Monday, August 22, 2011

Letter to Prime Minister George Papandreou

Dear Mr. Prime Minister,

if you (and your government) do not drop a „positive bombshell“ soon, and by „soon“ I mean the next few weeks, a disorderly Greek exit from Euroland is likely before the end of the year. I do not have to describe what the consequences of such a disorderly exit would be for Greece and Greeks. Absolutely terrible!

I say this because I have lived through a similar process in Argentina during the 1980s. During the next weeks, the troika will make its next compliance check and they will undoubtedly have to state that Greece is not in compliance. We will see a repeat of the last compliance check: Greeks will once again feel like they live at the mercy of foreign powers. Parallel to this, the second rescue plan will probably go out the window due to the “Finnish Arrangement”. Again, Greeks will feel like the fools of Europe. Then comes the population’s outcry “we have had it; no more of this!”. And then, I am afraid to say, even you and your government will find out that you have had it.

You will be very surprised how quickly things will get out of control once they start getting out of control. If you have never experienced that, let me describe: one day, TV stations will report that savers are losing confidence and starting to withdraw Euros from their bank accounts. The next day you will have to declare a bank holiday and freeze bank deposits. And that is when, as the Americans say, something hits the fan!

A “positive bombshell” could change that process. A positive bombshell would also bank on the sentiment “we have had it” but it would have to project positive change instead of destruction. And that is still possible. I have written to you before about this and I will repeat.

You have to play the “nationalistic card” to motivate your compatriots (even though your actions will hurt many of your compatriots). There is no other way to motivate the majority of Greeks at this point. Here are suggested bullet points of that nationalistic card:

“We will no longer stand by and watch how Greece becomes even more indebted when few Greeks, due to the EU freedom of free movement of capital, can use the proceeds of that debt to transfer their money to Switzerland, etc.!” – The consequential action is to introduce controls on capital outflows.

“We will no longer stand by and watch how Greece becomes even more de-industrialized because, due the EU freedom of movement of goods, everyone can export products to Greece which products we could produce in Greece just as well (and keep the jobs in the country instead of exporting them to other countries)!” – The consequential action is to introduce special taxes on imports.

“We will create new jobs and stimulate the economy by producing locally products which so far we have been importing!” – The consequential action is to introduce a new Investment Law assuring investors of the economic framework which allows them to produce at internationally competitive terms and conditions. Note: this Investment Law could not be applied to the whole country because that would trigger a revolution. It would have to be applied selectively to create new jobs instead of demolishing existing ones.

“We will ask the EU to guarantee compliance with that Investment Law so that investors can have full confidence in the promised economic framework!” – Should the EU not be willing to do that, then look for new friends in Asia.

And then come all those other measures which have been discussed over and over again (fight against tax evasion; liberalizing the economy; etc.). Those measures take time to show results. Greece does not have that time. As a result, Greece needs to revert to a “positive bombshell”.

The international community must get the feeling that now Greece is calling the shots, constructive shots that is. So far, Greece has preferred the position of the follower; preferring others to come up with solutions to the Greek problem. That might have worked if those “others” had been more competent than EU-elites have been in the last 3 years.

Please understand that, at this point, this whole crisis has become an issue of confidence. Greeks no longer have confidence in their own government; the EU does not have confidence in Greece and the world has little confidence in the EU. Someone has to break out of this vicious circle. The EU won’t, because they are far too complex an entity to all pull on the same string.

The conclusion is simple: Greece has to start calling the shots. But those have to be good shots! Good shots will generate confidence on the part of Greeks and motivate them (even if it means playing the nationalistic card a bit). And they might even generate positive surprise on the part of the EU that Greece is not lost, after all.

Again: a “positive bombshell” on the part of you and your government is urgently required. There is no way that further step-by-step and/or circumstantial measures have a chance to prevent the absolute chaos from happening before the end of this year!

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