Wednesday, January 30, 2013

Qatar - prototype of a foreign investor in Greece?

Qatar has apparently decided to invest 1 BEUR in a Greek investment fund provided that Greece matches that amount. Qatar is not interested in large state assets to be privatized. Instead, Qatar wants to invest in small and medium-size businesses.

As far as I am concerned, that is EXACTLY what the Greek economy needs. I don't see the Greek economy as being driven by large corporations. Instead, I see it driven by the huge number of small and medium-size businesses. Yes, it is important to get 'good owners' into the few large corporations presently owned by the state (above all for the purpose of know-how transfer) but one has to be very careful in chosing the 'right owners' for such large corporations. If they are financial investors and/or large multinationals who are principally interested in short-term gain, one might as well send them away.

My only concern would be the question of who determines the investment decisions of the new fund. If Greece is to own 50% of that fund, I immediately think of the risk that investment decisions might be influenced by political considerations (and politicians might end up in management positions). It would appear necessary to make sure that the investment decisions are taken by neutral professionals. The Greek government could be given a veto right, but no more!

Monday, January 28, 2013

A cute definition of the problem!

The reader 'Yiannaki' recently posted the following comment to an article in the Ekathimerini:

"What I do miss is the lack of understanding that the switch of the Drachma to Euro's did mean a switch from a devaluation economy to one without that possibility.  You can't switch from diesel to gasoline without switching the engine. Greece kept on using the same engine".

That's cute! 

It doesn't quite hit the mark, though. Both, a diesel engine and a gasoline engine fulfill the objective of an engine equally well --- i. e. to move the car. If one defines the objective of an economy to increase the economic well-being of all, then I would argue that a devaluation economy does not fulfill this objective equally well as one without that possibility. By and large, there is no free lunch in an economy; someone always pays the bill. In a devaluation economy, a lot of people are paying the bill without knowing that they do.

Still, Greece's challenge is to change the engine. If Greece cannot meet this challenge, a devaluation economy may become the lesser evil.

Friday, January 25, 2013

"Sudden stop", "FIFO", "pari passu" - and Cyprus

'Sudden stop' is the term which defines the sudden slowdown of voluntary capital flows to a borrower, be the borrower a company or country. In the case of Greece, this phenomenon occurred probably in the first quarter of 2010.

Actually, it is seldom a sudden stop because a sudden stop would imply that only new capital no longer flows voluntarily. In reality, a sudden stop very quickly transforms itself into a run on a borrower. It's like shooting a bullet straight up into the air. It climbs at enormous speed until it runs out of speed; then it comes to a halt in mid-air for a split second, only to fall back at high speed.

In consequence, one can endlessly philosophize about 'debt capacity' without being able to say what exactly a borrower's debt capacity is. Instead, one finds out what the debt capacity was after one has reached it because once it has become public knowledge that it has been reached, every creditor will try to get his money back.

Are banks or creditors in general bad people? Not necessarily. They are just attempting to always protect their own interests, which is their responsibility. The accounting equivalent of bankers' behavior is called the FIFO method (first-in, first-out). Every banker wants to be the first into the door when a good lending opportunity presents itself and every banker wants to be the first out the door, hopefully before the door closes, when problems surface.

'Pari passu' is the instrument which attempts to neutralize the downsides of the sudden stop and FIFO phenomena. As long as lenders know that, at the end of the day, they will be exactly in the same risk position as they were before the sudden stop, they won't try to play tricks like FIFO.

Which brings me to Cyprus. The lending countries (above all Germany) are voicing reservations about the Eurozone's bailing out Cyprus' banks because their research has told them that this would be tantamount to bailing out Russian oligarchs. This is a correct position and it should be held up, if --- if only the Eurozone had not violated the principle of pari passu from the beginning.

'Pari passu from the beginning' would have meant, to illustrate it with Greece as an example, that the official Greek rescue packages would not have been allocated to each country based on its share in ECB-owernship but, instead, based on its exposure to Greece. If Germany, for example, had held 40% of Greece's debt, then Germany would have carried 40% of the rescue packages (and not 27% as per its ECB-ownership). This was not done, leading to the unsatisfactory consequence that some countries now have an overproportional exposure to Greece whereas other countries (I suspect the UK, Switzerland and the US would be good examples) could walk away free of charge.

Applied to Cyprus, this would mean that if the existing Cyprus exposure were hald 50% by the Eurozone and 50% by Russia, then 50% of the rescue package would have to be carried by Russia.

'Would have'; 'should have' --- it's too late now because the wrong precendents have been set a long time ago. With Cyprus, the Eurozone is finding out what it can mean when one sets the wrong precedents.

The battle of current accounts

It seems that globalization may lead to a battle of current accounts. One of the few things on which economists seem to be able to agree, at least I think so, is that current account balances are a zero-sum game when consolidating them worldwide: One country's surplus is the rest of the world's consolidated deficit.

It also seems that nearly every country plans to stimute its economy through the expansion of exports, through the improvement in current account balances. For this to work, planet Earth will have to find another planet in a hurry, a planet which is prepared to run enormous current account deficits provided planet Earth gives them the funding.

During the opium wars of the 19th century, the British and the Chinese found out what happens when one does not understand that international trade needs to be structurally balanced over time: When that happens, international trade no longer provides for the wealth of nations which Adam Smith predicted.

Below is the text of verbal exchange between the Taipan of the Noble House and his son Culum Struan, taken from the movie 'Taipan' and based on James Clavell's bestseller. Culum has just discovered that his father trades with opium and he challenges him as follows:

Culum: "You trade in opium. You smuggle. You have done it for years!"
Taipan: "What did you think I did?" 
Culum: "I thought you traded. Goods from England for tea from China". 
Taipan: "The Emperor will not let us sell goods from England. Yet he demands silver for his tea. And if we paid in silver, it would bankrupt England within a year. So we sell opium to the Chinese for their silver. And give it back to them for tea. That’s how the China trade works". 
Culum: "Opium for tea?" 
Taipan: "Why not? I didn’t invent opium nor the trade".

The British and Chinese ended up settling the issue of one-sided trade through wars. Warren Buffett thinks the peaceful way of simply buying the trading partner is better. Whichever the case, international trade cannot go on forever if it is structurally one-sided.

Thursday, January 24, 2013

Parallels between Greece and the Weimar Republic, after all?

To date, I have resented comparisons between today's Greece and the then Weimar Republic vehemently. My simple reasoning was/is: When an economy has an industrial base (like Germany in the 1920s), stimulating it may work (and extreme austerity may kill it). When an economy has become a zombie-economy (like Greece in the late 2000s), stimulating it before structural reforms are implemented may not work (and it will be killed even without austerity once the foreign funds flow stops).

Prof. Albrecht Ritschl is a German Economic History Professor at the London School of Economics who has made a name for himself by referring to facts of German economic history which most Germans would prefer to forget. I have once before written about his argument that "Germany was the biggest debt transgressor of the 20th century".

Mainstream German economists/historians accuse Prof. Ritschl for 'distorting historical facts'. Sadly, I have not seen any literature identifying those distortions and the only way to eliminate distortions is by presenting facts which prove the distortion.

In this 24-page paper, Prof. Ritschl describes the handling of Germany's sovereign debt during the 1920s and makes interesting comparisons with the EU's handling of Greece's sovereign debt since 2010. If you only want to read part of it, read Chapter III. German speakers may wish to prefer listening to this 10-minute interview.

Despite all the differences between Germany then and Greece now regarding industrial strength, etc., there are, indeed, some striking similarities. Prof. Ritschl argues that the major reason why the 1920s unfolded in Germany as they did (eventually leading to Nazism) was that the creditors had been too lenient on Germany. What? Too lenient? Wasn't it the overburdening of Germany with war reparations which caused all the trouble?

Prof. Ritschl points out that Germany's final reparation bill was presented in early 1921, and it was shockingly higher than what Germany had reason to expect. As long as Germany had xpected 'manageable reparations', very constructive policies were pursued during 1920 and a reasonable level of economic stability was reached. Once the reparations were no longer deemed 'manageable', Germany started playing tricks with its creditors. To use the professional expression: The willingness to pay declined dramatically.

The Dawes Plan of 1924 should have corrected this 'overburdening' but led to the exact opposite development (this is what Prof. Ritschl means by referring to 'leniency'). The Dawes Plan allowed/enabled Germany to borrow in order to service debt. How could a bankrupt country return to borrowing? The Dawes Plan had a feature which can be considered as 'noble intentions gone wild' or, in the words of Prof. Ritschl: "All kinds of well-intended but highly dangerous safeguards had been built into the Dawes Plan. These allowed Germany to fool her reparation creditors in a flagrant case of moral hazard". Trade debt was made senior to reparations and other long-term financial debt. Thus, the lenders had an incentive to lend (because of their senior rank) and Germany had an incentive to take up trade debt (imports) because the more trade debt it had, the less it would have to pay as reparations. A classic case of 'crowding out' reparations and other long-term financial debt. Prof. Ritschl: "Germany attracted huge amounts of foreign capital and actually experienced its own version of the Roaring ‘Twenties, and even reparations were being paid". All of this with money Germany borrowed! By the late twenties, US banks and even Central Banks became worried about the debt-financed consumption-based growth in Germany, and the rest is history.

Prof. Ritschl's arguments are summed up in this paraphraph:

"The propaganda made by Keynes against the Versailles Treaty turned out to be fatal in its consequences, as it opened the gates for a reparation policy that postponed the hour of reckoning into the future, making its consequences probably much more severe than they would have been in the 1920s. Without the Dawes Plan of 1924, the German slump of 1929-32 would have occurred already in the 1920s, probably in milder fashion. Our conclusions from this will necessarily have to remain speculative. However, with memories from the Ruhr occupation still fresh on either side, it seems less than likely that anything like the rise of Nazism to power could have occurred in the 1920s, or would indeed have been tolerated by the Allies. Germany’s trajectory would have been less volatile but also less violent, had not a well-meaning doctrine been applied to reparations that alleviated the problem for some time, only to create a self-made transfer problem later".

And where are the parallels with Greece?

* From 2010-11, the illusion was upheld that Greece had both the capacity as well as the willingness to repay 'every cent' of its debt. This relieved pressure on Greece to make reforms. Instead, one should have admitted that Greece could/would not pay all of its debt; that some of the debt would have to be forgiven at some point in the future and that Greece would have to 'earn' this forgiveness though the implementation of reforms.
* Since Greece had lost access to capital markets, it had to agree to new official loans for the purpose of repaying loans to private creditors, reinforcing moral hazard on the part of private creditors.
* Almost 90 BEUR of bank deposits were withdrawn by some Greeks and replaced with ECB-funding which is now the liablitity of all Greeks.
* A harsh (as opposed to 'lenient') treatment would have caused a near-sudden stop to Greece's current account deficit which accumulated roughly 50 BEUR the outbreak of the crisis. That would have been harsh but it would have saved Greece valuable resources and it would have accelerated import substitution and new eonomic activity.

The above is only a superficial commentary on Prof. Ritschl's paper. Those who are really interested should definitely read his entire paper.

Sunday, January 20, 2013

Mr. Tsipras goes to America!

This article in the German language 'Griechenland Blog' summarizes an interview which Mr. Tsipras gave on the eve of a trip to the US where, according to the article, he will give speeches at the Brooking Institute and at President Obama's alma mater Columbia University. Below are some of Tsipras' quotes. If he makes his speeches in passable English and if he comes across as the 'great conciliator' whom he has presented quite well during his recent visit to Germany, he might get quite a bit of attention from Americans.

"The real problem is that at this point, under the responsibility of the Troika and our coalition government, the Greek economy is being destroyed" - Americans, by nature, are not great believers in austerity and they have seen media reports which have shown the dramatic decline of the Greek economy. Quite possible that Tsipras will catch their ears on this.

"We will negotiate a plan to exit the crisis which - contrary to the Troika-measures - will be realistic and which will avoid the country's bankruptcy. Obviously, no one wants to admit before the German elections that the Greek program has failed but Greeks does not have any more time to lose" - There is probably not a single person who does not know that Germany's decisions have been and are being taken with a view towards the upcoming election. Even Americans will have heard of that. Against that background, it is quite possible that Tsipras will catch their ears on this.

"Austerity and uncontrolled recession have made the debt problem even greater. It requires totally different measures domestically and internationally to avoid the risk of a break-down of the Eurozone" - Given that Americans have heard for 4 years now that a reduction in deficit spending would lead to economic chaos, it is quite possible that Tsipras will catch their ears on this.

"A monetary union is not possible without a fiscal union, without a mechanism to recycle suprluses, without an active Central Bank" - It is quite possible that Tispras will catch the ears of Americans on this. They might even say 'we have told the Europeans that for years!'

"Regarding the Lagarde list, the available evidence suggests that the political establishment will do everything possible to cover this issue up and to pursue only those who have meanwhile left politics" - It is very probable that Tsipras will catch the ears of Americans on this. After all, that's what they have been reading in their papers for quite some time now.

In summary, I believe that Alexis Tsipras has a fair fighting chance to get favorable press in America. It would only take the decision by Prof. Krugman to join Tsipras on the dais and this could become a real party! And if the right kind of media attention is attracted, even Americans may begin to ask the question which was recently posed: Can the Left save Greece?

A new generation of Greek farmers!

This article from the Ekathimerini (with a link to a video) highlights a most interesting development: the coming of age of a new generation of Greek farmers. Farmers who manage to cultivate their produce with minimal support from the government, no government subsidies and a deep recession howling behind them.

Here are some quotes from Pavlos Georgiadis, the producer of the video:

“With the interviews and images of our country we wanted to send a message to Europeans that there is another picture emerging from Greece – not of corruption, inconsistency and amateurism – but one of hard work, of companionship".

“The old against the new: the model of subsidies with the rampant use of chemicals and a waste of resources against the mentality of producers striving for quality, to protect the environment and boost the local economy".

“Our goal was to take the story of Greek farmers all over the world. I believe that agriculture is one of the areas that will help pull us out of the crisis. The Greek earth remains relatively untouched, our fate is hereditary, we have a personal relationship with the land of our ancestors. Our generation’s challenge is to reconnect with the Greek earth".

I can only recommend viewing the video!

Saturday, January 19, 2013

A six-month break from austerity!

Wow! This report by the Ekathimerini, if confirmed, will really be good news for Greeks! No new austerity measures for 6 months? What a noble gift! Celebrations all over Greece can be expected!

And what a non-selfish gift, too! Or is it perhaps not? Somewhere in the middle of the text I read that this offer was 'also attempting to ensure that Greece and its debt problems do not become a pre-election issue in Germany, which is gearing up for polls in September, sources have indicated'. Aha! 'I can see', said the blind man, took the hammer and saw...

'Austerity' is a relatively new expression. It was not really used before the Euro-crisis began about 3 years ago. In the old days, like during the Latin American debt crises of the 1980s, the expression was 'economic adjustment'. Personally, I think 'economic adjustment' is a much better description of what is necessary than 'austerity'.

The economic adjustment which Greece requires is brutal austerity in the public sector and massive stimulus in the private sector. I certainly cannot prove this but I will make the argument, nevertheless: a good portion of every stimulus Euro which is chanelled through the public sector will end up as waste and/or as private deposits in foreign bank accounts. I doubt that there is any waste or misuse of stimulus Euros when they are chanelled through the private sector. Why? Because private investors do generally make sure that their money is used properly.

Will private investment happen automatically? Probably not. At least not yet. There will have to be some very significant incentives at this stage for private capital to come voluntarily to Greece. To figure out the right incentives, that is the public sector's job. Or rather: that is the government's job.

I cannot emphasize enough the imporance of the 'herd instinct' when it comes to the movement of private capital. Let the story make the rounds that the Greek government is working out tremendous incentives for private investors. If that is done well, a process of foreign investment could begin which then feeds on itself.

Where does the EU stand on the Lagarde list?

Some time ago, I posted an article titled "Much ado about a list". I still stand by its content. I thought at the time that I would never again spend time on this issue. Recent developments have changed my mind.

Objectively, this list is 'peanuts'. If I recall correctly, the total sum involved was about 2-3 BEUR. However, it seems that this list has assumed an entirely different connotation than one could originally suspect. Suddenly, it appears that this list might be the key for unlocking the door for much greater corruption schemes having gone on in Greece in recent years (Siemens & Co.). And it has become the prototype example of how the Greek political elite deals with such issues.

What role does the EU play in all of this? Deafening silence! Should the EU play a role? Based on previous precedents, yes it should!

In early 2000, two democratically elected parties of Austria, which together represented an absolute majority in parliament, decided to form a coalition government. As it happened, the EU did not like one of the two parties. The EU thought that this party did not meet the high common values which the EU shared. For a while, it looked like the EU would proceed with a process aiming at expelling Austria from the EU. After long negotiations, the EU could be satisfied that a 3-person team of 'wise men' should visit Austria and pass judgement whether Austria could still be regarded as a civilized country. The 'wise men' passed positive judgement.

Having said this, what seems to be going on in Greece's 'triangle of power' (politicians, media, oligarchs) does not come as a surprise to anyone. The debates/votes around the Lagarde list have only highlighted this situation. It is certainly an unacceptable situation; a situation which can under no circumstances be reconciled with EU values. Finally, a situation which makes the common man and woman of Greece the fools; the fools who have no choice but to pay for the corruption of the mighty.

In my opinion, if the EU is worth any salt at all, it should involve itself in this issue. Yes, it is a domestic issue in Greece and the EU has no business in meddling with domestic issues. However, it has become much more than a domestic issue. It has become a question of who stands up and lets himself be counted to support those Greeks who desperately need support.

I think that if the EU decided to send three 'wise men' to Greece to examine how power is exercised there, taking the Lagarde list as a first case in point, a very large part of the Greek population would develop new sympathies for the EU.

So, where does the EU stand on the Lagarde list???

Friday, January 18, 2013

And the next one iiiis... Henkel!

In the blogosphere and twitter world, commentators are competing with one another for the best arguments as to why no foreign investor can really have an interest in investing in Greece in the foreseeable future. The convertibility risk and the political uncertainty are two of the reasons which are cited most frequently.

A look at the real world is quite encouraging. I have already written extensively about HP, Unilver and Cosco and it is excellent news that one can now add Henkel to the list. Perhaps there are other new foreign investments which haven't hit public awareness yet.

Henkel will produce detergents for the local market. Come again? Henkel will produce in Greece detergents for the Greek market? That has got to be impossible because every pundit in the world has explained in the last years why Greek production can never be competitive with foreign production. Is Henkel wrong? Or are perhaps the pundits wrong?

Facts speak louder than words and we will see what the Henkel-facts will be. But if 'big guys' like Unilever and Henkel with their huge economies of scale in production elsewhere still come to Greece to satisfy local demand with local production, one can only guess how attractive Greece could become to smaller foreign investors who do not have such economies of scale elsewhere.

Perhaps I will live to see the day when the toothpaste which I buy in Greece is also produced in Greece (instead of being produced in Brazil and imported to Greece via a German distributor)!

Tuesday, January 15, 2013

"Greeks are perfectionists in the realm of ideas!"

One of my readers, a passionate Greek who always gives me and my views a hard time, offered a description of the Greek character which I reproduce below. His conclusion is: "Greeks are perfectionists in the realm of ideas. That's the essence of being Greek: A Greek is a German perfecting ideas instead of automobiles".

I then asked two of my best friends in Greece for a reaction. One of them is a Brit with over 40 years of living experience in Greece and the other one is pure Greek. I also reproduce their reactions. 

Description of Greek character (by Phoevos) 
As far as Greece and the past, keep this in mind: Greece always survived because it was so divided. It's almost impossible to conquer divided people. Which is the antithesis of an empire. In an empire setting you capture the central authority and then your control what's underneath it.

There is nothing more anti-Greek as the concept of an empire. The Greeks fought against the Persians because they were an empire. The Greeks fought against the Romans who were clever enough to put Greek life as the pinnacle of their civilization thus neutralizing Greek resistance. Even Byzantium (despite what the Church says because Greek Othodox religion has all its roots in divine authority with the emperor) is anti-Greek but try telling this to the Greeks today when religion is nothing more than a modern adaptation of the Deities of the past. And the whole idea of Alexander the Great (the first globalization guy of this world) is that he marked the decline of Greece contrary to the popular opinion that he was the apotheosis of Greece. Because the minute he came face to face with the riches of the East he became seduced by them and so did his successors of the Hellenistic world leading to the Roman domination. Alexander and Philip are the sort of guys the Spartans always fought against. Sparta fought Athens precisely because Athens was so powerful and therefore so anti-Greek for one Greek state to dominate others.

My point is this: Whoever chose Greece as the start of the experiment for European unification made a grave error. Most likely Greece and what happens to Greece from now one will destroy rather than re-enforce the empire based inspired themes.

A True Greek is a great individualist, an urbane enough person to blend with all civilizations but one who has no room for equals in his heart.

If Merkel understood this simple fact, she would have chosen someone else for the experiment.

But maybe good things would come of it. Maybe individualism would triumph again against the empire concept in a way that only the Greeks know how to teach. Mind you we are not a destructive force. We are the sort of people that always make you and force you to think. That's our craft. Debate, debate, debate....and then debate again just in case you missed something. Greeks are perfectionists in the realm of ideas. That's the essence of being Greek: A Greek is a German perfecting ideas instead of automobiles. 

Reaction 1 (from a Greek friend) 
Rather simplistic and biased analysis. 

My feeling is that Greeks are overwhelmingly pro-European and also see their future within a unified Europe. 

Don't try to unmask a (British) Trojan Horse in the EU - that's not Greece, surely! 

Reaction 2 (from a Brit friend living in Greece)
The views do not surprise me. He has some good points. You know as well as I do that 'teamwork' is not exactly a Greek attribute. For instance, I remember when I first saw the Greeks play soccer. ..... great individual skills - but 11 players all trying to score a goal!! It took a German coach to knock heads together and show them what teamwork means - and they won Euro 2004!! Suffice to say that the fallback to individualism returned as soon as he had departed!! 

As you also know, except for young internationally alert Greeks, they can't be trained - it's 'Oh, I already know that'!!! Just look at the problems of the EU Task Force ! ....or, for that matter, the messing about on the whole reform issue. Need I say more?!

Additional reactions are welcome! 

Monday, January 14, 2013

Is Greece reforming or not?

My British friend was, for once, wrong: he had predicted a Grexit for Friday, January 11, 2013 at 22 hrs, but it didn't happen.

True to form, he sent me the following defence of his position today:

"Read today's 'Comment' in Ekathimerini entitled 'Samaras and the madhouse'. A true reflection of how I see the insurmountable problems in Greece - which can only be resolved by a return to the Drachma and a sole concentration on Tourism, Agriculture and Shipping together with an abandonment of true reforms across a myriad of professions. I.e. the Greeks will never change - except to be encouraged to enhance their activities in the three areas that I have mentioned".

Personally, I am at a loss. For quite some time now have I read reports how much progress Greece was making on just about everything and now the Executive Editor of a major newspaper writes that this is not so. 

Who in the world knows what's really going on in Greece? 

Sunday, January 13, 2013

Can The Left save Greece?

A blog by the name of New Left Project published an article titled “Can the Left save Greece?”, as well as an interview with Yiannis Milios who is a Professor of Economics at the Polytechnic University of Athens. Prof. Milios heads a group of economists including Yiannis Dragasakis, Giorgos Stathakis and Efklidis Tsakalotos, who collectively shape SYRIZA’s economic policy (according to the article).

The article impresses because it is quite balanced. Put differently, it is not demagogic, which is what one might expect articles from such a source to be. It is the interview with Prof. Milios which I find particularly interesting, at least interesting enough to comment on Prof. Milios’ statements.

“They (EU countries) are mostly governed by neoliberal parties, while their socialist parties are actually neoliberal as well. There is obviously intensification in class struggle, not just in Greece but also in Italy, Spain and Portugal, which slowly de-legitimizes the neoliberal spin on the crisis. Therefore, it’s the class struggles themselves that change the circumstances and create this new situation in which the Left perspective steadily gains ground” – I have trouble seeing it that way. Certainly France is not governed by a neoliberal party and there are many, many Conservatives in Germany who criticize Merkel for having moved even left of the center. The whole idea of a ‘neoliberal spin’ is far-fetched to me. I think what we have seen in Continental Europe for much of the post-WWII period is the unfolding of Keynes-policies. Except that Keynes, I believe, recommended deficit spending only during parts of the economic cycle with a balance over the entire economic cycle, whereas most Continental European countries have had uninterrupted (or only briefly interrupted) deficit spending for decades now. And what made matters worse: the spending was, to an excessive degree, ‘true spending’ (on consumption) instead of investment in the future. Yes, I agree that there seems to be a new perspective for The Left but that is more the result of ineffective leadership of cozy political establishments than the consequence of a failed market system.

“The Left has a very clear position: only through reshaping the social and production models can European societies get through this crisis” – I wish members of the established and cozy political elites would make statements like that! This is assuming that Prof. Milios means what I think he means, namely: a common market (particularly when a large part of it has a common currency) cannot be sustained when investment, production, employment, etc. move into one direction and loans flow into the other direction to finance consumption there.

“The model of a social co-operative economy, operating in a more democratic context, is the one that can take our societies out of this crisis” – the so-called ‘Genossenschaften’ represent an important part of the economies in the German-speaking countries.  The concept for such ‘Genossenschaften’ was developed by Friedrich Wilhelm Raiffeisen in the second half of the 19th century. Essentially, they are somewhat closed systems where the customers are also the owners. The owners’ profit motive becomes of secondary importance: if they earn less as owners because the ‘Genossenschaft’ makes less profit, they make up for that as customers who pay lower prices. Such ‘Genossenschaften’ are clearly interesting alternatives to capital market based ownership.

“Back in the 1980s, PASOK favored capitalist interests over the interests of the vast majority of the people.  Our lead is what society needs and not the imaginary ‘foreign ties of the country’ to its lenders. We say ‘people over profit’" – well, that is a statement for populist consumption. It would lend more credibility to SYRIZA if they didn’t use such statements which have general appeal but no specific meaning.

“We represent the social front created in Greece against austerity policies and our ambition, together with the affiliated forces of the European Left party and others who will join in the process, is to enable the establishing of a European front against austerity” – sounds like milk & honey! Prof. Milios should explain that there is not one Eurozone country which can print its currency. Thus, and to the extent that the above involves deficit spending, a country must be able to borrow. If it can’t borrow and if it doesn’t have the above-mentioned ‘foreign ties to lenders’, the country is caught in extreme austerity.

“We will call for an international forum to discuss the viability and targets of Greek and European debt and budgets. We also intend to take up initiatives in the direction of re-examining the European Union treaties that make up the pivotal points of what brought us to this" – well, I think Angela Merkel could live with that.

“Wages, for once, will be decided through free negotiation between social institutions that represent the productive classes” – I presume Prof. Milios means that wages should be freely negotiated between employees’ representations and managements of a company. That would be a dream come true for many entrepreneurs who despise dealing with central union dignitaries who have other things on their agenda than the well-being of the entrepreneur’s company.

“SYRIZA considers increasing revenue from taxation to be a major priority. We will use tools like the newly established assets list, we will establish a code that will discourage tax-dodging and we will achieve a dramatic (according to current data) increase in revenue” – all I can say to this is: more power to you!

“It’s unthinkable that in a society facing a humanitarian crisis, expenditure is directed towards military spending instead of covering basic necessities like feeding the population and heating schools and hospitals” – all I can say to this is: more power to you!

“It’s certain that the prosperity they (powerful lobbies) enjoyed for decades, the immunity from taxation, has created enough “stock” the powerful could and need to share in order to restart our society” – all I can say to this is: more power to you!

“There certainly need to be new ways to finance our dying economy. For instance, apart from the savings from structural adjustment, special purpose banks will be founded, to operate essentially as investment funds” – Prof. Milios is blowing smoke again because he leaves the impression that all Greece needs in order to finance new productive investment are special purpose banks. As pointed out above, Greece needs the money from those ‘foreign lenders’ because Greece doesn’t generate enough savings on its own in order to finance the necessary growth. Even a new special purpose bank can’t do any lending if it doesn’t have the funding.

“If we define ‘investment’ as a fund coming to buy up businesses which have found themselves in a tough spot because of the crisis, downsize them, fire staff and sacrifice its long-term prospects for short-term profitability, then we are categorically against this” – all I can say to this is: more power to you! Greece does not need asset strippers as it tries to turn-around its economy!

“If we define ‘investment’ as providing capital for the development of activities that respect our society as a whole, that in order to produce profit make use of what modern technology can provide, that respects the worker’s rights and the natural environment, if they cover basic social criteria like jobs creation, then yes, we are for that kind of investment” – all I can say to this is: more power to you!

“If a left-wing government is backed by the people who, in the past, flooded Syntagma square and demonstrated their dissent against austerity policies in every city in Greece, then we have nothing to fear. This negotiation will prove to be of benefit to the vast majority of the Greek society” – all I can say to this is: power away from you!

Conclusion: I am reminded of a previous interview with Mr.Yiannis Dragasakis of SYRIZA. He, too, had given a rather reasonable interview only to blow it with his last statement. Prof. Milios repeats that experience: by and large a reasonable interview but with his very last statement he confirms all the fears that some people have of SYRIZA.

Lest ye forget HP, Unilever and Cosco!

Positive news have a way of being forgotten so quickly when there is such ample supply of negative news. Thus, I want to bring back to memory two important events of the last couple of months.

Last November, it was announced that HP had chosen Piraeus as the site for its central distribution center for products destined for Central Europe, the Middle East, North Africa, the Mediterranean region and the former Soviet republics. HP products will be distributed by sea from the terminal that Cosco controls in Piraeus and by rail via state railway service operator TRAINOSE. That then rekindled Russian interest in Trainose which will transport a considerable share of that volume to other European countries.

Also in November, Unilever announced that 110 of its products that are currently imported to Greece from elsewhere in Europe will soon be produced in this country, in a much-needed boost for the local economy. Even a high school student will quickly understand that this move will have some positive impact on employment.

There is no new employment without new investment and there is no new investment without demand for logistical support. Thus, at the center of all this is a good infrastructure and outstanding logistical resources. That, of course, brings Cosco to mind again, an investment which I have already praised several times as the prototype of a good foreign investment in Greece.