Hamish McRae: Greece will recover — it’s just a matter of how

The banks are shut and the Greek people have a week to ponder whether to accept the harsh terms imposed on them by Europe or whether to accept the advice of their government and reject them. If they reject them, what then?

It is not the place of foreign commentators to tell the Greek people what to do — except perhaps to observe that conventional wisdom (which currently urges Greece to cave in to the financial establishment) is frequently wrong. It was certainly wrong when Britain was kicked out of the Exchange Rate Mechanism in 1992, an event that turned out to be the start of the longest boom the country has ever enjoyed.

What I think is worth saying is that there is no reason why Greece should not be a highly successful economy, as it has been in the past. Indeed between 1950 and the oil crisis of 1973, it was Europe’s fasting-growing economy, with growth rates of 7% a year. This period was dubbed the Greek economic miracle, and there is no reason why the country should not have another miracle in the decade ahead.

Objectively, Greece is in such an enviable position boasting a combination of location, beauty and commercial acumen. Any of the one million Britons who go there every year would acknowledge all this. And not just us: last year was a record with the country playing host to more than 21 million visitors, accounting for more than 15% of gross domestic product.

The harsh truth, however, is that you don’t fix an economy with a week or two of talks, whatever their outcome. You don’t fix it with a referendum either, whatever the outcome. What will matter for Greek people is whether over the next 10 years, the economy can do as well as it ought to be doing, given its potential. That means focusing on what it is good at and the policies needed to exploit that potential.

The starting place for that, inevitably, is tourism. This needs investment, both of money and skills. One good example here is golf, a great holiday attraction because golfers spend money and play throughout the year. The whole of Greece, with a population of 11 million, has only seven 18-hole courses, of which only four are on the mainland — the others being on Rhodes, Crete and Corfu. Cyprus, with 1.1 million people, has six — five in the Greek south and one in the Turkish north. Developing this particular tourist attraction is a no-brainer: golfers don’t just lie on beaches, they spend money and they spend it throughout the year. Greece must be doing something right in that it is getting the numbers of visitors but it needs to extract more money from them, and to extend the summer season.

Let’s take a second example of potential. Greece’s shipping excellence is widely appreciated and the issue there is how to bring more of that business to the country itself rather than have wealthy shipowners live abroad. Much less attention has been paid to the geographical position of Piraeus as an entry point for East Asian and Middle Eastern trade with Europe. Why ship stuff going to Eastern Europe right round to Rotterdam if you can land it in Athens? It is the natural point of entry for the Balkans. Privatisation of the port of Piraeus is one of the bits of last week’s rescue talks that was agreed but this is seen more in terms of what money is raises for the Greek government — some €500 million (£356 million) rather than the long-term economic benefits that might accrue.

The point here, as with golf, is that it needs investment. In the case of Piraeus, the problem is freight rail and road links northwards as well as modernisation of the port itself. Roads are expensive and rail investment, as we have just been reminded in Britain, is a tricky business and takes a long time to put in place.

These are just two snapshots of areas where there is huge potential but where outside investment is needed to unlock it. There are many others: upmarket food and wine production, transport services, cultural exports and so on. Here surely is the nub of the matter. To prosper over the next decade, Greece needs private foreign investment that brings in skills and access to markets as well as hard cash. The test now will be whether “continued austerity” or “break free and see what happens” is more likely to attract that investment.

For the rest of Europe, this is a debate about the future of the euro. To be brutal, the European establishment cares more about the euro than it does about Greece. What matters for the future of Greece, however, is how to engineer another economic miracle. That is the prize.