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Thursday, February 19, 2015

Alexis Tsipras: A 'New Greece' Within 6 Months?

A reader referred me to this article ("Not all Greek") by Edward Hadas of Reuters. Here is a key excerpt:

"Europeans talk of structural reforms, but Greece is not merely a malfunctioning welfare state like France and Italy. Its relative poverty stems from a much deeper weakness - a shortage of the habits and practices needed to run sophisticated industrial complexes and complex educational and healthcare systems, or at least to run them well".

I don't remember how often I have voiced my critique that all these seemingly endless discussions/negotiations of Greece's debt are literally a waste of time and effort because they address only the 'derivative' of the problem. The 'underlying' is what Edward Hadas describes in his article: the real economy, the quality of institutions, the know-how in all areas, etc. etc. ONE CANNOT SOLVE THE PROBLEM OF THE 'UNDERLYING' BY ONLY PLAYING AROUND WITH THE 'DERIVATIVE'!!!

How does one change the 'habits and practices' necessary for social and economic development? Some of them can certainly be changed through legislation and executive action. For example, it may well be that SYRIZA scares the tax cheaters and smugglers so much that they will end up paying taxes voluntarily. But there are certain 'habits and practices' which cannot be changed through legislation because they require, among others, a change in value structures.

Greece desperately needs an accelerated transfer of know-how in all areas ranging from technical know-how to general know-how such as good corporate governance. I think the EU Task Force for Greece has been an outstanding platform to accelerate such know-how transfer (I am not sure, though, that it has really been used to its fullest advantage).

The other very important source of accelerated know-how transfer is my pet subject of foreign investments. Some people associate foreign investments with privatizations of state-owned utilities, investments in financial assets like bank or corporate shares, etc. These are certainly foreign investments in terms of bringing money to the economy. Whether they also bring know-how, growth, new employment, etc. to the economy can be quite a different matter. But one thing is for certain: as soon as the Greek economy would experience headwinds, such investors would leave again in a hurry.

But could we imagine that a very serious family-owned company like MIELE decided to concentrate all its production for Greece, South Eastern Europe and the Near/Middle East in Greece? Anyone who is familiar with the MIELE corporate culture knows how much that would mean in terms of know-how transfer. Technical know-how, corporate governance know-how, employee relations know-how, etc. And, of course: it would also bring a lot of money and generate a lot of employment!

Only if and when SYRIZA starts talking about these kinds of things will I begin to believe that they will create a 'new Greece'. Not quite in only 6 months like Alexis Tsipras has announced but probably within a few years and certainly within a generation!

17 comments:

  1. Funny that you're mentioning Miele. Greece used to have it's own home appliance maker Pitsos, now a subsidiary of Bosch-Siemens Group. Actually I don't know the full story, but from what I've heard, they had to close their production facilities in Greece because of a number of serial strikes. Nowadays their products are made in Turkey and Spain.

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    1. Hahaha ... serial strikes? That's typical Greece. Absurdly enough those strikers would also have gotten the support of Syriza!

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    2. Don't know where you get your information Antionette?

      V

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  2. Take a look at this Klaus.

    http://www.capital.gr/tax/News_tax.asp?id=2233727

    The government is going to impose a haircut on taxes owed.

    This scandalous case of moral hazard (those who were responsible and paid their taxes are being punished, while those who refused to pay are being rewarded) is an example of why Greece has turned to a nation of dodgers and crooks. It's because the state rewarded these behaviors.

    I understand that the goverment must be getting desperate at this point in order to raise cash, but continuing the bad practices that turned Greece into a semi-failed state and a vessel of corruption isn't the best way to do it.

    This isn't the new Greece that Tsipras promises. This is the bad old Greece that we've come to detest.

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    1. The point Jim Slip makes is a very good one. I have heard on earlier occasions and read again in the press today that Greece does not intend to collect all the taxes that it is owed by its own citizens. How can Tsipras expect the rest of Europe to provide further money - after so many billions of euros have already disappeared there - when he does not even collect the taxes that are due at home. It is not surprising that frustration and anger in the other European countries are growing.

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    2. The tragic irony of the sort of comments you are posting -- mostly gleaned from right wing press -- is that they emanate from the very people who are the cause of Greece's problems. In this case, it is the high income-earners and businessmen who are the principal non-tax payers in Greece, not the ordinary people who are taxed at source. And quite high too, with additionally very high rates of indirect taxes.

      For decades, the OECD used to complain that large companies were not paying enough in corporation tax: we didn't hear complaints then. Now that the poor are being squeezed dry (and into bankruptcy) by extremely high taxes that Germans cannot (with their limited minds) even begin to comprehend, we get all of this whining about those who don't pay taxes.

      So, for the nth time: the biggest problem with taxes across the EU is with the rich. This is clear cut, and even includes Swiss raids on the only Swiss bank that had a leak of info about the criminal activities that are going on.

      Your comment, on the other hand, is nothing other than propaganda. It has no basis in fact, other than a recognition that there are too many small businesses in Greece that have a marginal profitability and cannot afford much (if anything) in the way of taxes. Roughly half have been bankrupted in the last 5 years.

      Of course, your uneducated cronies all leap to support the lies that you are propagating. Frankly, I am appalled at the bigotry and ignorance that is shown.

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    3. Piss off. I paid my taxes in full, and now Syriza is going to impose haircuts on those who didn't without even reviewing each case separately?

      What propaganda? I repeat, piss off.

      Rewarding the dodgers and crooks is only gonna create more dodgers and crooks. Next time I won't pay my taxes either. Why not? It pays off.

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    4. @Jim. Where in my post did I claim that you did not pay taxes? I deliberately avoided any mention of personal issues, involving anyone.

      Now, you seem to be saying that this is a personal issue, and not about fiscal management. I cannot but agree that it is unfair on those who pay their taxes in full, and most of my Greek friends also do so. This does not mean that the tax haircut is necessarily the wrong thing to do: it depends on the way it is done, I suppose.

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  3. Klaus, no doubt that you are fully correct on what _would_ be needed in Greece for a real success (plus a stable and efficient legal system).

    However, your are short sighted not seeing how Tsipras sees that entirely new Greece within 6 months:

    - Independent of what was felt as northern occupation
    - Own money Drachma
    - Social government which gives to the poor (freshly printed Drachma)
    - Paradise on earth (until hyper inflation breaks out)

    H.Trickler

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  4. Very Nice Article and Points Mr. Kastner,

    But to be honest as i have written to you in the past 6 months, but can not come on in the speed which you would desire. Change is here and now is growing but surely much less in the public systems. But change is happenning.

    The problem is, is that change while being beaten is quite hard. I have great concerns if a Grexit comes about, that question of change. Will it make us change mentality and direction, or will we further move back toward the abyss. I fear more probably the 2nd, but i have hope because people like myself which are growing in numbers everyday help those changes come along.

    I just certainly hope that there is not a severe collapse where my expertise and assistance in my sector, dissolves and i can not stay to help change come about.

    Sometimes i believe advocates of Grexit also have alterior motives as well. As you know 200,000 fresh young minds left greece in the last year for a better future. these minds went to greek foreign centers. Germany, USA, UK and Australia. Funny thing how we have all low grade workers coming into Greece and all educated people are being imported to Germany.

    Sincerely,

    V

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  5. Once upon a time there was a state that was the poorhouse among its neighbor states. It lived from primitive farming, tourism and grants from its rich neighbors. its population was introvert and suspicious of its neighbors. They were also convinced of their uniqueness as humans and their special culture. They were even a bit narrow minded, as you are wont to become when you isolate yourself. They were very religious, but in spite of all that, fun loving and hospital. One day they decided that they wanted to become as rich as their neighbors, not by making their neighbors poorer, but by making themselves richer. They stole ideas and people from their neighbors, they cooperated with them, they developed into a high tech producer. After 50 years they succeeded, they are now a powerhouse amongst their peers.
    Is this the next 50 years story of Greece? Only if they want it.
    It is however, the last 50 years story of the German state Bavaria. Did the Bavarians lose their uniqueness, culture, fun and hospitality? No, they did lose their narrow mindedness and a bit of their blind trust in the church. Did they lose their agriculture and tourism? No, they developed it to a very high degree.
    I don't know how it came about in Bavaria, who, why? It was carried by Bavarians, not by Chinese or Russian money, nor by natural resources as oil and gold.
    So nothing wrong with Bavaria? No complains? Yes, they have forgotten their past fortune and now complain they are paying too much to their poor neighbors.
    Lennard

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    1. That truly is an outstanding example! And I say this as someone who has spent 13 years of his life working in Bavaria, of which 6 years when Bavaria was starting to turn the corner and 7 years when Bavaria had become the star of Germany.

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    2. I agree Lennard indeed that is a nice example....

      It also helps though when a small country of men do decide to "lift" there head up, someone doesn't come along smashing it with a hammer while stealing everything that was created.

      V

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  6. Regarding the private sector, Drucker's quote about what culture eats for lunch applies down here too, Mr Kastner. The dominant culture has been cronyism and nepotism. There are brillant middle managers that can turn around any greek company, only to be marginalized by incompetent "family" cliques. There is a slang expression for this ("tsatsilikia").

    I would say that we don't need know-how transfer. It's already there, just take a look at successful and low profile domestic players (Kleeman, Raycap, Thrace Plastics, Karelias to name a few). What we need is a radical change in executive/sr management in strategic private sector corporations, especially these implicated in cartelization, state subsidizations and dubious transactions with the banking & financial establishment.

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    1. There is a saying in Germany like: "The fish starts smelling at its head". And another one: "Like master, like followers".

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