Tuesday, June 4, 2013

And here is another (irrelevant) debate: Is Greece a success story or not?

I am amazed how many learned people have deemed it necessary of late to debate in most sophisticated ways whether Greece can, at this time, be called a success story or not? Whether Greece has turned the corner or not? Why irrelevant at this time? Because it is far too soon to tell!

Let's begin with a few facts: Greece's GDP continues to shrink and the first month of growth, originally promised before Y/E 2013, does not seem to be in sight. Greece's unemployment rate is well over 25% and no one sees it declining any time soon. And, finally, as Nick Malkoutzis pointed out in his recent Reality Check on Greece, '1.3 million Greeks are out of work, some 400,000 families have nobody earning an income, about 300,000 workers have employers which have not paid them for months, hundreds of thousands who have work but are finding it difficult to make ends meet and numerous young people who see their future away from Greece'. A huge success that seems to be! Or not?

Yes, it looks a bit different from the standpoint of international creditors. Given that Greece has reached a primary surplus, the government will not need any Fresh Money for its operations (for interest and maturity payments it will). When this happens in a country which, only a year ago, was described as a hopeless bottomless pit, it certainly has a positive impact on confidence.

It is certainly a plus for Greece to have regained international confidence. Investors start taking an interest in putting money into Greek banks and corporations. That is certainly a lot better than having international investors pull back every money they can pull back. But does that really have an impact on the underlying, that is the real Greek economy? I doubt it very much! If the underlying continues to be bad but regained confidence pours new money into it, it only increases losses which will have to be taken in the future. A repeat of the Euro-experience.

Let me, once again, state my definition of what 'success' means in the case of Greece. In one sentence: it means new job creation in the private sector. I don't think there is anyone in this world who would argue that Greece's unemployment should be turned around by creating new jobs in the public sector. Given that, and given that new jobs MUST be created, it can only happen in the private sector. And as regards new job creation in the private sector, I state, once again, that it has to come through import substitution and export expansion, both with a heavy emphasis on foreign investment.

Now, here comes a little surprise. I came across an acticle which states that New Hirings in Private Sector Jumped to Highest level since 2008. What?!? That can't be true! If it were, it would have caused headlines all over the place and it didn't. Perhaps the facts of this article are wrong but I will state them, nevertheless.

From January-May 2013, the article states, 76.193 new jobs (net) came into existence in the private sector compared with a figure of 9.129 in the previous year. The net is composed of 368.853 new hirings (up 21% from the previous year!) and 292.659 firings. The month of May was the trigger because 55.927 net new jobs out of the YTD total of 76.193 were created in that month.

Now, one would think that such a development would fill the front pages of newspapers and the content of blogs and tweets. One would expect that there would be a lot of analysis of that development. Is it a one-off lucky punch or is it the beginning of a new trend? Or rather: what were the reasons behind that development? As for myself, I haven't read anything about that anywhere.

Personally, I get more pessimistic as time goes on. Greece has allegedly been on a radical turn-around path for over 3 years by now (4-5 years by different counts). After such a long period and after so much economic retrenchment, I would expect very significant signals that light at the end of the tunnel is in sight. I would expect new spirits taking root. And what do I see? I see passivity all over the place. Yes, life is brutal but that's the way it is. Full stop!

When a 'normal economy' records the kind of negative facts which I have referred to at the beginning (unemployment, etc.), one would see misery all over the place. The unemployment figures for even the worst areas of the US are much less dramatic than the Greek figures and, yet, when visiting those worst areas of the US, the casual observer sees complete misery. The casual observer may see complete misery in very selected areas of Greece but he does not see complete misery all over Greece. This can only mean that, as one of my neighbors told me, 'Greece is still living off the fat and there is a lot of fat left'. Ok, so that makes the overall situation a bit more bearable. But what happens when the rest of that 'fat' is gone?

My Greek friends tell me that there is plenty of 'fat' left. They concede that the 'fat' is limited to only a part of the population but that part, according to my neighbors, is quite large.

'Living off the fat' can be a very dangerous proposition because it creates the illusion that things are not as bad as they seem. In my opinion, the real Greek economy continues in a terrible situation as regards the famous 'ease of doing business'. If there are not, any time soon, real proofs that the ease of doing business in Greece is dramatically improved, 'living off the fat' will later be interpreted as having been the major reason why Greece could not 'turn the corner'.


  1. I don't think there is anyone in this world who would argue that Greece's unemployment should be turned around by creating new jobs in the public sector

    Sadly, I believe the converse is true: increasing the size of the public sector is a hugely popular notion. Just ask the French. It was an integral part of Hollande's campaign platform.

  2. Hellas Frappe does not tell us who wrote the report from which they're quoting, nor provide a link to it, nor are there any published comments.

    Here is what I assume is the Ergani site, make of it what you will, to me I looks like an EU funded Social Welfare QANGO. At a glance I couldn't see anything about job tracking statistics. The site is available in Greek and English. In that respect I applaud Greece - I am often surprised at how many of the 'public sector' websites are available in English.

    Looking at the rest of Hellas Frappe site one has to doubt the veracity of their claims on job creation.

    I heard a report on AJ about some young Greek entrepreneurs creating jobs for young people within the hospitality sector. It was only towards the end of the report that it became obvious that they weren't talking about paid work jobs, they were talking about unpaid volunteer jobs. Not that that is a bad thing, but if one only listened to headlines one might have thought that they were paid work jobs. I also wondered if the «young Greek entrepreneurs» were deriving any income from the supply of unpaid volunteers to conferences etc.