Saturday, May 12, 2012

Cheers for Alexis Tsipras! And more...

The readers of this blog know that my thinking is driven by common sense and by market-oriented considerations. Some might put me into the category of "liberal" or "neoliberal". Others might categorize me as conservative. In view of this, some readers may now be perplexed when I embark on what could be considered as a campaign for Alexis Tsipras.

First, Alexis Tsipras strikes me like a youthful, energetic and, above all, charismatic individual. The type of natural leader who can easily get people to follow him. Those are the traits which any leader who is hopeful of pulling Greece out of the present mess must have. I do not see those traits with any other Greek politician at this time.

Second, Alexis Tsipras undoubtely would take things into his hands. In his dealings with foreign creditors, he would call the shots (or at least leave the impression that he is doing that). I have said from the outset that the political leadership of a country in external payment difficulties must take the initiative, must call the shots with foreign creditors (or at least leave the impression that it is doing that). As soon as that leadership leaves the impression of following orders from foreigners, they have lost the support of their people. From this perspective, Alexis Tsipras would likely hold on to the support of the Greek people.

Third, Alexis Tsipras wants to annul the election law giving the largest party 50 extra seats. That may be a smart idea; I don't know. But it is certainly smart to raise the issue and to propose that a consensus for a new election law should be found.

Fourth, Alexis Tsipras wants the Blackrock report on banks to be released to the public. That might be a smart idea. It all depends what that report is all about. If it contains confidential information about banks, then it cannot be revealed to the public but it could be revealed to selected political leaders on the condition that they sign confidentiality agreements. The public should never get the impression that the government is holding back relevant information from elected leaders who happen not to belong to government.

Fifth, Alexis Tsipras wants to establish an international committee to audit the public debt. This is an excellent idea. Greece has built up so much public debt in the last decades that Greeks justifiably want to know what happened to the proceeds of that debt. Furthermore, that committee should also look into the application of all EU grants since Greece joined the EU.

Caveat: there may be other positive ideas of Alexis Tsipras which are not mentioned here because I am not aware of them.

Having said all this, I think what Mr. Tsipras needs more than anything else is good advisors with respect to dealings with foreign creditors (or with foreigners in general). Mr. Papademos had excellent advisors (Lazard as financial advisors; Cleary Gottlieb as legal advisors). I could only recommend to Mr. Tsipras to continue with these advisors. My guess is that these advisors would advise Mr. Tsipras as follows:

First, read up on the story of Ikarus. You have admirably assumed a role where you can determine the future of Greece. Be confident and strong with others but don’t be presumptuous! When you intended, shortly after the election, to declare to all Finance Ministers that the Memorandum was null and void; when you expected to have a meeting with the new French President who is not even officially in office yet --- that was presumptuous!

Second, do not ever use expressions like "declaring a moratorium" or "disavowing debt", etc. There is absolutely nothing to be gained from using such threats. A moratorium will happen by itself should Greece no longer get financing, and everyone knows that. Should that happen, you want to be able to say that you tried everything in the world to avoid it up until the last minute, but it couldn't be avoided. In short, don’t do anything which carries the risk of making Greece an outcast!

Third, do not threaten a Greek Euro-exit. The other 16 Finance Ministers might immediately take up your offer.

Fourth, do not overrate your bargaining position. As important as Greece is, it still only amounts to a small part of the EU. Instead, understand how other people view Greece these days. Very many Europeans are fed up with Greece by now. They consider the Greek system "rotten" and Greece as an unbearable burden for a solidarity union. To use the words of the CEO of a major European multinational: "This country of phantom pensioners and rich tax evaders, a state without a functioning administration has no place in the EU". Please bear in mind that these people are not entirely wrong. Show them that you understand their views.

Fifth, bear in mind that, while it is correct that much of the emergency loans so far was used to pay off foreign creditors, Greece still received about 100 BEUR in new funding from abroad (net) in the last couple of years (Troika and ECB). Had the Europeans not done that, Greece would have turned into chaos a long time ago. You should express appreciation of that!

Sixth, don’t brag to Europeans that “the Greek people have spoken”. That might prompt the people of other European countries to speak as well.

Seventh, stop saying that the Memorandum is the cause of the enormous adjustment pains which Greeks have to go through because it isn't true. Greeks have to go through these adjustment pains because the living standard of the last years was financed by debt and that debt is no longer flowing. Instead, focus on the fact that the enormous but unavoidable adjustment pains have so far been unfairly distributed and that you will change that.

Eigth, explain to the Greek people that without reforms in all sectors of society, Greece will likely become something like the European equivalent of Cuba. Understand that you cannot mandate the economy to grow. Instead, you must arrange for incentives. The most important incentive is that Greece becomes an excellent place to do business.

Ninth, explain to the Greek people that you have one overriding goal: to put in place measures that the Greek economy creates new jobs. Jobs which are good enough to allow their holders a decent living while still paying tolerable income taxes. Jobs which create profits for the employers so that they can pay tolerable corporate taxes and so that their owners can pay tolerable taxes on dividends. And emphasize that you will forcefully stand in the way of anything which might endanger the reaching of this objective.

Tenth, parallel to the above steps, arrange for a new branding campaign describing the new Greece which you envision. Do not promise anything which cannot be supported by facts but create a vision which returns hope and perspectives to the Greek people so that they can motivate themselves to embark on a journey with you. Before we forget it, re-distributing money which isn’t there is not a vision!

Needless to say, I could agree with what the advisors are recommending to Alexis Tsipras. As a matter of fact, if he accepts such advice, I could even envisage recommending to vote for him.


  1. Just for the fun of it:

    First - No, we are looking for a seasoned political leader not a gym teacher.

    Second - No, he is illiterate in matters of finance.

    Third - No, he can't handle any more burdens of government.

    Fourth - no, Tsipras reading the Blackrock report would be like a Christian reading the Quran.

    Fifth - Auditing the past when your immediate action is needed in shaping the future, sounds like a delay tactic to me.

    As far as advising Tsipras, I only have one advice for him:

    "Quit while you are still ahead. Junior league time is over. Run man, run."

    1. Just goes to show you how naive foreigners like myself can be...

  2. If the Blackrock report was commissioned by the government of Greece and it contains information on the operations, behaviour and dealings of publicly listed banks then perhaps it should be put into the public domain. Banks inherently don't have secrets that need protecting (i.e. intellectual property) all they have is people who _don't_ need protecting because of the massive salaries they've been earning. A case might be put that customer specific information should be redacted - unless of course the customer is a public institution, or perhaps even a public company - especially those known to have engaged in criminal behavior - bribery, cooking of books, selling products on the basis of falsified information.

    @Phoevos : Regarding Mr Tsipiras' age, I point out that he's about the same age as Harry Lee Kwan Yew was when he became first Prime Minister of Singapore in 1959. Other than that I suspect they have very little in common. I can only think of one current political leader who happens to be an engineer - Mahmoud Ahmadinejad ;)

    Should Greece revert to the drachma, or even exit the EU it will not become another Cuba unless its neighbours and others impose the stringent boycotts and sanctions that are, to this day, imposed on Cuba by the USA and, albeit now to a lesser degree, by Europe.

    I point to the example of Yugoslavia which was, under Tito, a communist dictatorship, as a _state_ it functioned reasonably well. And at the time, arguably, better than countries like Greece, Spain, Portugal & Ireland. As a _nation_ it did eventually fail, in no small part due to the inaction of all the other Europeans - again :(

    CK (another engineer)

  3. Even though Tsipras is very inspiring he is essentially moving his voters to a path of Euro exit. He wants to renegotiate the conditions but that will just not happen. Maybe he can change the content but not the extent of austerity... So how do we make clear to Greek voters what their choices are and the consequences of these choices... Vote for Tsipras? Exit from Euro, true misery, people getting no salaries, no money to pay for imports, cars stop driving after a while. Basically going back a couple of centuries and becoming an emerging market and then not one of the more prosperous ones where the middle class is growing (such as Turkey)...

    1. How can one make clear to the Greek voters what their choices are and the consequences of these choices? Well, I have recommended translating the paper below into Greek and sending it to every household (and voter).