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Tuesday, February 5, 2013

Growth measures - what's that?

Goldman Sachs' President Gary Cohn is articulating one of the major themes of this blog from the start: the only way a creditor can get his money back from a troubled borrower is by focusing on making the borrower strong again! And yes, this elementary logic has been absent from all rescue efforts of Greece so far.

One of my first articles proposed a way to do that. That's just one blogger's proposal. There are many more authoritative experts to make proposals. Sadly, no one is making any!

To me, the key elements of a good plan for Greece would have to focus on the following elements: import substitution, export expansion, immediate focus on shipping and tourism, foreign direct investment as a source of finance and know-how transfer, and full utilization of the EU Task Force to bring the public administration into shape.

The debt is the 'derivative' while the 'underlying' is the real economy. Playing around with the derivative does not solve the problem of the underlying. It's the real economy which requires all the attention.

I do not believe that more deficit spending and/or recycling foreign funds through official bodies (like EIB-financings) is the answer to all problems. Of course, some major new infrastructure projects would help but the benefit will be diluted through the foreign sourcing of such projects and through the unavoidable misappropriation of some of such funds.

What is required are incentives for foreign private sector companies to invest in Greece. That assures that the monies are spent wisely and 'cleanly' and it brings along know-how transfer. There is no limit to the imagination as to what approprirate incentives could be. However, they should be plausible incentives and not 'perks'.

One day, I hope, the EU will wake up to the fact that only a blossoming Greek private sector can generate the resources to service at least part of the country's debt!


  1. Eliminate wasteful red tape, simplify and make the tax code competitive, create a level playing field and investors will come.

    In large part this is what the TFGR is about. As I have shown previously these issues have been known in Greece since long before the current crisis. The Troika did not prevent Greece from doing then, what it is hopefully doing now under the guidance of the TFGR programs.

    If those measures are implemented then investors won't need to hire serried ranks of accountants to unravel tax codes measured in metres - thick, or hordes of lawyers to do battle with armies of bureaucrats armed with purple ink and pretty pink tape.

    Instead they'll employ engineers, scientists, creative arts professionals, brickies, boilermakers and chippies etc - to make the stuff of which the real economy is made.

    Argentina has used incentive schemes for the last 40-50 years. 70 years ago its economy ranked alongside other mid-size resource rich settler nations such as Canada, Australia etc. Today its not far short of being a basket case. The PM can't fly in her plane internationally for fear it will be seized in lieu of unpaid debts.

    Poland could be a good example for Greece to follow, In the last half of 2012 it had a positive Balance of Trade, its GDP is growing


  2. Thanks for long will we have to shout it from the rooftops?!
    Meanwhile, Johnson & Johnson is expanding its investment here - good news.