The former Governor of the Bank of England, Mervyn King, wrote a book titled "The End of Alchemy: Money, Banking, and the Future of the Global Economy". In it, he discusses the future of the Eurozone and makes the following comments about Greece:
"It is evident, as it has been for a very long while, that the only way forward for Greece is to default on (or be forgiven) a substantial proportion of its debt burden and to devalue its currency so that exports and the substitution of domestic products for imports can compensate for the depressing effects of the fiscal contraction imposed to date. Structural reforms would help ease the transition, but such reforms will be effective only if they are adopted by decisions of the Greek people rather than being imposed as external conditions by the IMF of the European Commission. The lack of trust between Greece and its creditors means that public recognition of the underlying reality is some way off".
While King does not use the term "Grexit", he obviously says that Greece should leave the Eurozone. At the same time, he suggests that Greece could consider re-joining the Eurozone a few years later after a new equilibrium has been reached, if it so wished.
Until about mid-2013, I was an adamant supporter of Greece's holding on to the Euro. My simple logic: it was the lesser of 2 evils (i. e. less social cost) and it had more longer-term promise than a return to the Drachma. This was followed by a period of about 2 years during which I began to doubt my earlier convictions. And for quite some time now have I felt the way Mervyn King describes above. With the benefit of hindsight I think that the social cost of a return to the Drachma could not have been much higher than it turned out to be with the Euro in the last 5-6 years and the economy would have found a new equilibrium much more quickly. Perhaps a worse one, but still.
What had been the objective of the exercise of the last 5-6 years in the first place? The official version read: "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".
If reforms were meant to reduce the budget deficit from over 15% to under 3% of GDP (on top of a declining GDP!), then Greece is now completely reformed. But is Greece really different today? Has Greece really changed? Did a jolt run through all corners of Greek society raising animal spirits to bring about change?
The EU Task Force for Greece (TFGR) was formed in July of 2011 and it included the above quote in its mission statement. One would have thought that a society desperately wanting change and improvement would have jumped at the opportunity of utilizing the help of its European partners to bring about such change and improvement. Regrettably, most attempts at change were treated with suspicion by Greek society for the simple reason that they were perceived - rightly or wrongly - as being imposed by the outside. Thus, they were not really adopted by the Greek people.
By the end of 2012, I made a last effort to pluck up my spirits and wrote an essay titled "Make the year 2013 the Year of the Task Force for Greece!" Exactly one year later, I re-published this essay and then I gave up pursuing the subject. By June 30, 2015, the TFGR's mandate expired and it was not renewed. Dismantling and institutional death had occurred.
Yet, neither the EU nor Greece wanted to throw the towel entirely. A new Structural Reform Support Service (SRSS) was set up in July. Its mission? "The SRSS will offer technical assistance to the Member States in order to facilitate their administrative and structural reforms". No more lofty talk about building 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. Now the specific goals were administrative and structural reforms.
As though this were not enough, French President Hollande personally came to Greece 3 months later to witness as the Finance Ministers of both countries signed a protocol by which, essentially, France committed to modernize Greece.
Every reader should now judge for him-/herself: how much have we heard about progress in these matters since then?
In 2010, Greece ranked #109 out of 183 countries analyzed by the World Bank for its Doing Business Report. In Transparency International's Corruption Perception Index, Greece ranked #78 out of 178 countries. In the former, Greece was the lowest European country; in the latter it the second lowest (before Bulgaria).
By 2016, Greece had moved up to #60 out of 189 countries in the Doing Business Report. A similar improvement was shown in the Corruption Perception Index where Greece ranked #58 out of 167 countries (2015).
And yet, all these statistical improvements notwithstanding, Greece's attractiveness for foreign investors is no better than that of Afghanistan of Mali.
In contract compliance, which is essentially considered the ability of a State to guarantee compliance with business agreements and to protect investors, Greece occupies the 133rd position, second worst among developed nations.
A key problem is the enormous amount of time required for legal resolution of appeals for compliance with contracts. On average, Greek courts need 1,580 days to issue a decision, that is almost four and a half years.
A similar picture appears in property registration, with Greece ranking in the 141st position, faring worse than Venezuela, Grenada, Tanzania, Mali and Guinea.
The German Finance Minister Schäuble is said to have said that Greece is allergic to reform. What seems as certain as it is understandable is that Greeks are allergic to reforms imposed from the outside, particularly when under the heading of 'help for Greece'.
Alchemy is the ancient practice of trying to turn lead into gold. Mervyn King describes the alchemy of banking as the process whereby safe short-term deposits are turned into long-term risky loans. The alchemy of the Greek economy is that the efforts to implement reforms seem to turn into even greater resistance to make reforms.
And what better way to eliminate any interest in reforms than by calling the brutal reduction of the budget deficit from over 15% to under 3% of GDP (on top of a declining GDP!) the prototype of what is meant by reforms?
"It is evident, as it has been for a very long while, that the only way forward for Greece is to default on (or be forgiven) a substantial proportion of its debt burden and to devalue its currency so that exports and the substitution of domestic products for imports can compensate for the depressing effects of the fiscal contraction imposed to date. Structural reforms would help ease the transition, but such reforms will be effective only if they are adopted by decisions of the Greek people rather than being imposed as external conditions by the IMF of the European Commission. The lack of trust between Greece and its creditors means that public recognition of the underlying reality is some way off".
While King does not use the term "Grexit", he obviously says that Greece should leave the Eurozone. At the same time, he suggests that Greece could consider re-joining the Eurozone a few years later after a new equilibrium has been reached, if it so wished.
Until about mid-2013, I was an adamant supporter of Greece's holding on to the Euro. My simple logic: it was the lesser of 2 evils (i. e. less social cost) and it had more longer-term promise than a return to the Drachma. This was followed by a period of about 2 years during which I began to doubt my earlier convictions. And for quite some time now have I felt the way Mervyn King describes above. With the benefit of hindsight I think that the social cost of a return to the Drachma could not have been much higher than it turned out to be with the Euro in the last 5-6 years and the economy would have found a new equilibrium much more quickly. Perhaps a worse one, but still.
What had been the objective of the exercise of the last 5-6 years in the first place? The official version read: "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".
If reforms were meant to reduce the budget deficit from over 15% to under 3% of GDP (on top of a declining GDP!), then Greece is now completely reformed. But is Greece really different today? Has Greece really changed? Did a jolt run through all corners of Greek society raising animal spirits to bring about change?
The EU Task Force for Greece (TFGR) was formed in July of 2011 and it included the above quote in its mission statement. One would have thought that a society desperately wanting change and improvement would have jumped at the opportunity of utilizing the help of its European partners to bring about such change and improvement. Regrettably, most attempts at change were treated with suspicion by Greek society for the simple reason that they were perceived - rightly or wrongly - as being imposed by the outside. Thus, they were not really adopted by the Greek people.
By the end of 2012, I made a last effort to pluck up my spirits and wrote an essay titled "Make the year 2013 the Year of the Task Force for Greece!" Exactly one year later, I re-published this essay and then I gave up pursuing the subject. By June 30, 2015, the TFGR's mandate expired and it was not renewed. Dismantling and institutional death had occurred.
Yet, neither the EU nor Greece wanted to throw the towel entirely. A new Structural Reform Support Service (SRSS) was set up in July. Its mission? "The SRSS will offer technical assistance to the Member States in order to facilitate their administrative and structural reforms". No more lofty talk about building 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. Now the specific goals were administrative and structural reforms.
As though this were not enough, French President Hollande personally came to Greece 3 months later to witness as the Finance Ministers of both countries signed a protocol by which, essentially, France committed to modernize Greece.
Every reader should now judge for him-/herself: how much have we heard about progress in these matters since then?
In 2010, Greece ranked #109 out of 183 countries analyzed by the World Bank for its Doing Business Report. In Transparency International's Corruption Perception Index, Greece ranked #78 out of 178 countries. In the former, Greece was the lowest European country; in the latter it the second lowest (before Bulgaria).
By 2016, Greece had moved up to #60 out of 189 countries in the Doing Business Report. A similar improvement was shown in the Corruption Perception Index where Greece ranked #58 out of 167 countries (2015).
And yet, all these statistical improvements notwithstanding, Greece's attractiveness for foreign investors is no better than that of Afghanistan of Mali.
In contract compliance, which is essentially considered the ability of a State to guarantee compliance with business agreements and to protect investors, Greece occupies the 133rd position, second worst among developed nations.
A key problem is the enormous amount of time required for legal resolution of appeals for compliance with contracts. On average, Greek courts need 1,580 days to issue a decision, that is almost four and a half years.
A similar picture appears in property registration, with Greece ranking in the 141st position, faring worse than Venezuela, Grenada, Tanzania, Mali and Guinea.
The German Finance Minister Schäuble is said to have said that Greece is allergic to reform. What seems as certain as it is understandable is that Greeks are allergic to reforms imposed from the outside, particularly when under the heading of 'help for Greece'.
Alchemy is the ancient practice of trying to turn lead into gold. Mervyn King describes the alchemy of banking as the process whereby safe short-term deposits are turned into long-term risky loans. The alchemy of the Greek economy is that the efforts to implement reforms seem to turn into even greater resistance to make reforms.
And what better way to eliminate any interest in reforms than by calling the brutal reduction of the budget deficit from over 15% to under 3% of GDP (on top of a declining GDP!) the prototype of what is meant by reforms?
Dr Schaeuble got it absolutely right, the Greek society is allergic to reform. Furthermore, the average person firmly believes that 1/ paying taxes is for the weak minded and 2/ that money will always come from the state and that private enterprise is only for those unlucky ones without access to state money.
ReplyDeleteSo, Euro, Drachma, Roubles ,... will not make a difference in the Greek attitudes towards taxation and private enterprise. Devaluation cannot compensate for chronic lack of productivity. Rather any devaluation resulting from Grexit will be overcompensated within a year or two by rampant inflation, and Greek economy will revisit the '80's with one-year CDs yielding 25%.
The only difference the Drachma will make is that Greece will reach its self sustainable GDP / capita equilibrium, probably 25% below current levels, much quicker than with the Euro.
I think rather Schauble is allergic to reason and very much in love with his own nonsense, repeated in endless fragments of the same stupidity which makes those who understand international finance blush at the depth of his ignorance.
DeleteSchaeuble is not an economist. He is a glorified tax-collector whose grasp of economics is pitiful and shameful. This would not matter if the man had the humility to take advice from the world's greatest economic minds: but no, he is not interested to listen to anyone. He is quite convinced that his intellectual grasp, backed by crony German economists, far surpasses that of the entire world. The correct word to describe this is "manic-delusional".
DeleteAs far as reform of the greek economy is concerned, this has never been an objective of the Troika or of Schaeuble. Their interests are (1) keeping the eurozone going; (2) keeping banks afloat when they should have been closed; (3) preventing any serious political debate on the future of the disastrous eurozone -- which meant silencing Varoufakis, for example; and (4) humiliating and punishing the Greeks in order to set an example for the rest of the bankrupted eurozone. The cost of doing these things is destruction of the real economy for most of the eurozone, along with political crisis and the potential collapse of the EU. However, the Germans are well experienced in destroying other European countries, and are not at all phased by this possibility. What matters is Germany -- and especially big business in Germany -- the friends of Schaeuble -- as opposed to the Volk.
So, when we talk of reform in Greece, we do not talk seriously. There was never any intention of reform -- only neoliberal dogma about privatisation and opening of markets. The primary issue in the Greek economy is lack of production, not the degree of imperfect competition in the retail sector. Any serious reforms would address the problems of production, and immediately comprehend that the issue of over-taxation (did you hear that, idiot Schaeuble? is central, alongside the inability of any Greek government to act autonomously and facilitate FDI and protect the interests of investors. When a country is run as a protectorate, with unstable governments, external rule by demented Germans and others with no grasp of economics, and state budgetary obligations that cannot be avoided (pensions, healthcare, education, unemployment benefits) -- nobody in their right mind will invest.
It is obvious that the X-rate is not the issue here. A devaluation is useful only if there is unused productive capacity that can quickly be utilised, export markets (or import substitution) for those products, and a state that can organise a more productive orientation rapidly. None of these conditions is satisfied. One can therefore conclude that either Schaeuble is a complete lunatic, or that he simply wants to wash his hands of Greece (and let the country collapse into fiscal and political chaos). It is the height of German callousness and irresponsibility -- yet another shame to add to their long list.
There it is, KK got it right. Leaving the EZ give Greece the "incentive" to create the necessary equilibrium overnight. It is not Europe's beef if Greece want to create it with lower living standards or higher productivity.
ReplyDeleteLennard
Again we need to mention that the so called reforms have nothing to do with improving Greece and everything to do with supporting the flawed euro because without a manipulated euro Germany collapses overnight.
DeleteAnd therein lies the dilemma of the Greeks. Why would they support a construct designed not to benefit themselves but benefit another? Because by now the myth of common and shared fate within the EU has been thoroughly discredited. There is no common fate in the EU. There are the interests of large players and the interests of smaller players and nothing to bind them together. If the EU was a good deal then Brexit would not have occurred. Apparently the eurozone is a very bad deal and everyone is now running for the exits.
It's a very simple and straightforward issue to read.
Anonymous (november 2): Absolutely correct. The insistence of people who know nothing about the greek economy in talking about "reforms" indicates how willing they are to swallow and regurgitate on demand the pigswill that has been fed them by Schaeuble, the Troika and even the IMF.
DeleteIndeed, the problem is the political construction of a monetary union that has damaged more than half of its members, and benefited only one country. Instead of the damaged members taking the initiative and reforming the eurozone, the country that has bled everyone else dry assumes some fake "moral authority" and determines the policy and direction of the eurozone.
I would not say it is a simple issue to read, otherwise there would not be so many stupid comments made about it continuously and depressingly.
Anonymous (november 4):
DeleteWe agree. When I say it's a very straightfoward and easy issue to read, I mean the framework of the debate. Obviously you could add various degrees of political complexity but the simple issue remains that the EU is nothing more than a free trade zone with all participants seeking advantage and no mechanisms for common will/action unless the EU further integrates which obviously it can't and such will never happen. So the EU as a political construct is just a joke. The only prevailing reality is that the EU is a free trade zone for mostly german products and if you want the germans to stop their destructive behavior you need to impose heavy and punitive tariffs on them. That's the only language the germans understand; restrict their trade and they lose all their manhood begining to behave like eunics.
??? a lot of offensive language, and from one calling for furthering integration with other EU members, no less.
DeleteIf Germany was such a dark power in EU, you would not have other countries (poorer than Greece) expressing more radical positions and if EU was only a free trade area, borders would have been closed far asylum seekers in early 2015.After all, refugee sharing or refugee cost sharing has nothing to do with a trade area.
Personally I want to further the union with friendly countries. Germany is one of them.
Jerome:
DeleteThere is absolutely no doubt that germany is a dark and evil force that needs to be dealt with. If you want to develop friendly relationships with satan then that's your business. No one in Greece in their right mind wants to share the same roof with germany which is a country that is sapping all the energy of the Mediterranean south. The only people I know in Greece that like germany are fascists, admirers of the old military hunta and many members of the New Tromokratia (its right sektor) which is the main reason that Mitsotakis will never get a shot at power. Because Greeks don't trust ex-collaborators and they are not about ready to make the same mistake twice.
There will be no settlements of the issues against germany. They are our arch-enemy and those who align themselves with our enemy then they are our enemies too.
Greece's dependable friends are the UK (because the Brits are a maritime nation as we are), the US (the supreme naval power of this world) and Israell which is both a nuclear and regional superpower in our neck of the woods. The only other european country we can thinly tolerate is France but that's it. The rest of the so called europe you can have it for yourselves because we want none of it.
Dear Mr. Kastner,
ReplyDeleteOk all read and understood. I am all for reform and just as all Greeks are. But when you mention reform, please be detailed in specific tasks of reform. I state this because there is a difference between what you mean when you say reform, from what Troika means in reform.
Every 3-4 months or so Troika comes and begins to re-discuss these reforms. What has been done and what has been applied. They evaluate this versus how the economy is going and present a need for new reforms. What is the reform you hear? New taxes, more taxes, adjusted taxes and btw more taxes. Then they hit the next category of reform. Lowered pensions, reduced pensions, removal of extra pensions, re work again and give lower pensions and finally increase payment to the pension system.
Then they get to the next subject. Employment reform. Lesser minimum wages, even lesser minimum wages, more flexible wages and no pensions and no insurance to newly employed young people.
Finally, increased corporate taxes, more taxes and higher brackets of taxes for special categories and more taxes.
With all do respect. What damn reform are you talking about!!!! Do you know or even follow what they discuss every 3-4 months? There reform is simple, give me more money and take it from everyone. I have told you many times from my gross income salary, directly and indirectly since the start of the crisis 70% of my money goes to the government. (In 2008 40% respectively) A government, where troika states "we don't state we want more taxes and income and reduced wages etc etc." The Greek government does this. Who approves what the Greek government does? And when troika does not like something they block it. So they are both in bed together.
Simple question how is a tanking economy going to rebound when every 3-4 months we need to pay more and more, the debt to the government and banks increases more and more because people can barely get by?
Even if we were to give away land for investors, who in their right mind would invest in such a bleak and economy that is tanking and is governed by these morons, Greek and Troika?
Where are the reforms that you are discussing? Governance, parallel checking systems, new ways of the public eye to work? Checks on public workers?Where is the mandate to cut through bureaucracy?? Where is troika insisting and mandating on these structural reforms be made by the next 3-4 month period of investigation? They are nowhere because they are still milking the cow.
As far as the sell off of public works and companies that is on target, isn't it?
I am all for reform but your manner of reform and their manner of reform is completely different.
And to be completely honest to commenters such as KK November 1, 2016 at 6:21 AM, when you take a sudden 40-50% hit in your family income then lets talk about who is being reformed or not. People are suffering but it is easy to sit back behind your computer or tv screen and make half guess assumptions of the problem is or characterized a terrorized people. The same way the bombs drop on Syria, is the same way you see the Greek crisis. From afar and completely impersonal.
And finally, Greece has made huge progress under the circumstances that we are under meanwhile being forced to do things which are inhumane under this modern occupation. But even under this occupation our place is in the EU. If we ever left Greece would go into the dark ages.
Sincerely,
V
Great reply!
DeleteAbsolutely correct analysis, V.
DeleteI see that my comment above has caused quite a stir, especially my assertion that Dr. Schaeuble "got it right".
DeletePlease consider that the Quadriga, Schaeuble, the IMF, the OECD are in Greece to advice / force / tell us to reform, because WE (GREEKS) allowed them or even invited them to do so! We needed (pre-crisis) and we still need their money to even pay pensions, so it only natural that THEY dictate their conditions, not we!
If Greece had not borrowed to the hilt and had not wasted such borrowings in corrupt ventures, consumerism, and failed vanity projects (remember the Olympics?), we will have not been in the dire financial situation we find ourselves in since 2010.
Finally, it is common logic, that to find a solution to a problem, you should first identify its root causes. Continuing to attribute our problems to external causes, is a sure recipe to never solving them.
KK:
DeleteNo one has ivited the Quadriga clowns to Greece. They invited themselves and in a situation that their nonsense is not welcomed.
The size of Greek debt was never an issue. If it was then the pre-crisis level of 115% debt to GDP would not have ballooned to 180% by the incompetent Troika and then have the same inneffective Troika pretend that is solving the problem.
The issue have always been borrowing rates. So when your debt goes from 3% interest rate to 24% interest rate because Merkel said that each country in the eurozone hell was on its own, then the issue is usurious rates. In case you don't know that usury means then let me inform you that it's the action or practice of lending money at unreasonably high rates of interest. synonyms: extortionate moneylending, shylocking; informal loan-sharking.
I am afraid you are getting something wrong here. The highest rate at which Greece ever borrowed since 2010 was about 5,5% (back in 2014). Thanks to Merkel & Co., Greece is presently borrowing at less than 1% from the EU, which represents the largest portion of Greece's debt. The IMF charges about 3,5% and the remaining private creditors about 5-6%.
DeleteI agree with you that the primary issue is debt service, i. e. borrowing rates. So you should be appreciative of the fact that Merkel & Co. lowered Greece's borrowing rates so much that the debt service of Greece is lower than that of other Southern countries. Put differently, very substantial debt relief has already been given to Greece (in addition to the 100 BEUR haircut).
Kleingut:
DeleteI beg to differ. Merkel & Co is now forced to lend Greece at below 1% interest rates otherwise their nonsense is exposed. In return, Berlin pretends that wants to reform Greece when in actuallity it only wants a weak euro to maximize its sinking (no longer as profitable) exports.
I suggest that if you want a sincere discussion and an accurate observation of Greece, we cut out the nonsense about reforms and understand that europe is in grave trouble because predictably europe has run out of options. And as such "europe" is no longer a desirable club nor one that should give empty advice instead of showing the world that it can cure its own messes which obviously "europe" CAN NOT.
Ok then @Anonymous, if it is all so negative for Greece within the EU why don't you start a campaign to exit it asap?
DeleteThat will give you the chance to sample the situation outside the EU and test your conspiracy theories.
"No one has ivited the Quadriga clowns to Greece. They invited themselves and in a situation that their nonsense is not welcomed"
Delete@Anonymous, please get your facts straight:
-- The IMF was invited by the G. Papandreou Government.
-- The Troica / Quadriga structures are part of the three (so far) Memoranda signed by the Greek Governments since 2010.
-- The OECD has a consultancy / advisory contract with and paid for by the Greek Government.
So Greek Governments have let the aforementioned into the country and I hate to have to tell you that it was the Greek population that voted such Governments into office.
KK:
DeleteThe issue for Greece is not the EU. The EU membership is for life and no one could change its status. The issue for Greece is abandoning the eurozone something which Greece has every reason of doing because it's to its maximum benefit.
As far as the memoranda signed to date or in the future they are all illegal documents. Basic law dictates that agreements signed under duress are neither legal not enforceable agreements.
@Anonymous, again facts:
DeleteIn legal terms there is no mechanism to leave the EZ and remain in the EU. That was clarified during the height of the crisis in 2012. So it will be EU exit for Greece.
As for the Memoranda being illegal, good luck with enforcing that claim in an international court / organization.
KK:
DeleteThe common knowledge is that of the 28 EU members only a certain number of independent states belong in the eurozone. Therefore it's common to be part of the EU and not part of the eurozone. Leaving the eurozone does not mean you leave the EU.
As far as international courts go obviously an agreement made under duress is not a valid and enforceable agreement. Everybody knows this.
KK:
DeleteThe following is for your education in matters you seem lacking enough of:
One option would be to invoke the EU’s so-called ‘flexibility clause’ under Article 352 of the EU treaties, which can be used to achieve EU “objectives” when the treaties “have not provided the necessary powers.” This article could potentially be used to provide a temporary legal avenue for Greece to leave the euro within the framework of the EU treaties.
The exact form an Article 352 decision would take is to be decided. One option would be to grant Greece the same status as those EU countries currently outside the euro but with an obligation to join, which are known as ‘member states with a derogation’ (this ‘transitional’ status applies to all non-Euro countries, with the exception of the UK and Denmark, which have opt-outs). Changing Greece’s status to a ‘member state with a derogation’ would remove it from Eurozone measures such as the governance of the ECB, fines for excessive deficit, and the rules on issuance and use of the euro currency.
Ok @Anonymous, assuming that the above legal construct is applicable and the rest of the EU agrees to grant Greece the transitional status outside the EZ, how is Greece going to pay back any of its 180% of GDP debts? Denominated in EUros and owed to IMF, the EMS, the ECB, various countries and Eurobond investors. The country has been in trade and budget deficits and living on foreign loans since its inception in 1827.
DeleteKK:
DeleteNone of the Greek debt is repayble whether you are in the eurozone or out of it. The Greek debt is only recyclable at rates below 1% interest. I am sorry but the lenders will never see their money back no matter what. And it makes no dirrence at which currency such loans are denominated.
To All,
DeleteWhy and how Greece arrived here, back in 2008, is mainly the fault of the Greeks themselves. I as a Greek I have a clear understanding of this and take full responsibility for this even though i have been a frugal character all of my life. But being a part of the Greek society, regardless of my personal well management of home economics, i must share this responsibility of falter with my country men.
Unfortunately, the Greek society of the last 30 years was definitely not accustomed to being given tons of "free" money and subsidies from the EU. They simply took the money with their old ways and exacerbated the problem even more. (Note I definitely believe there was foul play on the lenders of the time which in a sense is a conspiracy, but i can not live by conspiracy, so time will tell us why.) We as Greeks simply need to know we badly mishandled cheap money which could have been invested in our country's wealth. Our falters will negatively affect our children economical, but as characters they will only be strengthened. I am sure of this.
Now for the BS of who invited troika or not, this is a completely ridiculous discussion. Is Greece part of the western financial system? Yes. Inviting troika was completely procedural and even before the damn crisis these institutions existed but there was no close evaluation as there was trust. When we the Greeks within the crisis lost this trust our counterparts and PARTNERS decided that they have to keep a close watch on the black sheep of the family.
Plain and simple.
There is no point of discussion of Greece ever leaving Nato, Eu, EE etc. It is all hogwash. This is the current and most concurrent modern system of the west. With its flaws but it is what we have. Being outside of this system is an instant bullet to the head of the country. I will not go into detail as to why. And finally we are not the UK, a hugely established economy of the west, in the top ten, who simply says we do not want to be a part of this club. Who are you and critics think will happen to the UK. The UK will simple have a slightly different model of collaborations with the western financial structures. Big deal. Greece can not do this. Greeks know this all to well now.
Finally Greeks all to well know that our country needs reform. The only good thing that Syriza has by still being in power of government, is a constant reminder to the people that there is no easy solution and we must reform and god willing we find officials and Partners who can make better decisions and better strategies.
Troika is here in Greece and is running our country with our Greek leaders. And they are doing a terribly horrific job.
About 200 and 100 years ago respectively, Kapodistria and Venizelos came on a period of bankruptcy and restructuring of the country. They told their "PARTNERS" of then to get the hell out and let me do my job. Such men do not exist anymore more but i am hoping for a leader with sound logic to at least collaborate properly with our Partners.
Finally i mean no harm to any of my fellow commenters. And please excuse me for my quick outburst occasionally, i am simply frustrated with way my country/men being run into the ground and how global world is being run. Things are so badly managed that it is an insult to my humanity. Likewise, i can't stand for the bad decisions made which affect all of us Greeks and especially the weaker of society.
Sincerely,
V
Reforms take decades to produce tangible results. None of the Reaganomics reforms actually produced any benefit for the Reagan administration; only to the successors. So let's stop overplaying the reform mantra because it's getting old and boring.
ReplyDeleteNo V, the dark ages is where Greece spend the last decades, now enlightenment is being brought. Spare us the repetitions of what Greece don't want, tell us what YOU want. Not in the beautiful pictures of breathing space, growth policies, investment and solidarity, but in cool cash.
ReplyDeleteSo,in other words,"shut up and take it". Or should we continue to pretend that you wanted to hear anything else than your own voice?
DeleteDear Anonymous November 1, 2016 at 2:32 PM,
DeleteI am unaware if you are an old follower of this blog, but i have expressed my views multiple times here. But incase you are new and came out of the rock that you've been under i will express what i want.
1. Privatizations. I am all for it. It is helpful to the economy, closes holes in the government budget, gains some income from the sale and taxes the profitable private company. It also changes the public workers mindset into a more productive one of the private sector. I have stated many examples of successes and need for more privatizations. There are even other sectors of the public services which are not on paper which believe must be added. This such as waste disposal and transportation systems remaining (buses trolleys). The successes? Ote telecommunications, Main ports, Major and minor airports, Ellinikos, various property for property development, energy distribution, trainose, national roads and many more. Many more needed.
2. I am for complete re structuring of the core public services. For example Health, education, economical services, statistical services which are to be maintained by the government. Restructuring includes, manner of functioning, how public workers are evaluated, the removal of "ten year." The ability for immediate dismissal with out court ruling if a public worker has been bribed or has done something deemed unethical. Restructuring does not necessarily mean reduce cost but make more efficient with the funds they have. And finally a more streamlined salary system. Some civil protection organizations, have already been successfully restructured. Police, Fire fighters and Military.
3. I am all for the release of all closed sectors of the market to be completely open which has yet to be done after 3 memorandums. Taxi's, trucking, tobacco kioski's, pharmacy's and notaries to name a few are still closed to new licenses. They are not free market business categories. Release these.
4. Restructuring, real restructuring of the pensions system. Giving out flat reductions is not a fair system. A reevaluation of what money goes to how many people and re analyzing is. As i have stated based on Ekathemerini stated, a hand full of pensioners get 5-10 pensions which must stop. Consolidate and give a one maximum pension. It must be self sustaining while the only measures that the government can have is what to do to increase the labor force which contributes to the pension system not to contribute funds to an aligning system through subsidization.
The above points are just a few. Of course i am in for all of the above and i agree with you that it is indeed an enlightenment if implemented. But all you will see is no discussion of the above which simply remains on paper. They cut to the chase and see what new taxes they can suck the life out of us.
And as for your comments of growth policies, investment, well they are presented and cut by troika every time. They only allow this through privatization.
Unless you have ever had a clue as to what -40-50% of your salary taken on top of what is already taken, while cost of living going up, (because of taxes not due to non competitive products, where Greeks product apples for apples are the most competitive no) while this enlightenment as you call comes; then go back under the rock you came from. You have no clue to what sacrifice means.
Sincerely,
V
In continuations to the reforms question....
DeleteWolfgang Schäuble, well put in the 1st negotiations with Syriza, that proposal of the Syriza government of increasing funds income of 5-7 billions euro from the combating the battling of the black market trade in Greece, is ridiculous. He was right. Syriza has done nothing for this and not only have they not combatted the black market, but it is flourishing.
But my question to Troika, who seeks reforms, why they allow this black market, a huge thorn in the Greek economy, to continue?
Why don't they mandate it that a special policing task force (a combination of special police forces, a special part of the ministry of , economy, trade and SDOE (the national tax agency), be created to combat, black market gas/petrol trade, tobacco trade, commercial goods trade and one of the biggest no receipt issuance of regular small shop retailers. By increasing taxes, all these categories grow in the black market, while the last small shops and small businesses, not issuing receipts is the only why to survive.
The increased taxes has brought more funds to the government but not what was expected, meanwhile the black market trade only grows.
This black market needs to be combatted in an organized manner and it must be enforced measure by troika as a 1st priority. A system task force which will immediately combat the black market and allow for VAT reduction, as so healthy business can grow once again. These will also lead to growth in entrepreneurship.
When the above is not done or never combatted, it is always left in the Greek people's minds that behind all this illegal trade, that their are most probably some high profile politicians behind these dark schemes.
Sincerely,
V
Well put
DeleteIt is the hubris of economists to believe that economy is unrelated to the immaterial needs of populations or the social and political discourse in societies.
ReplyDeleteIn the minds of economists those factors that are not included in economic models can not possibly matter when formulating policies and analysing societies.
So whenever a society is in resistance against policies forced upon it by economist technocrats, the people resisting those "reforms" are pictured as "illogical", to stupid to see the validity of the economists arguments.
While those economist technocrats, without any democratic mandate, see themselfs as entitled to impose policies, they are in denial of forcing their social ideology and political belive systems on the people that are the victims of those reforms.
This arrogance and condescension that is felt by the receiving side, is often mirrored by increasing identity politics from the enforcing side, often resulting in blatantly racist statements. The technocrats are also in denial that they represent a totalitarian system.
Anywhere else but in narrative of economists, it seems to be obvious ,that what was and is happening in greece, was a fundamental social discourse about capitalism and democracy itself.
To discuss the economic reasoning behind reforms and policies is therefore clearly beside the point. Its about, who has a voice, who decides, what can be discussed, and what is not discussed.
Clearly alternatives to capitalism, the role of economic sciences, the financial system, the suffering of the people, the legitimacy of a state that is not in charge of its finances, its currency and its policy are all topics not to be discussed.
Be quiet and take it is exactly the position of Wolfgang Schäuble towards the greek. It is utterly cynical to speek of a resistance to reform when the reality is the resistance to totalitarianism.
Quote: "It is the hubris of economists to believe that economy is unrelated to the immaterial needs of populations or the social and political discourse in societies."
DeleteCould you be so kind and give us some examples of "immaterial needs of populations"? Thanks.
Urs
Pretty much all those needs we have as humans that are non material; "Maslow's hierarchy of needs"
Deletehttps://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs
If I should venture a guess which immaterial needs the greek get robbed mostly by the troika, Id say it be self-actualization, safety and self-esteem.
DeleteIf you read "needs" you might think those are minor in comparison to food, water etc., but what psychology says that we get ill when we suffer from a depravation of those needs, just as we would get ill from hunger.
DeleteTo get more concrete, I could go into the fact that in the United States, antidepressants are the most commonly prescribed medication or that there are more people suffering from psyhological illnesses than ever before.
I would like to give another example though. Bruce K Alexander is a very renowned addiction expert.
In his book, "the globalization of addiction", Alexander is quite thorough in showing the effects of capitalism on our psyche. He calls this approach the "dislocation theory of addiction".
"Global society is drowning in addiction to drug use and a thousand other habits. This is because people around the world, rich and poor alike, are being torn from the close ties to family, culture, and traditional spirituality that constituted the normal fabric of life in pre-modern times. This kind of global society subjects people to unrelenting pressures towards individualism and competition, dislocating them from social life.
People adapt to this dislocation by concocting the best substitutes that they can for a sustaining social, cultural and spiritual wholeness, and addiction provides this substitute for more and more of us."
See i.e. this article by Alexander:
Deletehttp://www.brucekalexander.com/articles-speeches/ecological-issues/addiction,-environmental-crisis,-and-global-capitalism
@ alien observer:
DeleteQuote: "It is the hubris of economists to believe that economy is unrelated to the immaterial needs of populations or the social and political discourse in societies."
and
Quote: "If I should venture a guess which immaterial needs the greek get robbed mostly by the troika, Id say it be self-actualization, safety and self-esteem."
No, it is not the hubris of economists to deny any linkage between economy and "immaterial needs". In fact most of them will agree that there is a strong and hierarchical link between economic activity and especially the three immaterial needs you listed.
And it was not the Troika that robbed them from the Greeks but rather the Greeks that gave them away when they repeatedly decided to rather live in a dreamworld than to acknowledge even basic economics.
Urs
Well,I think that economists are the ones that live in a world of make believe, where models that are proven as inadequate rule their responses to real life problems. We could have a discussion, but its not you and me that need to have this discussion.
DeleteWhat I was saying was that the troica never even allowed a discussion using the same argument you make.
Politics is the competition of world views in the market of ideas. Political debates can be unnerving and test our patience. Not having discussions when implementing policies is tyranny.
Tyranny will of course be met by resistance even if it would have good arguments for its actions.
The only case where we as a society are allowed to away freedom from one of our peers is in the case of a convicted felon, a prisoner. Are the greek prisoners?
To Urs November 5, 2016 at 7:28 AM
Delete"And it was not the Troika that robbed them from the Greeks but rather the Greeks that gave them away when they repeatedly decided to rather live in a dreamworld than to acknowledge even basic economics."
Ouch! What a cruel "observer" you make, you… you… you, Moderate! You… Realist! You… Swiss!
If only politicians of the countries that matter would have your franc-parler … But then, they wouldn’t have any proponents other than … Swiss observers.
But, say, when you're done dispensing justice left and right, would you be as kind as to reveal the extent of your knowledge of the Greek language?
If not anything else, so that we can continue discussing in Greek what is wrong with the mindset of the people you pontificate about … Oh! And reforms of course… And, the most appropriate punishment… And, stone-cold logic... And, the "gravy train"...
Lykinos
@ alien observer November 4, 2016 at 9:54 PM
DeleteVery Interesting. Based on this Pyramid, one can easily see that aside some from basic parts of Physiological Needs, most Greeks have been ripped away from everything else.
Having ripped away of these or the majority of these "needs," what this leads to is an interesting question. Or historical examples of.
Sincerely,
V
Dear Mr. Kastner
ReplyDeleteyou read my blog and my arguments, why is it so hard to even discuss the possibility that the greek crisis is in its core the result of a fundamental crisis in capitalism?
If it is, and we do not adress that issue, what hope is there for the greek people, if the powers that are responsible for that crisis in captialism are the ones that are in charge to "save" greece?
How can we deny the fact that the EU is in essence a tool for the international financial industry when even the former head of the EU-Comission, Barroso, today works for Goldman-Sachs?
How can anybody in Greece accept any kind of reform put forward by those powers if they are so overtly the tools of private banks?
Dear V.
ReplyDeleteWe have been here before, the Troika, or Europe, do not decide how your government rake in the money and distribute them
Ups, something urgent disturbed me.
ReplyDeleteDear V.
We have been here before, the Troika, or Europe, do not decide how your government rake in the money or distribute them. Should you wish Europe to govern your country you will first have to convince your compatriots to agree to that, then you will have to ask Europe if they are willing to do that. I don't know what is going to be most difficult.
As it is now you are petitioning Europe to interfere in Greek domestic economy in a way that you, one voter, find best, hardly democratic is it?
Lennard
Dearest Lennard,
DeleteHow the money is "raked in" is equally in the responsibility of both troika and our beloved
government. It is absurd to even discuss. Furthermore, when our government chooses to increase taxes it also falls into the partial responsibility of the troika, within the "fiscal financial goals." Likewise the bad decision making by both only contributes to the viscous cycle to further tank our economy. I just won't get into this now.
It is not troika who sets the "bar" for the financial goals? It is not troika who insisted that VAT levies on all islands which are special case, be increased to the levels of the mainland. 9% to 24%? In all categories including tourism? Where the eu average is 10%? It is not troika who stated that we need to further reduce pensions? Now they ask 150 euro a month! Why because they want the pension system to be below the 15% vs GDP EE mark? (If the country continues to tank what will they ask for? 100 or even 50 euro per month pensions?) Is it not troika who insisted that the property taxes levies be maintained in a tanked property market? Is it not troika who insisted that the property taxes be further increased into more categories? (For example i have a rock shed of 25 m^2 from 1854 which i pay property taxes of 75 euro a year for.) It is not troika who asked for higher taxes on farmers and consider them to the equivalent of small businessmen? It was not troika who insisted small breweries and small wine manufacturers to be taxed as in the same manner as the larger breweries?
I will leave the tax hike on salary income and unemployment tax on Syriza. Likewise the constant increased levies on petrol (auto and heating), energy, tobacco goods.
My dear Lennard, I do not wish for any EU politician to my country and run things. Nor do i want these incompetent idiots we have as politicians. To be completely honest on the most part i would like to see all politicians hang by there feet and let the crows at them all. What i wish for is for reform under structural basis and as i am a realistic person, knowingly at a human sacrifice. I do not ignore the fact that the country was run like crap in the last 30-40 years with unsustainable policies, of which i only became a part of in 1998, but you have to admit to the truth, that both troika and Greek governments of the crisis, are completely incompetent. That or they there is a dark aspect to the decisions being made.
I seek no pity, all i seek is understanding, as although you and many here state that Greeks have not changed nor the system has not changed, there have been changes. More is necessary but there have been steps and unfortunately not strides. Maybe you need to relook at how you see us? Maybe as a basic human being you should re think your views and try to have some understanding.
I am for reform as i am sure you are, but this reform, under the incompetence of the memorandum owners, will put a humanitarian crisis in Greece on EU soil which can only shame the EU basic ideologies and principles that it built on.
Sincerely,
V
Lennard:
DeleteEurope is a geographical destination and the EU a free trade zone.
You do not ask a geographical destination and a free trade zone for approval of your country's politics.
Please get a grip on reality and stop throwing your weight around pretending to be something you are not.
Europe has zero credibility in international affairs and its wishes are irrelevant. Please get used to this; the sooner, the better.
That Reagan's reforms took some time to pay off was probably no surprise for him. It say something about him (USA) that he (they) still did introduce them. How about Greece doing the same?
ReplyDeleteOh please!
DeleteHow can this be still a thing!
The "reforms" of Reagan are the SOURCE of the financial crisis today. The utter blindness and denial about the terrible economic policy of the reagan administration on the political right is astonishing.
I am not a fan of Krugman, but he speaks the truth in the NY Times when he says Reagan did it!
See: http://www.nytimes.com/2009/06/01/opinion/01krugman.html
So you want Greece to double and triple the national debt in defeating the equivalent of Soviet Union for Greece which by all accounts ought to be its arch-enemy Germany?
DeleteNo problem we can do this. Say when we start.
Firstly, yes, Greece hasn't changed. It still subsidizes the same old parasitic professions, either directly or indirectly (by allowing corruption): public servants, lawyers, pharmacists, notaries, crony businesses etc etc. That won't change, even if Greece re-adopts the drachma. Anybody who thinks so is daydreaming. Like KK said, in such a scenario Greece will settle for devaluation instead of reforms, but any devaluation will soon be negated by the high inflation that will ensue from monetary financing. Production won't increase cause Greece will still be subsidizing the same old unproductive professions.
ReplyDeleteI do disagree with one thing though. It's not that Greece is allergic to reforms imposed from the "outside". The problem is that the Europeans never imposed any reforms. Rather they settled for fiscal adjustment and little else. Hence it shouldn't surprise anybody that Greece is still doing terrible in the international competitiveness charts.
Did the Europeans ever imposed any reform that will speed up legal procedures? If so please let me know cause I missed it. The same goes for bureaucracy, corruption etc etc.
All this doesn't mean that the euro isn't a dysfunctional currency. It is and eventually it will either be abolished or turn to fiscal union (ECB's QE is a small step towards such a direction). What it means is that it is still extremely risky to hand over control of "the printing press" back to Greek politicians.
There is a funny thing in current Greek opinion, from the same person you will hear cries for sovereign Greek domestic politics and complaints that Europe has made (or not) the wrong reforms. Make up your mind Greece, witch way do you want it?
ReplyDeleteThe best way!Funny, eh?
DeleteReuters reports today:
ReplyDelete"Greek Prime Minister Alexis Tsipras promised "brighter days" on Saturday after a cabinet reshuffle aimed at speeding up reforms Athens has agreed to implement under its latest international bailout deal and to shore up his government's popularity."
As predicted. The greek politicians may be crazy but they are not stupid. At least not stupid enough to follow their own paroles. Tsipras and the Greeks may be allergic to reforms but they are certainly not allergic to money from Brussels.
Urs
What reforms, where?
DeleteOut of curiosity what are you people is lake Zurich are smoking?
Are you habitual drug users or only recreational ones?
@ V.
ReplyDeleteI disagree with you again, as I read it you:
-Reject the legitimacy of the present and previous governments.
-Do not feel responsible for their agreements.
-Do not want Europe to govern Greece.
-Do want the Troika to enforce the laws of Greece, or the part of them you feel should be upheld.
I think Europe shall only interfere in Greek politics if these policies prevent Greece from fulfilling their agreed obligations to Europe. Europe shall not prevent fuel smuggling, fraud and corruption in Greece, or support any party, fraction or clan. Europe shall make it clear to Greece that if she cannot govern herself in a democratic way, and keep law and order, she do not belong in Europe. Europe has enough problems without accepting the responsibility of policing Greek tribal wars. Values and democracy cannot be forced upon people, they have to want it themselves.
This does not mean I don't understand your frustration but that you should direct your frustration towards the perpetrators. Take one of your own examples, fuel smuggling and fraud. Do you seriously think that Europe benefit from the continued abuse? You have had numerous governments the last 6 years and none of them have solved this very simple problem. Do you think it has something to do with the fact that any government in Greece is a majority shareholder in your largest refinery and sit in their management, and that the government is also the largest customer and have sucker tax payers they can pass any price onto (as taxes)? Or that many voters benefit from fuel fraud in one capacity or another? Or that maybe there are too many people employed in the refinery, but they voted Pasok for ages and now vote Syriza?
Lennard
I am losing you. Democracy and self-rule are Greek values. By what means or methods do you suggest "europeans" teach Greeks Greek values? What does the most undemocratic and oligarchic Brussels construct know anything about democratic values?
DeleteAre you trying to say that as a european you aspire to become Greek one day but for now you can't?
Dear Lennard,
DeleteIs Greece part of the EU?EE? Is it not a centralized system? Is it not run by Brussels and from their the major powers of the EU? Within the crisis was Greece not assigned and suggested by the Eu that the IMF also get involved within the problem of Greece? Have you read what the basic structures and mandates of each country must have to be within the EU? In a sense we do not need local politicians because it all being run by the EU ever since it was founded. Greek politicians, so to speak are simply EU representatives located in Greece. Each country upon establishing trust with the central EU is allowed some leeway to make some small differences and changes which suit the local society.
I accept who has governed us, like shit the last 30 years, with some shining moments but very short periods, i accept the agreements because when you have no money you sign anything, especially (as in Syriza)case has acted like an ass to their PARTNERS, all countries more or less are governed by EU and I do agree new laws be enforced in Greece. But laws that are for the better.
Ofcourse the Eu does not want to bother with Greece but they seem to maintain a close overlook on what is going on Greece and Greek decision making. Do they not? And if they are here and they do care, even though to them these small problems of Greece, you mention above so correctly, are not addressed, the small problems of Greece will only become a bigger ones. I think this is why they are here moreso then to stabilize Greece.
Values and Democracy are most certainly wanted but they can not be emplaced when the rules are made as to prioritize numbers. And to be honest modern democracy is a bit flaky. But it is another discussion.
As for the refineries and tobacco. It most certainly would be in the best interests of the EU to pressure this mafia. Wont go into this now.
Thanks
V
@V.
ReplyDeleteI think we have exhausted our discussion possibilities, we have different cultures, that will prevent us from reaching agreement at some important issues.
PS. I did not describe how Europe has interfered in Greek domestic policy, rather, how I would like it to.
Lennard
Not too long time ago KK, our esteemed author, had wondered why discussions here had become more and more rare. Now, with the right theme we are back to previous levels and the same proponents repeat the almost the same thoughts as years ago...
ReplyDeleteIt is a matter of fact that the legal system and the bureaucratic deficiencies have not bettered at all, there still is no modern land registry etc. etc.
There is no use discussing if it is due to Greek allergy against reforms, imho Greece will not reform until there factually remains absolutely no other way - due to force majeure.
Everybody knows that Greece will never be in a position to pay back it's huge debts, but in the next few years the political situation will not allow to change that either. And unless earthquakes change whole Germany it will stay that way...
I have many times written that Greece is in dire need of a Greek "Lech Walensa". Since this did not happen in the many years passed by, I gave up that hope.
Hopeless situation? Yes, everybody will continue muddling through until the absolutely unexpected will happen, e.g. tremendous crisis of the Euro or the whole EU.
H.Trickler