Euro scepticism

Think of a country to which the following applies: a restructuring of the tax system, moves to recoup more tax from those avoiding it, the possibility of pension reform, a "sinking-lid" policy on replacing civil servants, and pay cuts for public sector workers.

The last item is the giveaway.

This is not the New Zealand Government's recession-beating economic prescription.

Even if it does have a familiar ring about it - particularly with regard to tax, and cutting costs in the public sector - no-one has yet dared speak of wage cuts in the public service. (Although those in the private sector who have gone without even inflation-linked wage increases in the past year might argue that it wouldn't be such a terrible thing if the same was imposed on their government counterparts.)

The above is, in fact, a loose description of the austerity measures the Greek Socialist Party leader and Prime Minister George Papandreou, a gun held to his head by leaders of the northern euro-zone countries and Brussels bureaucrats, has been forced to deploy.

No-one is very happy about it, for the economic crisis in Greece and within its similarly weak "Club-Med" counterparts - Portugal, Italy and Spain, the so-called PIGS of southern Europe - have undermined the euro.

Its value has fallen 10% against the US dollar in six months, and Wall Street speculators have been making hay in Greek bonds.

As commentators have pointed out, it has also laid bare some of the inherent flaws in the monetary-union-without-political-sovereignty model that applies across the euro-zone member countries of the EU: British commentator Timothy Garton-Ash once referred to it as a "hair-raising adventure... of unification through money".

But equally importantly - as both confidence levels in this country and the views of Minister of Finance Bill English illustrate - the world is far from out of the shadow of the 2008-2009 financial melt-down yet.

At the weekend, Mr English was promoting the "caution" message, suggesting the country is on the road to recovery, but the ride could be "a bit bumpy".

He reasoned the mere fact the downturn in this country was not as severe as it might have been led to a boost in confidence, only now being tempered by a sense of reality.

There is unemployment and the housing market is slow - not in itself a bad thing, many might say, given its perennial tendency to overheating.

But business confidence is lukewarm, too, and the exchange rate continues to make life difficult for exporters.

Nonetheless, compared with Greece and co, New Zealand - having come out of recession and with predicted growth in the forthcoming year - is in reasonable shape.

There are lessons to be learned, however, and should the Euro crisis deepen there will inevitably be international reverberations.

Greece entered the EU in the early 1980s and joined the euro in 2000.

Riding on a wave of national pride and new-found prosperity, capped by the ambitious and hugely expensive 2004 Olympic Games, the Greek people and their government alike went on credit-based spending sprees - living beyond their means.

The conservative government that came to power in 2004 presided over a massive hike in an already swollen public service, did nothing to address decades of graft and tax evasion, and concealed the extent of country's debt.

When Mr Papandreou won office last year, he uncovered the damage and blew the whistle.

The budget deficit is running at 13% of GDP, which is about four times the rate stipulated by Brussels, and Mr Papandreou's austerity package has seen civil servants and agricultural workers alike striking or taking to the streets in protest at lay-offs and wage freezes.

For now, the euro-honeymoon for Greece is well and truly over - and other European leaders will be regarding with anxiety the potential for a domino effect in the similarly indebted and stalled economies of Portugal, Italy and Spain.

For observers on this side of the world, the lessons are clear: reduce budget deficits (New Zealand's tends to run at a high 8-9% of GDP), close tax loopholes, and keep a lid on public sector spending now - or face the prospect of more radical action further down the track.