
So, what's the guarantee that when the state bails out the private banks, that anything will be different in their case? Until the public sector accepts that productivity is the only way to ensure competitiveness and efficiency, every venture they undertake will lead to more costs and expenses loaded onto already-groaning taxpayers.
One rule of economics is unlikely to change in the near future; our economic system is run on the basis of capital and you can't have more capital going out than what's coming in without facing significant debt problems. Soviet Russia learned that lesson the hard way, one can only hope that our already-struggling economy does not have to be sacrificed on the altar of outdated communist economic theories which advocate the centralisation of all financial resources and their redistribution based on the communist party's priorities.
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