Moscow Times
June 28, 2011
Some commentators have argued that Greece should emulate Russia, saving itself by default, devaluation and restructuring — assuming that, like Russia, Greece would quickly rebound, benefiting from a suddenly competitive currency, debt relief and even the renewed ability to borrow in international financial markets. In fact, such advice is almost comically misguided, based upon a failure to appreciate the fundamental differences between the two countries.
Like Russia in 1998, Greece is currently faced with a debt crisis, an inflexible currency regime and a largely unreformed economy with a dysfunctional tax system. The similarities, however, end there. Russia had a population 15 times that of Greece, as well as a legacy of Soviet industrial infrastructure almost entirely autonomous from the West. Following the 1998 devaluation and default, the plunging ruble rendered Soviet-era industry suddenly competitive as imports were squeezed out, with Russia benefiting from a deep internal market and complete self-sufficiency in vital resources, in particular energy.
Following the 1998 crisis, as foreign products were priced out of the domestic market, import substitution fueled growth in industrial output. Then a surge in oil prices coupled with the economic orthodoxy of Vladimir Putin's government resulted in the "twin surpluses" — both the budget and the current account swung into huge surplus as the state wrested a lion's share of oil export revenues from the oligarchs.
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