Even if the economy grows at 2 per cent a year, it will not return to its pre-crisis size until the early s. This would amount to a lost quarter of a century. A lost decade has already happened. Just before the crisis, Greek real GDP per head was about 80 per cent of German levels at purchasing power parity.
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Last year, it was down to 55 per cent of those levels. Unemployment also peaked at 28 per cent in — a rise of almost 21 percentage points from its pre-crisis levels. This is improving. But at the end of last year, unemployment was still 18 per cent, despite the country experiencing mass emigration.
In the severity of its depression and the weakness of its current and forecast recovery, the fate of Greece has been far worse than that of Argentina after , Indonesia after , or the US after If we are to assess how far Greece is truly on the mend, we must start with how and why it got this sick and took so long to recover.
Both fiscal policy and external balances were grotesquely out of equilibrium before the crisis. Membership of the eurozone had encouraged excessive borrowing and, since it takes two to tango, excessive private foreign lending.
Out of the Present Crisis: Rediscovering Improvement in the New Economy
Outside powers also refused to give needed debt relief promptly. Yet the scale of the pre-crisis excesses and post-crisis depression also suggests something deeper: the political and administrative systems and relationships between the people, politicians and the state have been dysfunctional. The most important positive feature of today is the broad consensus on the correct framework for economic policy: Greece will remain in the euro, will stick to a tight fiscal policy and will, at least in principle, pursue reforms supportive of desperately needed economic growth.
Reinforcing the credibility of this consensus is the fact that official creditors hold 76 per cent of central government debt. Moreover, even the relatively gloomy IMF forecasts a decline in the ratio of gross public debt to GDP from per cent in to per cent by The latter would still be very high, but less so. But the country remains far from being able to refinance in the market what it owes official creditors. Substantial reforms have also occurred in the labour market, public administration and the structure of public spending.
A noteworthy part of the latter achievement was a series of politically difficult pension reforms.
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The financial sector is also substantially stronger, with deposits returning to the banks from onwards. Emergency lending from the Greek central bank was almost eliminated at the end of December Above all, there has been a steady reduction in non-performing exposures, though the ratio to all exposures remains exceptionally high, at 45 per cent.
Greece exited from eight years of bailout programmes in August in far better shape than anybody could have expected three or four years before. So what lies ahead? There are three possibilities: continuation of current trends; backsliding into a renewed crisis; and radical further improvement.
What would the first mean? After such a damaging depression, there is uncertainty about what the current growth trend, and the extent of excess capacity, now are. The IMF believes growth will be 2. The government hopes for growth at about 2 per cent in the medium term.
Either way, this would continue to be a steady, but slow, recovery.
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The second possibility is that even this will prove impossible, partly because of the failure to resolve legacy problems, partly because of the risk of backsliding on reforms and partly because of a possible downturn abroad. One important legacy issue is the impaired state of private sector balance sheets, notably in the banks. Not only do banks suffer from high non-performing exposures, but efforts to deal with this are hampered by their weak capital positions, poor profitability and the stretched balance sheets of their borrowers.
Another legacy issue is weak external competitiveness. Notwithstanding the severity of the depression, the current account deficit last year was 3. True, this is a huge reduction from a deficit of nearly 15 per cent in But if demand recovered strongly, the external deficit could grow significantly. This would not matter if inward equity flows both direct and portfolio financed the gap. Otherwise, a debt problem could re-emerge.
Moreover, backsliding on policy is a real threat. Maintaining the agreed primary fiscal surplus of 3. The IMF is also concerned about the already decided 11 per cent jump in the statutory minimum wage, the abolition of the sub-minimum wage for young people and the reversal of reforms to collective bargaining agreements. The authorities have also cancelled the pre-legislated pension reform, while the courts threaten the pension reforms of and The external environment is also a concern.
If there were to be a significant downturn in the eurozone, tourism — a particularly important and buoyant export sector — might be severely hit. The third possibility, however, is determined continuation of pro-growth reforms, to improve the quality of public spending and taxation, modernise and improve administration, raise public investment, encourage private investment, raise the confidence of the Greek people in their politicians and officials and encourage the Greek diaspora to return home.
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Growth could then accelerate and indebtedness would fall faster, generating a virtuous upward spiral. The Greek crisis is now over, but it has left a dire legacy. The economic and political frailties that caused it have also not disappeared. This renaissance in improvement through technology is creating the greatest opportunities for forward-thinking organizations to improve, leapfrog competitors, and dominate global markets in the new economy.
The future of improvement is definitely in the transactional enterprise and extended enterprise space of organizations, and the leapfrogging will occur at warp speed. Two trends will continue to radically change the face of improvement: the rapid emergence of enabling technology and a higher value-add content in transactional processes. With physical processes, one can use the senses to observe a machine' performance, talk to the operator, count and categorize scrap, listen for tool vibration, or feel a leaky air hose.
As the shift in improvement occurs from the manufacturing floor to the transactional process areas, our ability to use our natural senses to solve problems diminishes greatly.
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This calls for the need to blend continuous improvement methods with technology as depicted in the figure below:. Additionally, the problems are much more complex. One cannot readily see the root causes of an invoicing error, a supply chain availability problem, a warranty issue, or product development leadership and process issues that make new products late to market or way over margin targets. These problems typically surface after the damage occurs, when it is too late for preventive improvement.
Reactionary damage control in the transactional process space is not improvement, but unfortunately it is the typical first response and usually makes matters worse. People tend to focus on issues within their own silos and are insensitive to the impact of their actions on the end-to-end process and the total value stream. The challenge of transactional problems is that the "roots" of the root causes are buried deeper in these complex, integrated processes.
In fact, transactional waste has far reaching multi-directional consequences across the enterprise, and the quantified costs of non-conformance are usually astronomical and beyond belief. Cutting headcount and IT budgets is not the answer to these complex but huge opportunities. Transactional processes continue to become enhanced by new technology. Transactional processes are integrated and interdependent. This process relies more heavily on information technology than it ever has before. With transactional processes, one cannot pick up a part and measure dimensional characteristics to determine defects and quality levels.
One needs facts provided via real time event driven metrics, transaction stream mapping, digital performance dashboards, and business analytics. The differences between root causes and outcomes is often fuzzy, and the challenge becomes one of identifying and isolating the right pain point segments of these transactional processes with real facts. Success requires a deep understanding of both improvement and key business processes. This is not your traditional Lean or Six Sigma practitioner at work here. Technology-enabled improvement plays a key role in this next generation of improvement.
Technology is enabling this warp speed transformation of organizations into global, multilevel networks of transactional enterprises. Unlike most Lean Six Sigma improvement of the past, transactional improvement is transparent and comprised of key business processes, information flows, knowledge-based employees, and complex, contradictory decisions. There are literally hundreds of professional and knowledge resources managing thousands of dynamic process touch points, a continuous churn in changing requirements, specific country needs, time constraints, communications issues and exponentially greater opportunities for waste, variation, human risk, and bad decisions.
A major consideration of technology-enabled improvement that must not be overlooked is that the real intelligence lies in the improvement practitioner and the user community in the form of human intelligence.
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The process of improvement still relies on human intelligence to define and segment the right root cause information, analyze data with the right methodologies and tools, draw the right, data-driven conclusions, take the right fact-based actions, and close the loop with the right performance metrics. This is the current disconnect with business analytics activities in organizations today. If one is missing this core competency of structured and disciplined improvement, then technology is reduced to providing more information quicker - the old data rich, analysis poor syndrome.
It is the equivalent of replacing the war rooms of manually prepared performance charts of the past, with digital dashboards that contain even more conflicting and non-actionable information. People, knowledge, and talent create the improvement side of technology-enabled improvement. The integrated enterprise architecture provides the technology side of technology-enabled improvement, and this combination also optimizes the value and ROI of enabling IT investments.
In terms of Lean Six Sigma thinking, the interaction effects of technology plus improvement combined produce much greater benefits than treating the two as mutually exclusive. History clearly validates that organizations have tried one without the other for decades and it does not create sustainable best-in-class business processes. There is no doubt that technology is evolving faster than organizations can assimilate it successfully. The future is all about the correct fusion of formal structured and deliberate improvement with enabling IT.
This future includes how to get the most out of existing technology and integrated enterprise architectures, and assimilating emerging technologies such as mobility, real time enterprises, cloud computing, and other capabilities as a strategic weapon of global competitiveness. For example, some of our clients running on SAP's integrated enterprise architecture have built the capabilities of real time, event-driven and self-managed performance dashboards, data visualization technology, business analytics capabilities, simulation, and instantaneous access and monitoring of critical root cause metrics across the globe.
This is a huge game changer for improvement because it is transforming the traditional wave batch , project-based Lean Six Sigma improvement activities of the past into living, real-time improvement. Emerging technology is a major enabler of the next generations of strategic and continuous improvement.
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