Wednesday, June 20, 2012

Milestones for the new government

I suppose some people will judge the new government by how tough it acts versus the Troika and by the concessions which it achieves. Others might judge it by the how much it can raise minimum salaries and pensions. And so forth.

For my part, I will look for certain soundbites and if I hear them, then I will start believing into a future for Greece. Some of these soundbites would be:

We will create new jobs through import substitution!
We will weaken the import lobby and strengthen the export lobby!
We will do everything to attract foreign investment!
We will privatize primarily for the sake of getting private know-how transfer to Greece!
We will fully use the resources of the EU Task Force to get Greece's public administration into shape!
We will use the advice of the EU Task Force in formulating an overall tax reform!
We will carefully examine proposals like the Greece Ten Years Ahead or EURECA!

I could go on and on with more soundbites but, frankly, if I were to hear only the above, I could quickly become bullish again about Greece's future!

PS: and perhaps the new government wants to copy some of Alexis Tsipras's soundbites such as the "National Plan for Reconstruction and Growth"; or "ending Greece’s corrupt and inefficient political and regulatory systems"; or several of the others which sound great but which must be implemented, too.


  1. I could accept these changes. We know the tax hikes, pay cuts, and recession are going to continue - but if the corruption is halted and growth is really giving a change, it would be okay.

    But I'm not optimistic even though I know Samaras isn't Karamanlis - but New Democracy is New Democracy, still.

  2. Mr. Kastner, all that is good, but,

    In the economy, psychology is very important. Psychology in Greece is the following: All targets of the plans have failed,debt is piling up, each time they tell us that they saved us and 3 months later they say that they will save us again and 3 months later that they have to save us again (each time requiring cuts). On Monday, Mr. Schauble says that he will kick us out of the euro, on Tuesday Mr. Westerwelle, on Wednesday Mr. Roessler, on Thursday Hans Werner Sinn, Paul Krugman and Nouriel Roubini predicts the Grexit and on Friday a panicked granny runs to the bank to save her few euros and hide them under the pillow, an also panicked tax evader hides his money in a bank cabinet an also panicked shipping magnate sends his money to Cayman Islands. And all together stop consuming and on the weekend see Mrs Merkel on tv threatening again and this time they think "well, good think i hid my money in the garage!". Result:

    - Banks were dried up from deposits.
    - Credit is inexistent.
    - The state is halting payments for months to privates, who on their turn go belly up, taking with their some other company to whom their owe money.
    - Businessmen don't invest anything, because they 're afraid their investment in euros will evaporate when the drachma comes. As a result, they are also hesitant to partecipate in entepreneuring programs that include funds from the European Investment Fund, since they don't want to expose themselves and for many it's impossible to take new loan from the banks for their share of national partecipation.

    And there you have the downward spiral. This year, the recession was supposed to be 4,5%. As with every other year, this is too optimistic, it will end in 6+%. Cumulatively, Greece will have lost more than 20% of GDP, which i think is the same amount Argentina lost if memory serves me.

    Foreign investors will never go somewhere where even the local investors are afraid to invest. You can buy the entire Athens stockmarket for peanuts nowdays, but nobody touches it exactly because of the uncertainty.



  3. (continues here)

    Mr. Samaras has in various occasions said his "program" (can you by any chance read greek?). The notorious Zappeio I, II, III (3 revisions).

    He also said lately that "he will chew steel in order to bring investments". Good intentions aren't enough however. The troika must approve everything. And if the above wasn't enough, Bulgaria for example, has 10% corporate tax and ridiculously cheap industrial electricity. 3000 greek companies left for Bulgaria in the past 2 years. In Greece not only the taxation is higher, profitable companies paid extra one-off tax, electricity cost was raised (along with gas) and i think the troika has hinted yet another increase in electricity in order to save the electricity company.

    The French that came to Greece in order to re-shape the pubblic administration, according to an article, are pretty much lost and don't know where to start.

    The troika has changed the taxation system every 6 months. This isn't helping to bring investors and is also creating some really unpopular situations. For example, currently an unemployed that happened to inherit a house or a homeless person that lives out of Church charity meals, have to pay tax. Then Tsipras come breathing to your neck at 2% distance.

    In order to substitute imports with exports, someone must invest into a new indigenous product. Not many out there ready to do it. Even healthy companies are shutting down.

    The way i see it, something that will change the climate is needed and an end to the uncertainty on the currency. If not, Greece will arrive to the social explosion and Grexit. If this happens while Samaras in on power, then Tsipras will reign for 20 years, bringing the country out of NATO too and looking to Russia and China for new ties. This is becoming actually popular to the right party of "Independent Greeks". Golden Dawn is also in favour of the drachma. The communist party also wants out of NATO, EU and euro. I mention them, as one of them will probably sooner or later receive the votes of anger-despair.

    Today's recurring theme, people waiting in 37C to get a box of 12 euro worth of fruit that farmers from Crete brought to Athens and gave it away for free:

    These will vote for Tsipras in the next elections. And can't blame them.

    I think, you could make a very instructive article, on what to do once in the drachma. How to restart. It's a subject that greek economists are divided to this day.


  4. Well, i suppose it doesn't continue... I had posted the rest, but an evil internet bug must have eaten it.

    Not important.



    1. Indeed, a very impressive result in the current account!