Earlier this month the final curtain came down on a Greek tragedy. Although 61.31 percent of Greeks rejected the bailout proposals of European creditors, Greek Prime Minister Alexis Tsipras was subsequently left with no choice but to accept an even harsher bailout plan.
One of the conditions of the plan is for 50 billion euros (US$54.95 billion) worth of Greek national assets to be privatized and held in a trust fund. This is equivalent to the ceding of territory and payment of reparations, and is the price demanded by Athens’ creditors for a financial rescue package of 86 billion euros.
The question is, since the EU creditors ignored the result of Greece’s referendum and appeared willing to shoulder the risk of Greece exiting the eurozone, why did they persist with what Greeks see as an even more humiliating bailout package?
The reason is German Chancellor Angela Merkel saw that Greece had already reached the point of no return, unable to prevent the disintegration of its banking system and the total collapse of its economy.
This Greek tragedy serves as an important warning for Taiwan. There are many frightening similarities between the two countries and this has already been discussed and analyzed by many people. However, most commentators focus on the financial aspect, such as bloated pension systems and the buying off of voters through the benefits system.
Greece’s national debt is 171 percent of its GDP, while Taiwan’s has reached 156 percent of its GDP. Greece’s pension replacement rate is as high as 100 percent; in Taiwan, the average pension replacement rate for government employees is between 89 and 102 percent. The retirement age in Greece is 57; in Taiwan, the average age of retirement for civil servants is 55.
Greece’s financial crisis is not the result of a fire on the opposite side of a river: Unless there is reform, before long the inferno will envelope Taiwan, too.
However, the lessons to be learned from Greece stretch far wider than just financial problems. The reason Greece had no option but to submit to a humiliation of Treaty of Versailles-like dimensions is because, aside from its tourism industry, the country possesses no other sizeable manufacturing industries. Although a “Grexit” would allow Athens to devalue a new drachma, this would not be sufficient to save Greece. This is the underlying reason why Tsipras had no alternative other than to yield to his EU creditors.
The fiscal crisis will not last forever. For instance, Greece’s income replacement rate has been cut to 56 percent and the retirement age has been raised to 67. Over time, the fiscal crisis will dissipate. Nevertheless, it is a complete unknown as to when Greece’s manufacturing and production sector will be able to recover. Unfortunately for Taiwan, President Ma Ying-jeou (馬英九) and Beijing’s scheming may have produced the Greece of East Asia.
Beijing’s strategy of achieving unification through economic means has already hollowed out Taiwan’s manufacturing sector. Furthermore, Beijing is vigorously promoting its so-called “red supply chain” and “made in China 2025” policies, in addition to a 120 billion yuan (US$19.3 billion) strategic fund to nurture its semiconductor industry. These policies are designed to target Taiwan’s semiconductor and other manufacturing industries.
In light of the above, it is bizarre that Chinese Nationalist Party (KMT) presidential candidate Hung Hsiu-chu (洪秀柱) is loudly calling for Taiwan to “stand on the shoulders of China and ride the crest of the wave.” Well aware that Beijing seeks to suffocate Taiwanese industry, the KMT continues to increase the quota for Chinese tourists each year. The plan is to do a Greece — to build a country around its tourism industry — and the KMT is asking all Taiwanese to cooperate with its plan.
The KMT must stop concealing the truth and the public should pay close attention. If you choose to ride the tiger, you risk being flung to the ground at a time of its choosing. Unless Taiwan changes track, in a few years’ time it will head down the same road as Greece. Today it is Greece, tomorrow it will be Taiwan.
This is absolutely not alarmist talk. Greece is bankrupt, but the country will survive. However, if Taiwan turns itself into a tourist economy, it cannot be saved. This is the real lesson to be learned from the Greek tragedy.
Huang Tien-lin is a former president and chairman of First Commercial Bank and a former presidential adviser.
Translated by Edward Jones
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