Wednesday, December 14, 2011

Good news - Bad news

In times like this, bad news often travels faster than good news. First to the good news.

A - Good news

"Greek-German cooperation boost" writes the Ekathimerini. According to the arcticle, a new bank for investment is to be formed in Greece and Germany, which has know-how with her own KfW, together with the EIB, will bring in assistance and know-how in order to allow the Greek economy to fund investments while the country remains shut out of international financial markets. More importantly, when the Greek Development Minister and the German Economy Minster appear jointly (and smilingly) before TV cameras in Berlin, that can certainly be considered as good news.

Mind you, Greece desperately needs foreign investment to finance part of her current account deficit because debt financing for that purpose is drying out (and when the current account deficit can no longer be financed, imports will collapse leading to a significant decline in living standards). And remember, the beautiful difference between foreign debt and foreign investment is that the latter does not need to be repaid (nor does it carry interest). But even more important than money, foreign investment brings along know-how which the Greek economy desparately needs.

Along those lines, it is excellent news that the Greek government is now pursuing the establishment of Special Economic Zones. This blog has argued since inception that SEZs are the key instrument to bring foreign investment into the country. Under current conditions, no sane investor would transfer money to Greece. To make the entire country investor-friendly will take years if not decades. Therefore, one has to start with "pockets" which offer, essentially right away, the foreign investor excactly that business framework which he seeks. And if those SEZs work well, their business framework may rub off on the rest of the economy over time.

Permit me to ask: why do I see a tweet coming out of Greece saying "IT HAS BEGUN... Eur/USD 1.3057.." (as though one were celebrating the impending collapse of the Euro, which would be a disaster for Greece) instead of a jubilant tweet saying something like "Good news; foreigners are interested in investing in Greece!" (which would be one of the best news which Greece could have)?

B - Bad news

"German industry eyes local talent" writes the Ekathimerini. According to the article, the European Employment Service (EURES) is organizing match-making meetings at Greek universities to "marry" German demand with Greek supply. I have heard that other countries (Australia, Norway, etc.) are taking similar initiatives towards Greek talent which seeks greener pastures elsewhere.

Now, one could see this positively and say that it reflects the high opinion which foreigners have of Greek talent. Or one could take it for what it really means, namely: the first step towards national economic suicide. Greece has spent enormous sums on education (allegedly, Greece has the highest rate of academics in the EU). Note: that was an investment and not an expense! Losing one's investment can never be a praiseworthy accomplishment. At the same time, if steps towards an economic turn-around are not initiated soon, there will no doubt be a massive drain of young talent (and talent overall) to foreign economies. Those foreign economies will undoubtedly be grateful to Greece for having produced such good talent but the Greek economy will not get very far without talent.

Permit me to ask: when the Greek government sees that foreigners are beginning to snatch up Greek talent, why doesn't it immediately announce plans so that such talent finds it more interesting to stay in Greece?

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