Greece Ten Years Ahead was the report which the Athens office of McKinsey published in the summer of 2011. Here is the Executive Summary. To recap: the report proposed policies which would lead to about 500.000 new jobs in the next 10 years and add about 50 BEUR to the Greek GDP. Since we are already one-fifth of the time down the road, the question would be: where are the first 100.000 new jobs and the 10 BEUR of new GDP?
In the last 2 years, I have seen just about zero debate in Greek media, blogs, twitters, etc. about recommendations of this report. As for myself, I have written 14 articles about it but most of them remained below the level of readership which I normally get on my articles. Instead, the Greek media, blogs, twitters, etc. were full with discussions about Greek debt issues. The debt problem can't be solved before the underlying economy is repaired!
I can't really judge whether the McKinsey recommendations make sense for Greece. To me as a foreigner they make a lot of sense but, as cannot be stated often enough, it's the Greeks who have to chose the measures and policies which can change their country and economy. Foreigners can only (and should!) assist.
It escapes my imagination why there would not be more domestic discussion about the real issues facing Greece, i. e. what to do in order to make the Greek economy stronger. Making reforms like liberalizing the economy are undoubtedly important measures but they alone won't solve the challenge that foreigners need to bring investment capital and know-how to the Greek economy.
The 100 or so projects which McKinsey propose would appear to be most interesting targets for foreign investment. Why not go after them???
In the last 2 years, I have seen just about zero debate in Greek media, blogs, twitters, etc. about recommendations of this report. As for myself, I have written 14 articles about it but most of them remained below the level of readership which I normally get on my articles. Instead, the Greek media, blogs, twitters, etc. were full with discussions about Greek debt issues. The debt problem can't be solved before the underlying economy is repaired!
I can't really judge whether the McKinsey recommendations make sense for Greece. To me as a foreigner they make a lot of sense but, as cannot be stated often enough, it's the Greeks who have to chose the measures and policies which can change their country and economy. Foreigners can only (and should!) assist.
It escapes my imagination why there would not be more domestic discussion about the real issues facing Greece, i. e. what to do in order to make the Greek economy stronger. Making reforms like liberalizing the economy are undoubtedly important measures but they alone won't solve the challenge that foreigners need to bring investment capital and know-how to the Greek economy.
The 100 or so projects which McKinsey propose would appear to be most interesting targets for foreign investment. Why not go after them???
I am by no means an expert in economics like you. But the McKinsey report isn't unknown in greek media. But you would have to know greek.
ReplyDeleteFirst, the report was financed and ordered by SEB, the Association of Greek Industries. It is accessible in SEB's website.
Second, it was divulged in all mainstream media. For instance, searching google, you easily find:
-SYRIZA's Avgi newspaper, accusing it of being a report to suit the tastes of the greek industrialists:
http://archive.avgi.gr/ArticleActionshow.action?articleID=638093
- Similar position took the SYRIZA-leaning Eleftherotypia newspaper:
http://www.enet.gr/?i=news.el.article&id=307723
- Known leftist news website:
http://tvxs.gr/news/ελλάδα/mckinsey-η-ελλάδα-μπορεί-3-ανάπτυξη-σε-10-χρόνια
- Very long,"Critical Analysis"(=rejection) by Leftlab. The author is coordinator of SYRIZA's economic policy.
http://leftlab.gr/?p=1250
- The Association of Merchants dispute the conclusions as far as commerce is concerned:
http://www.energia.gr/article.asp?art_id=49831
- SKAI television presented the plan here:
http://www.skai.gr/news/finance/article/198066/mckinsey-oi-okto-viomihanies-pou-tha-borousan-na-sosoun-tin-ellada-/
- Ethnos newspaper (PASOK-leaning): "Stournaras' plan for 2020", which is the McKinsey report under the skin and explains that Stournaras wants to allocate possible EU funds starting from 2014 to this program.
http://www.ethnos.gr/article.asp?catid=22770&subid=2&pubid=63772871
- Το Vima newspaper (PASOK-leaning). Stournaras-Hatzidakis-IOBE-KEPE meeting for 10 year development plan, which includes McKinsey:
http://www.tovima.gr/finance/article/?aid=495351
My non expert understanding, is that the hurdles for the progress of such a program, are multiple:
1) Funds and banks. For many actions, it is required financing. Either state or private. State has no funds, privates will be hesitant to invest, banks will not lend, foreign investors are afraid of Grexit. We recently saw this with Samaras' visit to China, where he tried to bring chinese investment to Greece, using direct approach to chinese investors,like it occurs with Cosco, but failed.
2) Compatibility with troika and ministers who are already over their usual capacity trying to satisfy troika's demands. Being late is more common than being ready.
My belief is this: Before you plan on how to paint your house, you must first have a house. Just like, in order to build a roof, you must have first built a floor and walls. Some things are prerequisite to others. The first (1) hurdle is halting all the rest. In Greece it is still unknown whether there will be a house inside or outside euro. It is of paramount importance that this is clarified. Banks have only now finished recapitalization, but still, it is not expected to release new loans to applicants. As a matter of fact, many fear that Greece will be the next victim of forced levy in bank deposits. If it was to be clarified that Greece stays in euro and banks are safe, this would attract back all the money that have been sent away or hidden and banks could work again.
Since all this doesn't exist, going back to state funds, Stournaras waits for 2014 funds, because for new funds you can ask new allocation. Old funds are already earmarked on specific projects.
In the meantime, people don't talk much about it, because it becomes like George Papandreou's eurobonds. Good plan, but is it feasible in useful times? Professor Yannis Varoufakis has a complete plan on how to save the Eurozone. It is not discussed largely either. Because it may sound good, but is it politically feasible? The only thing certain in Greece right now, is troika and death. So people talk about troika.
This is my humble opinion, as an outsider to the world of economics.
Antonis.
Am Donnerstag soll Deutschlands Finanzminister Schäuble nach Griechenland kommen.
ReplyDeleteIn der griechischen Presse geht es schon jetzt wieder hoch her.
So heißt es in einer griechischen Zeitung.
„Bringen Sie das gestohlene zurück“
Was übrigens falsch ist: Bringen Sie das Gestohlene zurück.
Aber geschenkt.
Hier die ersten Artikel in der deutschen Presse, die sich mit dem Schäuble-Besuch beschäftigen.
Im Spiegel und im Focus.
http://www.focus.de/finanzen/news/staatsverschuldung/tid-32344/vor-staatsbesuch-in-griechenland-bringen-sie-das-gestohlene-zurueck-griechen-machen-stimmung-gegen-schaeuble_aid_1043340.html
http://www.spiegel.de/wirtschaft/soziales/besuch-in-athen-griechen-rufen-zur-grossdemo-gegen-schaeuble-auf-a-911048.html
Berichten Sie, Herr Kastner, bitte ausführlich über den Besuch. Auch und gerade, wie und was in den griechischen Medien berichtet wird.
Meine Vermutung:
Schäuble wird den Griechen sagen: „Haltet still bis zur Bundestagswahl. Danach kriegt ihr euren Schuldenschnitt. Die blöden deutschen Wähler sollen vorher nichts merken.“
Bakwahn
PC-Support und Netzwerkadministration
Hamburg Bangkok Düsseldorf
@ Klaus Kastner
ReplyDeleteHaving seen the reply given to you in Twitter, by fellow greek "Λογική Ελλάδα", with whom i share similar views, i would like to underline the importance of political stability. The troika program is literally devouring greek goverments. It is politically too demanding. A more clever approach would have been to make it more heavy on reforms on the 1st year and leave the income cuts for later. But the opposite happened. Now every greek that hears of "reforms", holds his wallet tight and expects an attack to his salary.
This is the 3rd goverment in 3 years. The bet in Greece now is whether the goverment will be forced in elections after the german elections, which will happen because the economy will derail or next year, at the same date with the elections for european parliament, because the goverment will have to take new measures. As you know, the troika program, demands that Greece should have each year a primary surplus of something like 3,5% of GDP up to 2020 in order to reduce debt. So the goverment, we know, must take new measures. It is a matter of time.
In such a political situation, making 10 year plans, even if the goverment had no other concern and was free from any troika imposed plan, are of very relative real value. Because the life of your goverment won't permit to advance such a plan to any significant degree. Greece is in an unofficial electoral campaign. Fotis Kouvelis, leader of DIMAR who just left the coalition, revealed and this was not denied by neither ND nor PASOK, that Samaras, due to the ERT (state television) crisis, wanted to go to anticipated elections, but the Europeans prohibited him to. And trully, going to anticipated elections would have been the most logical option, while he can still beat SYRIZA! In a year from now, most probably he WON'T be able to beat SYRIZA! But anticipated greek elections, would upset german elections...
As for SYRIZA, its leader, Alexis Tsipras, has once mentioned the McKinsey plan and the need for restructuring the production model of the country.No details given. His chief economists though, explain that public investment is the way out, just like after the war. As for the money to do it, they claim it will be from taxing more the rich and denying to pay interests for the debt, as long as the economy is suffering. For example, Tsipras mentioned that in the next 5 years, Greece is to pay 25 billion in interests. This money, SYRIZA will not pay, but use them instead as public investment.
Let us say, for argument's sake, that Stournaras had some funds and started allocating them in a project. Next year, ND loses elections, Tsipras scraps everything and does it his own way. A 10 year plan, is easier to be followed, when the political scene is dominated by 2 major forces that could find an agreement in a common, moderate strategy. But at least, you should have 4 years ahead to try implement a coordinated action and a good portion of it. It is not the case for this goverment.
Instead, we now have ND hanging in there, as the last fortress of a collapsing middle class, together with the remnants of a derelict PASOK,while SYRIZA being the looming power,gathering the unemployed as they come, with so many conflicting ideas inside that nobody really knows what they will do if they come to power and Golden Dawn, the fascist party, being the 3rd power. This is a very dangerous situation for the political stability. Because if Samaras is burnt in a way Papandreou was, there is a high risk that Greece will find itself with the 2 most powerful parties, being SYRIZA and Golden Dawn.And the danger exists, if Samaras tries to target once more the income, with more taxes and more cuts. The patience of good part of the electorate that still supports Samaras, will eventually expire.
And then 10 year plan will be useless. Emergency Evacuation plan will be needed.
In the meantime, Samaras today made a plea to the bankers: "Please give loans".
Antonis
My perception differs from yours (obviously, we will never know whose perceptions were right).
DeleteI think the EU would have given Greece every amount of money back in 2010 if they could have had the confidence that Greece would reform its political, administrative and economic structure in such a way that money spent would have the nature of investment into a better future instead of throwing good money after bad.
Many of the reforms agreed to by Greece in the first memorandum of spring 2010 have not been implemented to this date. It is quite clear that the EU lost confidence (or never even had it) that Greece would do what it needed to do. And when that happens, it is only natural that creditors 'put on the screws'. Those screws being the argument 'you better to this now or else...'. And that's what we have been seeing since then.
Greece's problem, in my opinion, was that with Papandreou, Greece had an 'ambassador' to the EU who was very consensual and promised the EU that Greece would perform miracles. Except, he had never assured with his domestic power base that Greece would indeed perform miracles. Thus, Papandreou magnified the negative impact which happens when you promise a lot and deliver virtually nothing. And the negative reaction of creditors to something like that is a given.
In any financial crisis, be that a company or a country, the leadership of the borrower has to act quickly and decisively. The leadership has to propose a turn-around plan/strategy which convinces the creditors that they ought to finance it. Papandreou never even came close to presenting a credible plan/strategy. Instead, all he did was to tell Greeks that they had to suffer because the Troika required it. If you ever want to see a perfect example of political failure, that is it!
In a financial crisis, the borrower has to stand up and drive the direction in which everything is supposed to go. He has to present such a convincing plan that none of the creditors will dare not to support it. If the borrower tells the creditors 'please tell us what we have to do', the creditors will take the borrower to the cleaners. And that's what happened with Greece. Morally wrong, but objectively a natural consequence of wrong political behavior.
@ Klaus Kastner
DeleteI don't think giving amounts of money was the issue. Europe didn't give amounts of money to Ireland or Portugal or Spain for what matters.
My view in reality isn't much different than yours. The Europeans sought to protect their interests above all. Only fools that don't know history, like Papandreou, would expect otherwise. The problem in the greek program, starts before the ink had the time to dry up.
Correctly you say, that the borrower is in conflict of interests with the creditor and as such, he must have his own strategy and bargain. George Papandreou, went to the Europeans, with a combination of fear, naivety about "european family" and a vague idea that a eurobond was months away and would solve his problems. As well as, with the illusion, that he and his largely inexperienced cabinet, was capable of following what he signed, in the short period he signed.
Not only Papandreou himself lacked any background to support the theory that he was a reformist politician, but also key ministers. Finance minister Papakonstantinou had no past experience and he was expected to carry on the heaviest adjustment program ever imposed on a country? This shows how much contact with reality Papandreou had. Other ministers had absolutely no experience too and their only qualification, was that they were Papandreou's personal friends. Some were friends he met at the gym. This is not a humourous statement, but a fact. They became known as "the gardeners".
Reforms, as you say correctly, weren't implemented in time, but he had also signed a reduction of deficit by 5% in the 1st year. Which he did, by attacking income. Of course, the recession was violent.
Papandreou fooled himself into believing he was able to do so many reforms so quickly and at the same time, doing a most aggressive and unsuccessful devaluation (because living costs didn't follow). And that there would be a european total solution, which he liked to think it would be eurobonds. He kept repeating that, along with "green development".
There were various voices from France mainly, by experienced old politicians, like D' Estaing, that upon reading the program said that only a dictatorship could make it. I think that even the famous Hans Werner Sinn, had once said that internal devaluation is something that in unbearable for a country. Only Papandreou thought he was capable.
History is studied, so that we can learn from the past, eternal gift of the previous generations.George Papandreou is somewhat excused, because he grew up learning american history. History of small countries is almost the opposite of the big ones in the methods they have to follow in order to survive.That we will pass in the history books as the first country that after 2 defaults in 3 years, ended with more debt than when started, will be a good lesson for future greek generations.
Antonis
Like my friend "Λογική Ελλάδα", although i differ in some points with his comment, i also think that this will not end well for Greece. I am more in favour of a negotiation for an exit from the euro. In the worst case, Greece could try to repeat the Icelandic recovery based on tourism increase. Once the country is stable and population knows its departure point, then you can implement a program, like after the war and there will be less options to argue about.
DeleteHowever, as ancient Greeks were saying, there is no evil out of which something good coming out of it. A crisis, within reasonable limits, builds character for the younger generations. Character is build through adversity. I was almost worried because Greece had no wars lately and the young were growing too spoilt. In addition, despite all the problems, the crisis showed to a good portion of population the real face of PASOK's socialism. They represent a big portion of voters that don't vote or don't state their political preference in polls. In all polls at the question "who is the most appropriate prime minister", the majority replies "none of the 2".
The euro, with the current structure isn't for Greece and another crisis sooner or later will hit. Greece should be better off finding its freedom and more reluctant lenders and higher interest rates are always good in keeping politicians at bay with expenditure.
At the end though, Europe, if wants to become a union for a long period of time, will have to face what all empires did. Find the "glue" that will hold together the nations. The euro alone is not enough. The Romans, detain the longevity record, because they offered a supranational common identity, that of the roman citizen, together with the roman law, common to every corner of the empire. And if we go further, the eastern part lived even longer, with common language and religion. Currency alone is not enough. Europe needs to make the Austrian, the Greek, the Italian, the German to identify themselves first of all as "European" and be happy with that definition. If Europe continues with one country trying to overpower the one next to it, building national alliances to dominate in votes and so on and so forth, the expiration date of EU will not be long down the road.
As for the troika's programs in general, leaving aside the greek case, i doubt that they will pass in economic history as a success story, to put it in a way Samaras would say it.
Antonis
@ Klaus Kastner
ReplyDeleteRegarding your comment where your friends say "Greece will never change". Greece does change. Has changed many times. The change that started by PASOK's goverment in 1980 is the last, very obvious one. But it won't change in 3 years. There is such a thing called "historical time". It is the most common mistake made by people with limited perception of historical time. A blunt example is: "If Germany after the war produced cars again in X years, then Greece should do the same in X years". The flaw is in the starting point. Greece never produced cars before.
Greece, since the foundation of the new state, was constantly under direct or indirect foreign rule. This was obvious particularly looking at the kings. The policy of Greece and the way of ruling was shifting according to which european royal family, the king at the time was related to. So Greece had a germanophile king in WWI, but an anglophile in WWII. This always created tentions with the elected PM, that occasionally was reaching points of profound national division, because being of foreign royal families, they were using Greece as a pawn, to help their original country.
Moreover, Greece almost becomes the state which is today in 1922 and finally stabilized its borders in 1947. Τhere is the characteristic period of the 50s, where the Palace, had established a parallel state, loyal to royal commands, including the assassination of Grigoris Lambrakis. At that point, conservative PM Karamanlis, went out publically and asked "who is governing this country?". Because, it wasn't him the governor... If we were to search for the first period, where Greece exists as entity with a relative independence from external political interference, we need to go to 1974.
In a sense, the greek political system is still a "teenager" and inexperienced in how to administer the country and PASOK further weakened the never very sound institutions and structure of public administration.
Returning to the current time, Greece, if you search OECD records, is in the first position in reforms. But Greeks are also impatient and want to see results immediately and in their pocket. Just to cite a few that come to my mind.
- For the first time, self-employed (what in Greece we call "the free professionists"), paid some taxes.
- Private doctors have now direct connection to an informatics system and their recipy is registered online and has to abide by certain rules. Generic medicine is now widespread.
- The taboo of layoffs in the public sector was broken (ERT) and many more are now mobilized. Some of them will be laid off. But already, the public sector has shrunk by 250.000, due to incentives to go into pension.
- Many closed professions are being liberalised, this time with more success. For instance, George Papandreou did that too, but with limits. An energy efficiency inspector, had a minimum fee with the Papandreou law. With ND law, no more. The fee is in free negotiation.
- 120 certificates can now be obtained online, without going to public offices.
- They cut on red tape for businesses.Ministers actually meet with important businessmen and potential investors to discuss their needs.
- The market of labour is now only on paper with some restrictions. Firing is very easy, the minimum wage doesn't really exist as hurdle, there are minijobs with 200 euros and uninsured jobs with whatever salary.
- Tax declarations are now submitted online and this will facilitate to cross-reference data from various sources.
- Τhe ND goverment is implementing clawback on private health facilities, to limit the excessive expenditure there.
1 of 2
2 of 2
ReplyDeleteThat your greek friends don't see it, has more to do with, as i said, the habbit of many Greeks to see as "change", only what is concerning the wallet. There is also a tradition, where each generation has a lack of faith in the next one. The generation of 1890 had mistrust for their young, but these proved them wrong through many wars. They grew old and had mistrust for theirs, but these proved them wrong again in WWII. The next generation rebuilt Greece. The next fought for democracy.
What Greece would benefit more from, would be Constitutional change, but this parliament has no authority to commence it and a change in the political system, passing to the french model, with President having increased powers. This would liberate the ministers from a good part of political cost, since it becomes incompatible to be MP and minister at the same time.
At the end, as leftist poet Yannis Ritsos writes, "Don't cry about Greece, at the point that is about to bend, with the knife touching the bone and the leash around the neck, there she goes up again and grows mightier and stabs the beast with the sun's harpoon".
But Greece will never be Germany and the Greek german. For one thing, the Greece will always love kafeneion. Because it is an opportunity to quarell with his friends about politics, without starting a civil war and an excuse to see the sun and the blue sky.
Antonis
(End)
I was lucky enough to find very easily 2 articles:
ReplyDelete"Greece was the leading country in terms of reforms in 2010 and 2011 among the member states of the Organization for Economic Cooperation and Development, an OECD report showed this week."
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_29/02/2012_430529
"Greece was the country with the greatest rate of reform promotion for the 2011-12 period among its member states, implementing some of the “toughest” structural changes."
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_15/02/2013_483357
Not popular news, especially in german press, where other news sell better, but news no less.
Many Greeks expect that someone will press a button, everything will magically change the day after and their wallet will grow fat. Unfortunately, this is not how things work. And Greece, for as long as it remains in a limbo between drachma and euro, with no liquidity and with a huge debt, will not allow a Greek, to see a change in his wallet and this makes the Greek pessimist and depressed.
Yet, this doesn't mean that changes aren't made. The issue of currency and debt, in a way or another will be confronted. If the life inside euro becomes unbearable and the price to pay will be too high for too long, the population will eventually turn to other options. There is a saying "in democracy there are no dead ends". The reforms will be there, no matter what the currency.
I am not very optimistic for Greece staying in the euro. Certainly not in this euro, which is suffocating Greece. I am also unsure about whether there will be a settlement for the debt that the greek society will be able to accept. Solutions like "you will have surplus 4% every year up to 2020 to reduce debt to 122% and then after 20 years you will be within Maastricht parameteres", are unrealistic.
But Greece is changing. Not to german-discipline model, but to a model that will allow the country to move forward.
Antonis
I follow this blog almost daily and i usually agree to 99% of the view point from Klaus. However, Antonis is adding some intersting angle and very interesting comments... Just wanted to thank both of you (and most of the other commentators on other articles) for enriching my understanding about Greece and Greek politics. Thank you!
ReplyDeleteyes, look in description
ReplyDelete