A Question of Prof. Krugman's Integrity

Economics not being an exact science, one has no choice but to accept certain unprovable arguments even though common sense might suggest that they are wrong. This contest between unprovable arguments and common sense I experience quite often when reading columns and/or blogposts by Prof. Paul Krugman.

In this piece in the NYT Krugman has, so I believe, overdone it and one is inclined to question his integrity. And one is reminded of Prof. Niall Ferguson who once wrote several articles attempting to prove Krugman's lack of integrity.

Krugman, off the bat, aims at destructing the myth that the rescue loans which Greece has received since 2010 have been subsidizing Greek spending. Well, if that is a myth to Krugman, then he is probably the only one to whom this is a myth. The figures have been public knowledge for everyone who ever took the time to look at IMF reports on Greece. From 2010-12, rescue loans totalled 247 BEUR, of which 206 BEUR went to debt service. A whopping 83% of rescue loans only served the creditors. However, there were still 41 BEUR which stayed in Greece to finance the primary deficit. How would Krugman call that other than 'subsidizing Greek spending'?

But Krugman's real fast one is yet to come. He says that "it’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) voluntarily borrowed vast sums. It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price. But the private lenders have been largely bailed out (despite a “haircut” on their claims in 2012). Meanwhile, Greece is expected to keep on paying".

Excuse me, Prof. Krugman, was Prof. Ferguson perhaps right when he accused you of a serious lack of integrity?

Whether or not the private lenders paid a price or the European tax payers bailed them out (which I argued at the time was the prodigal sin) has absolutely zero bearing on Greece as the borrower. All it did to Greece was that it changed its obligors from private lenders to the Troika. Had the private lenders not been bailed-out by the tax payers and had they all gone bankrupt, it wouldn't have made one cent worth of difference to Greece as the borrower. On the contrary, the insolvency judge of those lenders might have radically called all those loans in order to maximize cash. To suggest that it was the other way around is simply unacceptable.

Krugman essentially suggests what the EU has signalled that it is willing to do: reduce the debt service burden by lowering rates, extending maturities and installing longer grace periods for interest and by lowering the primary surplus requirement. What Krugman ignores is that SYRIZA is not satisfied with what Krugman suggests and what the EU has signalled it would be prepared to do. SYRIZA wants a straight-forward haircut for demagoguery reasons. They are so fanatic about their dogma that they don't even realize that the Krugman proposal (like the EU plan) would be much more beneficial to Greece than a haircut.

FM Varoufakis: "We Don't Want the 7 Billion!"

"We don't want the 7 billion" - This is what the new Greek Finance Minister Yanis Varoufakis told the NYT in an interview after assuming the position. It is totally consistent with what Varoufakis has published in his blog in recent years. The theme was always: "Greece should not take on one more Euro of debt only to repay debt. If that means default, it means default".

It's going to be very difficult for Varoufakis to backtrack from this position. February 28 (the expiry of the present Troika agreement) is approaching with great speed. Even with the 7 BEUR, Greece might face a bit of a cash squeeze in the next months, so much more so without it.

One cannot help but interpret this as Varoufakis' throwing down the gauntlet. Two cars are racing at each other in a Game of Chicken and one of the two drivers has just thrown the steering wheel out of the window. Or to use the language of soccer: "Either the home team will win or the visitors, but there won't be a draw!"

Words Are Easy; Action Speaks!

Zerohedge published an Open Letter from Alexis Tsipras to Germany titled: "What you were never told about Greece". If I were Tsipras, I would not have published that letter because it is so obvious that I wasn't its author and, above all, it's not my authentic language. But there are other reasons, too.

The letter reminds me a bit of President Obama's educating Republicans what politics is all about. It is serene wisdom on one hand and assumed ignorance on the other. And, by the way, the letter does not contain anything which the German public has never been told. All one has to do is to read the weekly column of Jakob Augstein in Der Spiegel, to read blogs like NachDenkSeiten or Spiegelfechter or, to make it easy, to simply listen to Gregor Gysi, Sahra Wagenknecht or Oskar Lafontaine when they speak in the Bundestag and/or on TV talkshows.

The comparison with the Germany of the 1953 Debt Conference is often made. Perhaps one should imagine how it would have been perceived if, prior to the conference, Germany would have published an Open Letter to the Allies explaining to them what German virtues are all about and how "a great opportunity for the West was about to be borne in Germany; an opportunity the West could ill afford to miss".

Must Debt Relief be "Deserved"?

As is well know to my readers, I am for a Greek debt relief but against a haircut. Strictly on the basis of economic – and not political – grounds. A well-structured debt relief provides the same benefit for Greece as a haircut (perhaps even more) and it causes less one-time pain for the creditors. Both sides have to be happy!

SYRIZA has presented the argument that Greece deserved the same debt forgiveness as Germany in 1953. I argued that 1953 was not a good example because no one would have had to take a loss on German debt if, instead of a haircut, there would have been a well-structured debt relief. And now I read this article by Leonid Bershidsky, a former publisher of Forbes in Russia, in Bloomberg’s ("Germany deserved debt relief; Greece doesn't!"). Given his background, Bershidsky obviously has some very strong feelings against anything which comes from the left. But still, his article is worth reading and there will undoubtedly be many who will consider it as a reality check for Greece. Here is an excerpt:

“Of course there are political arguments for Greek debt relief, as there were in the German case 62 years ago. European leaders are worried that Greece might leave the euro zone and trigger its disintegration. It might be less costly to write off some of the debt than to deal with such dire consequences of a tougher stand. Then, however, the problem should be framed in these stark terms: Greece's creditors would be paying ransom to its far-left government so it doesn't mess up the common currency, which Greece had no business adopting in the first place. If that is the case, we should be spared parallels with the 1953 London conference. It had far nobler goals, and Germany was much better positioned to put creditors' generosity to good use than is Syriza's Greece”.

SYRIZA: Don't Fool Around With Tourism!

"We do not want to continue the current saturated model of intensive exploitation of tourism". 

This is how Alexis Tsipras is quoted in this Daily Mail article. Apparently, the context is that SYRIZA objects to all-inclusive deals which, in their mind, bring no value to the local economies. Whether that makes sense or not is something for experts in tourism to discuss.

My point is a different one. When providers of a service attempt to tell customers what they should and should not do, that generally doesn't work so well, at least as long as customers have a choice. If I think an all-inclusive deal is the best for my family vacation, then I will get an all-inclusive deal. If I can no longer get it in Greece, I will get it elsewhere. 

I am all for trying out new experiments but I wouldn't necessary try out my experiments with one of the most important sectors in the economy! Experiments can also fail!

Tough Talk Between EU and Greece?

Suppose the Troika negotiation didn't get anywhere and, at some point, the EU has had enough of Greece. They prepare a take-it-or-leave-it proposal and present it to Greece's Chief Negotiator. And then imagine that the following dialogue would take place:

Chief Negotiator of Greece: "No Greek government could accept such a plan!"

Chief Negotiator of the EU: “F..ck your parliament and your constitution. The EU is an elephant. Greece is a flea. If this flea continues itching the elephant, it may just get whacked by the elephant’s trunk, whacked good. We pay a lot of good European Euros to the Greeks. If your Prime Minister gives us talk about democracy, parliament and constitution, he, his parliament and his constitution may not last very long!"

Rest assured! No European politician would ever talk like that. I am only paraphrasing above what President Johnson said to the Greek ambassador over the Cyprus issue in June 1964.

Greece's Primary Surplus of 4,5% of GDP!

Per the end of November 2014, Greece reported a year-to-date primary surplus of 3,6 BEUR. After closing the books for 2014, Greece reported a primary surplus of 1,5 BEUR for the entire year.

Now, I have tortured my ageing brain; I have used my calculator; I have used Excel. Whichever way I slice it,  my result says that, if the primary surplus for 11 months was 3,6 BEUR and for 12 months 1,5 BEUR, there must have been a primary deficit of 2,1 BEUR in the 12th month. Is there anything wrong with my math?

We have heard that Greeks started not making tax payments in December in anticipation of tax cuts by the new government. If that is the primary reason for the December deficit, then one has to expect that the January result will be equally bad. If not worse because in January it was already quite clear that SYRIZA would be the new government.

For 2015, Greece - before SYRIZA (BS) - had budgeted a primary surplus of 3,3 BEUR. That seems to be a bit less than what 2014 would have been had taxes continued to flow in December. So, at best, a stabilized primary surplus was budgeted. In 2014, the most difficult quarter was the first quarter when March produced a primary deficit of about 1 BEUR. Presumably, this year's March would be similar.

It is hard to imagine that Greece currently runs a primary surplus when tax payers continue to be on strike. Furthermore, the emergency measures which SYRIZA is implementing with incredible speed will add expenses which had not been included in the original 2015 budget. What does that tell us?

It tells me two things: first, it tells me that, as has often been discussed, the Greek banks might run out of money if there is an accelerated deposit flight. And, secondly, it tells me that the government itself might run out of money only for its regular operations, not to even mention the extraordinary maturities of bonds which start coming up in March.

The longer the Troika negotiations last, the tighter the situation for SYRIZA will get. Do you suppose the Troika knows that?

Prof. Paul Krugman Discovers The Importance of Cash Flows in Greece!

It's good to feel vindicated from time to time. With all this hype that has been going on for years over the sustainability of Greece's debt, leading to the self-conviction of many that the most important thing which Greece needs is a haircut --- I have always said that the level of Greece's debt doesn't really matter. What matters the most is how much debt service flows through the budget. The level of debt is totally irrelevant when it carries a zero interest rate and when it has no maturities. That's also called equity.

As I have written before, Greece currently spends about 4,5% of GDP on debt service (actually not a high percentage) and that percentage goes down to about 2,5% when considering ECB interest rebates. SYRIZA can't touch the debt owed to private creditors at this stage, so they can never get the debt service down to zero. But with some touch negotiations with the Troika, SYRIZA ought to be able to bring the overall percentage of debt service (net) down to 1% or even a little less.

And now witness what Prof. Krugman writes in this blogpost: "Most discussion is framed in terms of what happens to the debt. But at this point Greek debt, measured as a stock, is not a very meaningful number. After all, the great bulk of the debt is now officially held, the interest rate bears little relationship to market prices, and the interest payments come in part out of funds lent by the creditors. In a sense the debt is an accounting fiction; it’s whatever the governments trying to dictate terms to Greece decide to say it is". Put differently, the message is: "It's the flow, not the stock, stupid!"

I once argued that Greece's decision point would come when a primary surplus was reached. As long as there was a primary deficit, Greece paid interest not out of its own resources but out of new borrowings. With a primary surplus, Greece has to decide what it uses that surplus for: for domestic investments or for paying interest to foreigners.

So I guess Prof. Krugman, who has been a fierce proponent of idea that Greece's debt is not sustainable, now agrees with me (Sorry! I agree with him!) that there should be two major negotiating points with the Troika: How to get the debt service close to zero and how to use much or most of the primary surplus for domestic investments.

Was Nun Auf Tsipras und Seine Regierung Zukommt

For those who read German I link below my assessment of Tsipras/SYRIZA after the election, as published in nzz.at.

Was nun auf Tsipras und seine Regierung zukommt

If you can't open this link because of restricted access, you can also find it here.

Alexis Tsipras - It Was Just Like Obama's First Election Night!

Back in 2008, I was a passionate admirer of Barack Obama. First of all, he could deliver such wonderful soundbites in his speeches. And, secondly, he was an outsider to the Washington establishment of cronies and lobbyists. He had the power of the people behind him and I believed him when he promised to really change America. His acceptance speech in the evening of the election was the last time I could see the Obama of the campaign. From then on, he retreated behind closed doors; no more arousing speeches; no longer a revolution against the establishment. The President Obama seemed like another person from the Obama of the campaign.

I have not been a passionate admirer of Alexis Tsipras. However, I did, from the start in June 2012, like his beautiful soundbites. Of course I noticed that he could rally a lot of people behind him but I thought that most of them were the 'crazy ones'. At the outset of this election campaign, I thought the 'crazy ones' would commit such blunders that voters would get scared. Today, I know that 36% of voters cannot be crazy. And I know a few other things.

Tsipras, in his words and in his writings, has made a dramatic shift to the center in recent weeks. If this was only fake, then he is a great actor. SYRIZA's latest policy statement reminded me a bit of what George C. Marshall could have recommended for the reconstruction of Germany after WW2.

As I prepared a guest commentary for a Swiss online paper last evening, something began to dawn on me, and I had to scratch my head when I realized it. Much of what Tsipras has been saying in words and in writings in recents weeks is VERY similar to what I have been writing in this blog since the start. Some examples:

* Greece must drive the process of change and not the Troika.
* Greece must be the owner of the problem and of the solutions and not the follower of the Troika's commanded solutions.
* A National Economic Development Plan is needed and it is Greece who has to make it.
* The increase in tax revenues must come from those who never paid taxes and not from those who always paid them.
* All the parasites of the Greek system must get scared that someone will come along and stop their game.
* Etc.

A Greek economist who allegedly is a close adviser to Tsipras but whose name I didn't catch (his German was perfect!) summarized SYRIZA's policies last evening on Austrian TV. There was not anything which I would have disagreed with. There has been a massive shift in support for Tsipras and SYRIZA outside of Greece in the last days/weeks. A well-known Austrian economics professor called for a public demonstration in Vienna last evening to show support for SYRIZA. A feeling seems to develop, to an extent also in Germany, that any decent human being simply must support SYRIZA.

Despite all my agreements with Tsipras' recent words and writings, why would I still hesitate to throw my support behind him? Here are a couple of reasons which come to mind off the bat:

* I am generally suspicious of rapid changes from Saulus to Paulus.
* While I could buy that Tsipras has changed from Saulus to Paulus, I cannot imagine that his voters and future parliamentarians can also make that change.
* When someone after over 30 years of experience with an exploding public sector still thinks that the public sector is part of the solution and not part of the problem, then I scratch my head.
* Everything I have written about concerned the private sector and private enterprise in general. I have not heard much from Tsipras about the private sector and private enterprise.
* I have almost become obsessesd with the idea that foreign investment is part of the solution for Greece. I have not heard much from Tsipras about foreign investment.
* I have always expressed surprise about Greek corruption and cronyism when, in day-to-day life, I would meet Greeks who are decent human beings with high ethical and moral standards. Still, I find it hard to believe that the SYRIZA leadership and upper ranks consist only of Greeks of high ethical and moral standards and none of the parasites. Something tells me that many of them have been parasites of the Greek system just like so many others.
* Etc.

I generally prefer to see the glass half full instead of half empty. So let me say that Tsipras' glass is half full. But it is still far away from becoming full and it could become empty again very quickly. As Nick Malkoutzis formulated it in this outstanding commentary in Macropolis: 

"The thinking goes that if the people are visibly on SYRIZA’s side its bargaining position will be impregnable. This is the dream, at least. The nightmare is that people will be on the streets protesting because of the failure of a SYRIZA government to reach an agreement with Greece’s lenders, leading to the European Central Bank putting a stop to liquidity. It is a scenario in neither side’s interests but that does not mean it cannot happen".

Or as I once quoted a Greek proverb:

"Any fool can throw a stone into the sea but, once he has done that, not even a hundred wise men can get it out again".

A Precise Prescription for Greece

A reader by the name of William Hunt posted the following commentary to this WSJ article: 

William Hunt

Prescription for Greece -

1. Default on its debt
2. Leave the Euro zone
3. Recover on their own with no access to international financial markets

This has occurred all through history, so it is not anything new.  Projected recovery time - 5-10 years. Get on with it.

Well, it certainly is a crystal clear and concise prescription!

Germany's Debt Forgiveness of 1953 - The Wrong Precedent!

Germany's debt forgiveness back in 1953 is now being universally cited as the proper precedent to justify a haircut for Greece. I think that this is an extremely poor example. To me, Germany of 1953 is a classic example of a mistaken haircut.

Assume the amount of debt which was forgiven in 1953 had, instead, been converted into a 50-year bond with an interest rate adjustable to something (perhaps GDP; perhaps government revenues; etc.) and a 20-year interest capitalization period. No cash outflow would have burdened the German economic miracle during the next 20 years. At the same time, the German economic miracle would have put Germany in a position to pay all debts which it had assumed. The classic example of making a borrower strong enough so that he can pay his debts.

By 1973, Germany would have easily been in a position to pay annual interest on the bond. And by 2003, Germany would have easily been able to repay or refinance that bond.

And the moral of the story is? Well, if you want to get money back from a poor borrower, the first priority must be to make the borrower strong again. If you only forgive his debt, he may have less debt but he remains poor.

Prof. Yanis Varoufakis - Always Good for Innovative Ideas!

Prof. Yanis Varoufakis wrote an article in his political blog where he introduced a new line of argumentation which I have never heard before and which I find innovative, for sure. I did not read the original but this German translation of the article instead.

Varoufakis makes reference to Greek bonds (volume not revealed) which the ECB under Jean-Claude Trichet purchased in the secondary market during 2010/11. The only possible benefit for Greece of the ECB's purchasing bonds in the secondary market is that Greek yields are contained and facilitate new borrowings. Since nobody would have lent to Greece at the time, Varoufakis argues correctly that Greece had no benefit from those bond purchases which were done under the exclusive responsibility of the ECB. Apparently, these bonds begin maturing by June of this year.

And here comes Varoufakis' innovation: had the ECB not purchased these bonds under their exclusive responsibility, then these bonds would have been subject to the 2012 haircut and would have been reduced by 90%. Why should Greece pay 100% for something which would have been 10% if only the ECB had not made such a blatant mistake?

Good question!

At the same time, this argument could be made for all rescue loans, too. Without the rescue loans, the debt would have remained private and would have been subject to the 2012 haircut.

All I can say is that it will be interesting to watch how this negotiation will unfold over the next months.

SYRIZA's Party Resolutions - Still Valid?

"SYRIZA leader Alexis Tsipras has proclaimed that he does not want Greece to leave the euro and will push to decrease the country’s debt. However, at its congress in 2013, his party resolved unequivocally to 'cancel the memoranda and the implementing laws' and undo the reforms mandated by our creditors. 'The first step will be the restoration of employment relations, collective bargaining, minimum wages, minimum pension, unemployment benefit, and family allowances to pre-memoranda levels.' Furthermore, 'In our perception of the public sector as a lever of reconstruction, all the employees who have been laid off are necessary and will be hired back'."

Nikos Kostandaras reminds the world in the Ekathimerini of some official party positions which SYRIZA had unequivocally resolved in 2013. Presumably, they have not been officially revoked since then. The statements which one hears lately from SYRIZA are truly conservative compared with the aggressive and unequivocal above resolutions.

Normally, I would expect the media to quiz a candidate and pose some though questions. One tough question for Alexis Tsipras would be whether he still stands by the above resolutions or not. It's hard to see how this could by anything by a yes-or-no answer. 

Have the media asked Tsipras this question? 

Is This Alexis Tsipras?

"History of course repeats itself, but, as usual, the second time as farce. Greece’s 2015 is not its 1981, and Alexis Tsipras is not Andreas Papandreou. He lacks the social, professional and political experience that is necessary for the task he is called for; is mostly adept at low-level party politics, but still leads a motley coalition of forces he is not in complete control of; and, for all his genuine wish to put an end to austerity and hardship in Greek society, he lacks a concrete plan of action for achieving it. For, it is one thing in politics to say what you want to pull down, but an entirely different thing to explain what you are going to build up instead, and how".

Prof. Takis S. Pappas in openDemocracy.

Greece's Export Perspectives

Internal devaluation was supposed to make Greece cheaper (sorry: more competitive) so that exports would increase. Now a Grexit is no longer being ruled out which would really make Greek exports explode. Is there substance to these claims?

Despite significant interenal devaluation, Greek exports have only increased moderately since the record year 2008. Part of the explanation may be that the reduction in wages was offset by increases in other costs, but that can only be part of it. Exports can only increase significantly when there is an export-oriented infrastructure which is underutilized due to high wages and other costs and which explodes as soon as the costs/prices have become competitive: I would suspect that Italy, with its huge industrial sector, would quickly become a fierce competitor for Germany if Italy could devalue by 20-30%. A country which does not have a car industry cannot increase car production by subsidizing wages.

Jens Berger runs the German blog Spiegelfechter and is a major contributor to the blog NachDenkSeiten. Both blogs focus on 'progressive economic thinking'. Critics would call both of them leftist blogs. In this Videopodcast (in German), Berger explains the export perspectives of Greece. The podcast was made in June 2013, so the data presented may no longer be actual.

Berger's major point is that the Greek economy has a very low productive capacity. The largest productive sectors are foodstuffs, metals and mineral products (cement, etc.) which Berger says are not the classic export sectors for a developed economy (personally, I cannot quite follow this argument because certainly foodsstuffs should be a major export sector for an agricultural country). Even though large by Greek standards, these sectors are quite small by international standards.

Greece's major exports are in raw materials and refined raw materials, again not typical examples of a developed economy. The classic export sectors of a developed economy (refined metals, beverages, chemicals, plastics, pharma, electronics, machinery, optics, semiconductors, clothing, etc.) are extremely small in Greece. A case in point: among the largest Greek companies, one does not find classic production companies.

In shipping and tourism, Greece is an international giant. But still, Berger claims that these two sector are not very sensitive to domestic wages.

In essence, Berger's presentation supports what I have been arguing in this blog all along: Greece urgently needs to build up more of a productive capacity, a greater capacity to generate economic value, in order to make its economy (and above all its exports!) grow. And if Greece cannot accomplish that alone, then this is the area where the EU should help Greece.

Lorenzo Bini Smaghi on Sustainability of Greek Debt

"Overall, Greece’s debt does not look as bad as the simple “175 per cent of GDP” ratio would suggest. The request for a substantial debt cancellation can thus hardly be justified on the basis of sustainability alone. It seems rather to be aimed at creating the room for financing a more expansionary fiscal policy. This would entail the risk, however, of going back to the pre-crisis policies of rising public spending and giving up all the reforms that are needed to improve the competitiveness of the Greek economy so as to make it a lasting member of the monetary union. The difference would be in the financing, which would come this time from other eurozone taxpayers, rather than the capital markets. Unfortunately, experience suggests that the outcome of such a policy would most likely be the request for a new debt cancellation within a few years".

Lorenzo Bini Smaghi in FT

Specific Plans of a SYRIZA Government

To date, I have become familiar with 2 policy statements of SYRIZA: their First Economic Manifesto of June 2012 and the reports about Alexis Tripras' Thessaloniki Speech on September 15, 2014. The latter seemed to be a rather loose accumulation of bullet points for public consumption.

SYRIZA has now come out with a full report about the Thessaloniki Speech. I must say that this is the first comprehensive (and understandable!) policy statement I have seen from anyone in Greece. If I didn't know the country and if I didn't know the authoring party, I might guess that it came from the inventors of the Social Market Economy (Ludwig Erhard). There isn't really anything in there where I could say upfront "This is stupid!" or something like that. In fact, some of the most critical points are phrased in very moderate fashion ("gradually" we will do this or that).

Of course, I am missing something in the paper but knowing that the paper comes from a socalled radical left party, I am not surprised that I am missing it. What I am missing is much more emphasis on a competitive private secctor; an emphasized belief in a market economy; an emphasis on foreign investment and know-how transfer from abroad; and other things like that.

Well, Mr. Samaras, where is your policy statement?


ADDENDUM
One of the commentators below has come to PM Samaras' rescue and provided the link to the policy statement of ND titled "The New Growth Model". I have browsed through it. It is long but not necessarily comprehensive and I am not sure that it is as easily understandable as the above statement of SYRIZA. It is long on prose and short on bullet points which are easy to remember. Still, it is a policy statement.

Greek Sovereign Debt a Soap Opera?

A reader of my blog commented that Mr. Panagiotis Roumelioutis, Greece's former IMF representative, made the statements below. I don't know whether Mr. Roumelioutis indeed made these statements nor do I know when he made them.

"Up to 2020, Greece must pay 90 BEUR in interests. From 2020 to 2030, it must pay another 201 BEUR. Summing it all up, in 15 years, Greece must pay 291 BEUR or 160% of GDP. In interests. No country in such short time has ever paid such amounts of debt. So, pretending that the debt is sustainable, doesn't lead anywhere. Let me say some characteristic points: This year we have to pay about 22 BEUR. In interests. This is 27% of the state budget. This is not sustainable according to the international standards. After that, we have to pay for about 16-17% of the state budget up to 2020. If we go to 2021 and beyond, then things become i would say, insane. Because for instance, in 2022, we must pay 33 BEUR in interests. So, we must start from this discussion. The EU partners must understand that the main problem of Greece is debt."

From today's standpoint, this is pure nonsense! Greece pays VERY LITTLE interest! 5,7 BEUR for 2014 according to the state budget. Perhaps a little more when other entities are included. At the same time, Greece receives large amounts of interest rebates from the ECB and much of the interest due to the Troika is deferred for 10 years. Depending on how you do the math, one could even argue that Greece pays no interest at all. The point is: allocating less than 5% of GDP in interest is VERY moderate these days for a normal country, not to mention an 'overindebted' country.

This story about Greece's suffering from sovereign debt is turning into a soap opera. Creditors have forgiven debt, have lowered interest rates to below 2%, have deferred interest payments for 10 years, etc. How much more can one expect??? Well, creditors will undoubtedly be willing to lower the interest rates even more. Perhpas close to zero. What else is Greece going to demand afterwards?

SYRIZA wants debt to be forgiven without understanding that debt at zero interest (or close to it) is no longer debt but equity. Someone ought to explain to them that 100% of debt at zero interest rate is better than 50% of that debt at market rates because that would cost a lot more.

Greece's debt problem is a domestic one (70 BEUR in non-performers, arrears of the government, 70 BEUR in unpaid taxes, etc.). Here I would like to see proposed solutions which do not involve the need for more foreign capital.

I hope that sooner or later the eyes of commentators are opened so that they see that the Greek sovereign debt problem - once the maturities are extended to 50 years or more and once the interest rates are lowered to close to zero - is a soap opera. The proof would come if the Troika forgave 50% of the debt and put the other 50% on market rates. Then SYRIZA would learn what it means to be indebted.

Is Greek debt really unsustainable? (Social Europe)

Greece: Not War Loan or Not. Instead, Loan or Not!

The forced loan to Nazi-Germany has finally made it into a headline of Der Spiegel. That is a remarkable event! I have expressed my opinion on several occasions: a loan is a loan, and a loan only disappears when it is either repaid or forgiven. That is really not a question of war loan or not. It's a question of loan or not.

It would really be in the benefit of all sides if this issue could be cleared up once and for all. Provided, of course, that it is kept separate from the negotiations about Greece sovereign debt.

Greece's Race Against Time

This article by Hugo Dixon of Reuters, published in the NYT, is the most realistic assessment of the stuation I have read so far. Just a short excerpt: 

"All this means is that if SYRIZA wins the upcoming election, it will immediately be under extreme time pressure. Its first priority, to form a government, will not be easy because it is unlikely to have an overall majority. Syriza would have to secure a coalition, and its most obvious partner, the centrist To Potami movement, is adamant that it won’t agree to a deal that could put Greece’s membership of the euro at risk. (…) The top priority now is for the eurozone creditors and the moderate elements in SYRIZA to put out feelers to one another to work out how the party could perform a kolotoumba without too much of a loss of face. The creditors should indicate that they would extend the bailout deal so long as Syriza asked for one nicely. After all, it is in nobody’s interest for Greece to be driven out of the euro".

To translate this into soccer language: neither the home team nor the visiting team should expect a win. Instead, they should both learn to be happy with a draw.

A 15-Year Old Had Found Solution for Greece When He Was 11!

In October 2011, the Ekathimerini published the following letter: 

"Dear Mr Papandreou, 

My name is Theodore Vasilopoulos. I am 11 years old and I live in Athens.

I am writing to you because I have found a solution to Greece’s debt crisis. The government could build a factory that converts solar energy, wind power and waterpower to electrical energy.

Please try to convince countries that we owe money to and ask them if we could pay our debt in energy. It might take a while, but if we have that factory, we might become the most resource-rich nation in the world.

I have listed the advantages of implementing my proposal in point form below.

1) We would be able to pay back our debt for free.

2) We wouldn’t have to buy raw materials from other countries to produce energy (for example coal and petrol).

3) We would get the energy for free.

4) When we pay back the debt, we could continue supplying countries with our alternative energy, making a profit.

5) If the countries appreciate the work we have done, we might be able to stay in the euro.

I hope you seriously consider my proposal. Looking forward to your response.

Yours sincerely,

Theodore Vasilopoulos"

Theodore Vasilopoulos turns 15 this year but he will sadly have to recognize that there is still no economic development plan for the Greek economy.

Those who think Theodore's plan won’t work should come up with a better plan; and again with a better plan. And if Greek brainpower gets its act together, there would probably be a fairly decent plan within weeks. 

But for heaven’s sake, don’t leave the planning up to 11-year olds!

Think Twice Before Demanding a Debt Conference À La 1953!

Alexis Tsipras and SYRIZA have been very outspoken about the need for a European Debt Conference à la 1953. To a certain extent, that makes eminent sense. Even Prof. Hans-Werner Sinn has proposed this idea.

However, Alexis Tsipras and SYRIZA might not like if they got what Germany got in 1953. Germany was not a sovereign nation then; neither was Austria. In Germany, it was the Americans who were running the show. Documents released recently showed that not even the currency reform and the introduction of the much admired Deutsche Mark, generally thought of as a master piece of Ludwig Erhard, were of German doing.

In Austria, the Americans had a High Commissioner who had to supervise the spending of the European Recovery Fund (Marshall Plan). There were always conditions attached to the disbursements. Interestingly, already back in the early 1950s, the High Commissioner demanded that the public sector and bureaucracy would have to urgently be reduced. Well, Americans are not almighty. If Austria's public sector and bureaucracy had only stayed at the levels of the early 1950s without any reduction, then everything would be fine today!

So, are Alexis Tsipras and SYRIZA prepared to accept a EU High Commissioner, stationed in Athens, who will have the final say on every policy issue?

If not, think twice before you demand a debt conference à la 1953!

ECB: Ultimatum to New Greek Government or to EU?

"The continuation of the waiver is based on the technical extension of the European Financial Stability Facility programme until the end of February 2015 and the existence of an International Monetary Fund programme. It is also based on the assumption of a successful conclusion of the current review and an agreement on a follow-up arrangement between the Greek authorities and the European Commission, in liaison with the ECB, and the IMF”.

I cannot interpret this statement by the ECB in any other way than an ultimatum. When the European Central Bank officially goes on record for saying this, there is no imaginable way that they can backtrack from it in the near future.

The question is to whom this is an ultimatum. At first thought, Greece comes to mind. If the new government of Greece does not play ball with the EU, the country's financial sector will fall into the Aegean. So the new Greek government better think twice before it embarks on an irrevocable strategy.

Or is it perhaps an ultimatum to the EU? The EU could easily make the new government play ball. If the new government is SYRIZA-led, all the EU would have to do is to fulfill all of SYRIZA's demands.

Whatever the case may be, this statement has definitely added seriousness to some of the mutual bluffing of recent days. There is now a line drawn in the sand and this line seems unsurmountable.

A Dishonorable Message To The Greeks

German-speaking readers may be interested in this article of mine which a prominent Austrian journalist published in his blog.

Eine unwürdige Botschaft an die Griechen

A Campaign Spot For Alexis Tsipras!

This would make for a good campaign spot for Alexis Tsipras!

Ah, Those Wonderful Soundbites of Alexis Tsipras!

"Greece is on the cusp of a historic change. SYRIZA is no longer just a hope for Greece and the Greek people. It is also an expectation of a change of course for the whole of Europe. Because Europe will not come out of the crisis without a policy change, and the victory of SYRIZA in the 25th of January elections will strengthen the forces of change. Because the dead end in Greece is the dead end of today's Europe".

Ever since I started writing about Alexis Tsipras 2-1/2 years ago, I have emphasized the man's exceptional ability to form wonderful soundbites. I have also remarked on several occasions that, in a depression, soundbites have a much greater impact than hard facts.

This article in the HuffingtonPost underlines my above point. The article is attributed to Alexis Tsipras but, from the sound of it, I think some passages come from someone else's brain. That doesn't matter. What matters is that these wonderful soundbites are attributed to Alexis Tsipras, the source of hope; to some perhaps the Messiah.

I am always puzzled why so many politicians do not have the ability to speak to people in a way that the people feel spoken to. In Greece, I cannot think of anyone other than Alexis Tsipras who has this ability.

Perhaps Mr. Samaras should take a look at FDR's first inaugural speech which was also given in the midst of a depression. It consisted of three parts. Parts two and three focused on new social security measures and on new investments. Part one focused on the spirits of people living in depression. It included the famous quote "We have nothing to fear but fear itself!"

And where are the wonderful soundbites of the other Greek politicians who are now campaigning for the election?

Here Is A Party To Vote For!

Prior to the 2012 election, I wrote an article about a party which I could vote for (see below). After re-reading it now, I must say that I haven't changed my mind since then.

Sunday, April 22, 2012

Here is a party to vote for!

Ronald Reagan proved that one doesn’t necessarily need a detailed party program to accomplish something. Sometimes it is better to have a few simple messages which everyone understands and which are repeated all the time. Below are the messages of a Greek party which I could vote for.

OUR PROGRAM

First, to get new jobs quickly we will “steal” them. We will steal them from other countries which presently sell to us products which we could produce ourselves in Greece. We will create an “obsession with import substitution” in the minds of the Greek people so that Greek consumers become literally ashamed when they buy products from abroad when such products are also produced in Greece.

Second, we will create an “obsession with exports” in the minds of the Greek people so that Greek producers become literally ashamed when they do not sell a good portion of their production to other countries, particularly agricultural products. And we will be “smart exporters”, that is we will make the products shelf-ready and market them directly to individual countries (instead of selling bulk to Italy).

Third, we will create an “obsession with tourism” in the minds of the Greek people. Our mindset will no longer be that tourists should be thankful for being able to visit Greece but, instead, we will let them know that we really want their visits (and their money).

Fourth, money will be required to accomplish the above, particularly for the investment in new productive facilities for import substitution and new exports. We will create an “obsession with foreign investment” in the minds of the Greek people. Whenever a foreigner invests money in Greece, we will consider this as a compliment to the attractiveness of our country as a place to do business.

Fifth, we will privatize state companies as much as we can but we will sell them only to investors with a sustainable business philosophy. Investors with a short-term financial focus we will consider as asset strippers and treat them accordingly. The primary motive for privatization will not be the one-time financial gain but, instead, the future technology transfer which we expect to receive in those companies.

Sixth, we will take full advantage of the resources of the EU Task Force to build a modern and prosperous Greece: a Greece characterized by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos. Our goal is to move up to the world’s top-20 countries as regards the ease of doing business as well as the low level of corruption. This within only one generation.

Seventh, our guiding policy will be that anything which hinders the above or even makes it impossible will be reformed with great speed. We invite our critics to remind us forcefully should we deviate from this policy.

Finally, it will be a priority for us to raise the spirits of the Greek people again. We will set in motion a Greece-is-Changing movement and we will invite people from all walks of Greek life to participate in creating the vision of a new and more prosperous future perspective for Greece. We will use the most modern media technology available to reach all Greeks with our message on a regular basis.

Bruegel - Why Grexit Would Not Help Greece

The question of Greek exports, or rather the unsatisfactory growth of Greek exports since 2008, has been discussed here several times. This article from Bruegel ("Why Grexit would not help Greece") sheds more light on this issue. Some of the highlights:

* Contrary to Ireland, Portugal and Spain whose improvement in the current account has come primarily through increased exports, the Greek improvement came almost exclusively through a contraction of imports.
* hourly wages in Greece declined markedly whereas they inceased in Ireland, Portugal and Spain.
* it can't be the wages (or rather their reduction) which are the main drivers behind exports.

The author concludes that "the reasons for the weak Greek export performance might primarily lie in other factors such as rigid product markets, a political system preventing real change and guaranteeing the benefits of the few, the lack of meritocracy among other factors, as nicely outlined by Brookings scholar Pelagidis. To the extent that the Troika can help reform the country, an exit of Greece from the euro would even be counterproductive".

German And Austrian Hysterics About Greece

Ever since Der Spiegel reported that Merkel/Schäuble allegedly now felt that a Grexit wouldn't be much of a problem, the German and Austrian media have gone literally berserk about Greece. The various outcome scenarios of the upcoming election are being discussed as though the election were in Germany or Austria, and not in Greece. Well known journalists discuss the pro's and con's of expelling Greece from the Eurozone without informing the public that treaties make such an expulsion next to impossible. Socalled experts seem to know exactly what SYRIZA will and will not do. How a SYRIZA government would be a 'suicide mission' for the Greek economy. Etc., etc.

The more I see and hear about this nonsense, the more I develop sympathies for Alexis Tsipras and SYRIZA. It will be interesting to see if Greeks will react the same way.

Hans-Werner Sinn Banks on Alexis Tsipras!

"Alexis Tsipras is one of the few Greek politicians who have understood the nature of the problem and who are, because of that, prepared to embark on new courses".

Quite surprising that this statement would come from Prof. Hans-Werner Sinn, as quoted in the Handelsblatt. Sinn's point is that, with present policies, there will have to be an open or hidden debt forgiveness, then there will need to be new loans, to be followed by new debt forgivenesses, etc. Sinn argues that only a return to a local currency will allow Greece to regain competitiveness.

Oops, I Did It Again!

Dear readers and, above all, dear commentators,

I have just been extremely successful in accidentally deleting the last 100 comments which were posted to my articles. I have checked the guidelines and I am sorry to report that there is no way to retrieve those comments.

I am so sorry, possibly more sorry for myself than for you because it could well be that I enjoy reading the comment more than you enjoy writing them.

Sincerely, KK

No Realistic Way That Greece Can Ever Pay Back Its Debt?

The re-awakened discussions about a possible Grexit also bring back the discussions about the sustainability of Greece's debt. One of the more interesting conclusions I found in an article in Mish's blog:

"Even if the interest rate on the bailout was 0%, with a €3 billion surplus every year, it would take Greece 81 years to pay back that debt! There is no realistic way Greece can ever pay back €245 billion, so it won't!"

I would like to see a list from Mish of all countries which can pay back their sovereign debt in less than 81 years based on their current primary surplus. I doubt that there will be many.

My point is: sovereign debt generally DOES NOT get repaid nor does it have to be repaid. It just needs to be able to be serviced (i. e. interest must be paid and principal must be refinanced). Above all: sovereign debt must be regularized, that is to say: compliance with agreements must be assured.

And this is the real point: one cannot always force reality into agreements. Instead, agreements must be adapted to suit reality. If Greece cannot afford interest on 320 BEUR of debt and/or cannot refinance debt tranches upon their maturities, then the agreements must be adapted to reduce the interest rate and to extend maturities.

The two extremes would be a combination of Evergreen Bonds (no maturity) and zero interest rates. That would no longer be debt but equity instead. Offhand, I cannot think of a country which has issued Evergreen Bonds but Mexico, a few years ago, issued 99-year bonds. And I cannot think of a country which has issued debt at a zero interest rate (except perhaps Germany these days) but Greece comes close to it with part of its debt due to the Troika. If creditors don't like a zero interest rate, an alternative would be to make the rate adjustable (i. e. adjustable to GDP growth).

The day the Troika converts its loans into 99-year bonds and structures the interest rate in such a way that Greece will only have minimal interest expense (if not a moratorium for several years), Greece's debt problem will be regularized. Not solved, because the debt would still be there but what will 320 BEUR be worth in the year 2114?

Withdrawal and/or Expulsion from the EU and the EMU

DER SPIEGEL cited a senior member of Angela Merkel's party as saying that a Grexit, voluntary or not, may not be provided for in EU treaties but 'resourceful lawyers' would find a way.

Below is what the ECB has to say about the subject in a Legal Working Paper authored by Phoebus Athanassiou (who I presume is Greek!).

Legal Working Paper #10

Greek Debt - The New Testament Has The Answer!

"In New Testament Greek, debt means 'sin'. But, though it might be sinful to go into debt, Matthew 6:12 supports absolution: 'Forgive us our debts, as we also have forgiven our debtors.'"

Prof. Robert Skidelsky in The Guardian.

The Cost of a Grexit

We live through amazing times! Not too long ago, the mere mentioning of the word 'Grexit' was considered anti-European or irresponsible. Today, however, there is hardly an article about Greece which DOES NOT mention the word. The German government which made history by declaring that a bail-out of Greece was 'without alternative' is now - according to DER SPIEGEL - expressing the view that a Grexit wouldn't be a big problem.

On the political side, George Papandreou, who made history by personally guaranteeing that all of Greece's debt would be paid but who never lived up to this personal guarantee, is returning with a new party. He has learned from Alexis Tsipras that positive soundbites are important. It's no longer "There is money!". Instead, he is now onto "Let's go!", "We'll write history!". Papandreou is now talking about values. He is calling for solidarity. He is choosing beautiful words like "wanting to express politically a social alliance between Justice and creativity, emphasizing that the 'post-dictatorshiop era ends in Greece and now the new struggle is to free democracy that has been imprisoned by economic and media interests that are supported by the clientist state'". And, for that, pundits predict that he will get up to 5% of the vote!

Everyone agrees that a Grexit would impoverish Greece in the short-term and only few voices warn that a Grexit might not be smooth sailing for the Eurozone. But no one seems to remind the Northern champions of a Grexit that a Grexit would entail great costs for Northern tax payers as well.

Early on in the bail-out game, EU politicians warned their tax payers that not bailing out Greece would entail enormous direct and indirect costs for their economies. Is anybody making such estimates now? If so, why are they not informing the public about it?

DER SPIEGEL reports that the maximum damage to Germany of a Grexit would be 70 BEUR. Since that would only be the starting point for negotiations, the actual damage would be much lower. I presume this is assuming that Germany's damage is limited to its share of the bail-out financing; no more.

But even if the actual damage to Germany were 'only' 50 BEUR, that amount could not be hidden like much of the bail-out financing has been hidden from the budget so far. Instead, that amount would sooner or later have to flow through the budget and, at that point, German tax payers would awaken to the fact that a Grexit was not free of charge to them.

Only a few months before the Lehman bankruptcy, it was considered inconceivable that Lehman would be allowed to fail. For the simple reason that the cost would be prohibitively high. As Lehman's demise progressed, talk about their possible bankruptcy intensified. At first, that talk was a warning that bankruptcy should be avoided at all cost. At some point, the 'crying wolf' lost force. I still remember the week before Lehman's bankruptcy: everyone had basically agreed that a bankruptcy could not be avoided and that was that. No one 'cried wolf' any longer.

And then the wolf showed up...

Mario Draghi: "I Believe That Fulfilling One’s Obligations Is Not a National Peculiarity of the Germans"

Here is a very long and interesting interview with the President of the ECB.

SYRIZA Should Focus On Interest Rates and Not on Nominal Value of Debt!

Given the multiple sources of information (with differing numbers, I should add), let me first clarify that I am looking at the Ministry of Finance's latest State Budget Execution Monthly Bulletin which shows an interest expense for 2014 of 5,7 BEUR. The same Ministry of Finance reports in its Public Debt Bulletin that Greece's public debt stands around 320 BEUR.

It could well be that these two numbers are not directly comparable to each other because an interest expense of 5,7 BEUR on debt of 320 BEUR would represent an interest rate of 1,8%. I know that Greece's debt to official lenders is very cheap but there is still other debt due to private creditors and the interest rates there are much higher. An overall rate of 1,8% seems very low. Perhaps the 5,7 BEUR is not the entire interest expense which Greece pays on its entire public debt.

A significant debt forgivensess is a pillar of SYRIZA's economic plan. Let's just assume that the Troika were prepared to forgive Greece enough debt so that the remaining debt is within the Maastricht level, i. e. within 60% of GDP. In exchange, the Troika would likely insist that the remaining debt must be priced at market rates, say 6%.

Assuming that 60% of Greece's GDP is around 110 BEUR, which would be the remaining amount of Greece's debt, then the annual interest expense on that reduced amount of debt at 6% interest would be 6,6 BEUR annually, or quite a bit more than Greece is paying now.

I think SYRIZA is making a mistake by focusing exclusively on the nominal level of debt and ignoring totally the equally important elements of maturities and interest rates. What matters for Greece is how much debt service flows through the budget and, thereby, reduces government revenues which could be used for other purposes.

The interest rate has a far greater impact on the debt service in the budget than the nominal amount of debt. To wit: if all of Greece's debt were at 0% interest, Greece could easily double its indebtedness without a budgetary problem. Greece would still have a maturity problem but that could be solved by stretching maturities way into the future.

One can assume that it is easier for the Troika to give in on interest rates than on the nominal value of debt. For Greece, the interest expense should matter much more than the nominal value of debt. One thing is clear beyond any doubt: both sides will have to be prepared to make a compromise. If they are adamant about the current positions, there will be no solution.

A good compromise allows both sides to declare victory. The Troika's victory would be that they did not forgive any debt (the lowering of the interest rate to something close to zero would only be a footnote in the press release). SYRIZA's victory would be that they brought down the interest expense to an extremely low level. So low that there wouldn't be much difference between the primary balance and the overall balance of the budget. Thus, SYRIZA's press release would state that Greece managed to keep the entire primary surplus for its own benefit (with only a footnote saying that the nominal amount of debt would remain unchanged).

Greece - False Hopes Better Than No Hope?

I must admit that, back in June 2012, I thought one would have to be kind of nutty in order to vote for SYRIZA. Beyond wonderful soundbites, that party seemed to have nothing but destruction on its agenda.

But then I came across an article which a blogger by the name of Heidi (a young American married to a Greek teacher) had posted on her blog HomeInGreece. The fact that I remember this article well to this day proves how much it had emotionally touched me. An excerpt of the article is below.

The essence of the article was sadness, disappointment and hopelessness after SYRIZA had missed the win by a small margin. I had not been aware how much hope had been riding on SYRIZA’s campaign, particularly among the younger generation. When I read Heidi’s comment that “a false hope is better than no hope”, it dawned on me that there had been much more to the election than party programs and policies.

Heidi discontinued her blog shortly thereafter without any comment whatsoever. When she started the blog, she had said that she wanted it to be a positive, upbeat place. I suppose she lost the strength to be positive and upbeat.

Which brings me to the upcoming election. If, two years ago when they seemed to be a bunch of crazies, SYRIZA could unleash so much hope among hopeless Greeks, one can only guess how much more hope they are unleashing now when they have become much more mature and when the hopeless have increased in number. When a very large part of the population would rather have false hopes than no hope at all.

This makes me wonder what would happen if there were a repeat of June 2012. If the scaremongering during the campaign succeeded in, once again, making SYRIZA a close number two. If a large part of the population had to, once again, realize that, instead of possibly false hopes, they were cheated out of any hope altogether.

When pondering this, I am beginning to wonder whether it would not be best if any form of hope, even a false hope, carried the day on January 25.

 

Heidi on June 19, 2012

“I started this blog because I wanted it to be a positive, upbeat place. Greece has a government now. A government almost identical to the government it has had for the past several years/decades. Is there a reason why things should have changed? Is there a logical, common sense reason why voters might have chosen a different party to form a government – a party that has not been the direct and foremost cause of the domestic factors leading to the crisis? Apparently the answer to these questions is “no, we’re happy with those parties. They represent us well. We trust them. Their leaders are honest, ethical, above corruption, and clearly work for the best interests of the Greek people.”

ND and PASOK campaigned, and came to power, on the platform of “renegotiating the agreement with the Troika.” While the campaign was going on, European political leaders and the German press sent constant inappropriate messages toward Greek voters, telling them that they must vote for these parties. (Inappropriate because voting in a national election is a domestic matter.) But as soon as the government was formed, the message changed dramatically: “no renegotiation is possible. You can ask all you want, but the answer is ‘no’.”

The nice thing about the campaign season, despite the annoying ads, is that people say nice things. Candidates make promises that people want to hear. Bad stuff is put on hold. But now the elections are over and, for the first time in two months, they’ve started again with the constant news reports on the new austerity measures starting in July. My husband is expecting another pay cut. We’ve lost our prescription drug coverage, but the number removed from the paycheck for health insurance hasn’t gone down at all. We just found out how much we owe (yes, owe – for the first time in our entire lives, we owe) for income tax – and it’s a four digit number.  A kind of large four digit number.  Every last one of those four digits is more than we can afford. But we have to pay it, because if we don’t, we get fined even more. And eventually thrown in jail.  [We owe even though we made much less than the year before.  It’s because the standard deduction was reduced to much less than half of what it was before, and pretty much all tax write-offs and credits were eliminated; there are also several new taxes that were added.  Everyone in Greece is dealing with this same thing right now.]

I have nothing but disgust and distrust for the new government. Their campaign tactics repulsed me. The demography of their voters (retirees for the most part) doesn’t impress me. They are proven failures, every one of them. There is no hope for Greece with this government. False hope would have been better than no hope.

It might seem hard to believe that in Greece in 2012, people would actually vote for “politics as usual,” but it isn’t. There are two explanations: 1) the Greek public was the victim of a campaign of terror launched by the old political parties, the European political and banking community, and the mass media (although only the media were really honest about doing it); and 2) old people tend to be conservative. Greece has a lot of old people.

I did, however, see one small glimmer of hope. I have a friend in Thessaloniki who voted (like everyone in my generation) for Syriza. So did his two brothers. His parents – retired now, one from coal mining and one from working in a factory, who went to Germany to find work after the war when Greece was destroyed but Germany was booming, and who have remained illiterate throughout their lives – have voted for ND in every election since ND was formed, for reasons that they themselves cannot articulate. This year, for the first time ever, they didn’t. They couldn’t bring themselves to vote for a different party, but they decided to stay home. “This is your future… you have to decide,” my friend’s father told him. Despite this gesture, Thessaloniki – due to a last-minute terror campaign by a local ND politician – experienced a massive increase in elderly voting, and was the only major city in Greece that voted for ND – even after voting for Syriza in May".