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Friday, February 15, 2013

Greed is not good but sustained foreign investment is!

This short editorial from the Ekathimerini reinforces the obvious need for new investment to reduce unemployment. The following sentence caught my attention:

"The state, society and the media must change their hostile stance toward investment and stop seeing it as something suspicious and profit as a bad thing."

I was not aware that there was such a hostile stance against investment on the part of the state, society and the media. Instead, I thought that stance did only apply when it came to 'foreign' investment.

If there is indeed a hostile stance towards investment on the part of the state, society and the media, then we are really back to square one of economic understanding. Then the government might indeed be well advised to start a propaganda blitz with tutorials, etc. to explain to the Greek public how jobs come into existence.

My point all along has been: it's not only investment in general which Greece needs. It is particularly 'foreign' investment which ought to be the top priority.

Why foreign investment? Two reasons. One is for Balance of Payments purposes and the other one for accelerating the know-how transfer which Greece needs in most areas of its economy.

When Gordon Gekko exclaimed that 'greed is good!', the audience should have been ashamed instead of amused. Should the Prime Minister go on TV a couple of times per month to explain to Greeks why 'foreign investment is good!', then he should be congratulated.

There is only one mistake one can make with foreign investment and that is - one attracts the wrong investors. That is investors who don't have a long-term investment perspective but, instead, a shorter-term profit orientation. Greece is well advised to stay away from the latter!


  1. When you say

    "There is only one mistake one can make with foreign investment and that is - one attracts the wrong investors."

    The same is true in life. Attracting the wrong sort of friends (they sponge off you). In business. Attracting the wrong sort of clients, who take up so much of your time that you can't make a profit on them.

    The art is in getting rid of them and it is here that some gentle reverse-psychology is needed.

  2. I find this a very odd statement on the part of Kathimerini, taken at face value, and considering that the majority of greeks, including professional work for or own small businesses. Of course greeks believe in profit and in business. (Though perhaps the civil service has forgotten this, and the fact that private sector business pays a good part of their salaries).

    However if this statement applies to the present, then yes, many greeks do fear that companies will move here to take advantage of the Troika mandated minimum wage, of 584€ a month. This minimum wage, which has no automatic adjustment for time served; from which tax is deducted, and which may or may not include provisions for IKA and unemployment benfits, seems to most greeks a poor return for their sacrifices, since it obviously cannot support a family. Further, it is arguable that it can even support one person, since our bills have doubled, and we pay more for our shopping basket than the germans, due to the still unchecked cartels. If a person on minimum wage owns a property, this wage obviously cannot cover property taxes, leading to probable loss of property and homelessness, and/or imprisonment in the newly suggested tax prisons .

    People are afraid that we are being pushed on purpose and by design to become the new China. This is not unreasonable given the fact that Chinese wages are rising and companies are starting to repatriate factories from there. Greece's (and Portugal and Spain's) closeness to the heart of Europe means considerable savings for European manufacturers in terms of transport.

    Exactly such a proposal was outlined by the head of German Industry for Greece last summer - he is considered an 'expert' on Greece having being the head of Hochtief for the construction of the Athens airport. (By the way, the airport commission was directly awarded to Hochtief at EU level, under german pressure, breaking the EU laws on open tender for public buildings.)

    His proposal was for SEZs in which greeks would work 13 hour days, 6 days a week for the minimum wage. This breaks numerous EU laws on labour protection. Furthermore there would be no IKA or pension benefits.

    I welcome any investment that would honour EU law and recognise the cost of living; that would reward good work. But I and many others are worried with good reason about the above.

  3. I think we just reached the crux of the Greek problem. I perfectly agree with the above statement from Kathimerini. Greeks do not like investment or capital concentrations of any kind and large state companies (or state dependent-obvious parts of the political system, like civil engineering companies living off state contracts)are the only kind TOLERATED. That is why, for example, the Costa Navarino hotel near Kalamata needed 25 years to get all the licenses. Nobody but the owner really wanted it.
    As I have mentioned before in this blog (remember my stating that Greeks want their economy organized along the lines of the UK war economy or that an Oklahoma like take over is necessary? The above is why)Greece is not capitalist in the sense understood by the rest of the western world. It is a medieval country attempting the impossible-enjoying the fruits of modernity while retaining Ottoman or Byzantine political and economic structures. Excuses like they want us to have China wages etc are just that: old excuses in modern language.If you start a car factory in Greece and look for workers at 50000 euro/year with guaranteed work until retirement, you will find few takers (at least until 2012) Industrial discipline is unGreek.
    That was acceptable by the global powers that be up to the end of the Cold war. Now the game is up and the Greek political class was presented with an ultimatum :modernize or else. I suspect this was done sometime after 1990, but the soft methods failed and the crisis gave the opportunity for some hard love. If this looks too much trouble for the sake of Greece I will answer like the German President of the Industrial Federation (the German ΣΕΒ) :Look at the map.
    I also agree that, from the economic point of view, we are at square one of economic understanding. The problem is deeply political. And public relations blitzes help, but not much. The only approach is the one taken by the Troika: break the old by starving it of money and push for the new. That is why the economy must be forced into a 1930's like depression. That way the resistance against reform will weaken a lot and eventually the legal, regulatory and political props of the ancien regime will be removed. Hopefully then the country will recover. It is neither easy nor without dangers.But it seems the only way.
    I am going to make a suggestion. I understand that your wife is Greek and that you visit the country often. Go to a video club and get a 70's movie: THE HEAVY MELON -ΤΟ ΒΑΡΥ ΠΕΠΟΝΙ (greek version of the phrase all hat and no cattle). The main character and its tribulations are a perfect example of Greek economic and political thinking.

  4. If I wanted to get my production out of China, then I would only relocate to Europe or USA if I could do something like Philips did with their shavers - fully automated hi-speed robotics facility. Otherwise I'd go to Malaysia, Vietnam or Indonesia etc where the minimum monthly wage ranges between €120-250 per month.

    But that's not what I came here to talk about

    I just saw this in eKathi Hollande to explore outlook for French firms during visit to Athens. In which there is this

    Hollande is expected to propose the leasing of two French FREMM-type frigates to be used in prospecting for oil and gas in the Aegean ... such a development would pave the way for boosting French business involvement in Greece, with companies such as Total, the oil and gas multinational, believed to be interested in future projects.

    Eh- prospecting in the Aegean for oil and gas with a couple of French Frigates (which haven't been built yet) - seems a bit odd - why would I need Sylver cruise missiles and Exocets to do oil & gas exploration.

    Turkey just bought itself a seismic survey vessel for oil search - from Norway, I guess it can do that because its NOT in the EU. I suspect Norway knows a heck of lot more than France about searching for oil and gas under the sea.

    Does anyone have a rational explanation for why Greece would lease a couple of French Frigates to do offshore oil and gas exploration. I guess the depth charges could be useful.

    Or is France saying we'll give you longer to pay your existing debts providing you take a couple of these frigates on 30 year leases - you can say their for oil search - they won't know. Reminds me of BAE systems shoving military radar systems down the throats of the Tanzanians for their civil air traffic control.


    1. The deal is simple really. Greece buys lots of French weapons and the political group in power in France takes its cut. So Monsieur Hollande is coming to arrange for his share. Given his difficult political position he needs the cash. So Greece buys frigates, Hollande and some Greeks get lots of loot and then, hopefully, Greece gets political support in extracting the gas. Elementary my dear Watson.

    2. Meanwhile Turkey is out there with a real survey ship 'putting facts on the ground' as they say.

    3. That's true but I am not so sure how meaningful these facts are. I would rather have the French president on my payroll than doing surveys. In any case there is so much theater and posturing for internal political reasons in all this that I am not sure what is real and what playing to the gallery.

  5. Tsigantes / theAthensdog

    You might be interested in looking through the exchange between Xenos, Dean Plassaras and Anne Baker in the comments to an article by Nick Malkoutzis.

    1. Most is just noise and repeating slogans and received wisdom. But some of it is exceptional. Copy-paste the best part:"Another reason, that I have direct evidence of, is that state officials and politicians used to prefer not to receive EU funding if it would benefit persons or companies outside of their political influence. They also preferred to turn down money if it presented difficult choices — like having to decide which of three Pasok-oriented companies would benefit from Eu financing. The correct way, of competitive tendering, was always and remains faked. No politician here believes in competition, and I suspect that few Greeks do as well."
      Perfectly correct. Replace "outside their political influence" with "outside their duchy/tribe" and you get a good idea of how the country works.Everybody in Greece knows it, but will not talk about it. If you corner them in,say, a taverna you were going to be verbally abused. Important point: fear has changed this. Now the "european minded" are on the offensive and the response is not the usual verbal abuse (traitor, naive, or the triumphant go to the US to live if you don't like it)but silence. This is a great step forward. And it is due to the drying out of money in the economy. Suddenly delaying to avoid the political choices is not an option. The political cost of not getting the EC money as soon as possible is several times larger than the political cost of ignoring your rebellious vassals/fellow tribesmen and upsetting political balancing acts.
      Another point: most Greek politicians are not vlakes(stupid) as it is often repeated in the exchange. Some of them are, but most have found themselves completely outside their envelope of experience. Something like me or you required to run not a bank or an IT outfit but say a big hospital. We will look stupid. And this is the most dangerous part, because it creates the feeling of operating in a pit of molasses where nothing moves.
      Two seemingly irrelevant questions: why did the IMF went public with the "mistake" right now? And is the upsurge in terrorism obvious in Greece lately unrelated to the reform pressures?

    2. Yes, Dean Plassaras pops also up in Varoufakis' blog and has often a nice, but not anyuthing to do with the item, video there. For me it is, as theAthensdog says: "Most is just noise and repeating slogans and received wisdom."

      I think it is worse.

      I do not even go there, not even after Herr Kastner's recommendation. I am just here for a moment to watch the news. I like it to follow the comments, the debates here. Wonderful. Clear language.
      I admire Gemma, she is the only female who really knows where she is talking about in this atmosphere of Knowledge. I belong more to the Plassaras types. :)