Saturday, March 21, 2015

Greece - An Accident Waiting To Happen

"Next year Greece is scheduled to repay 8.4 billion euros to the IMF, just short of 6 billion in total interest payments, bonds held by the ECB and other eurozone national central banks (NCBs) worth 6.7 billion euros at the end of July and August plus 300 million of other bond and senior note maturities. This is over 21 billion euros of debt obligations and forms a pretty sizable funding hump that will need to be addressed irrespective of who is in power. Wanting to re-negotiate aspects of Greece's programme and insist on the debt relief the eurozone had agreed to are justifiable policies and would in many respects be welcome. But doing so without a clear plan or strategy is an accident waiting to happen".

Yiannis Mouzakis wrote in MacroPolis on December 18 of last year that "the one question SYRIZA needs to answer" is how they plan to come up with a minimum of 21 BEUR to pay obligations in 2015. After almost 2 months of governing, it is becoming crystal-clear that SYRIZA has not yet answered this question. Or: SYRIZA has already concluded that there is no positive answer to this question and thus the priority should be to engineer a default in such a way that the blame for it is put anywhere else but Greece.

Interestingly, at the time of writing, Mouzakis still assumed that the primary surplus for 2014 would be just over 3 BEUR. Those were the days, my friend... Those were the days when Greece had just passed the lowest point after 5 years of decline; when Greeks were still paying taxes; when there was still a primary surplus; when Greeks still kept their deposits at banks. Those were the days before a maverick decided to cause political turmoil; before the primary balance recorded a deficit of 2,1 BEUR in December; before Greeks started pulling their deposits from banks.

Those were the days when 2015 looked like it could be a stable year for Greece with a recovery, albeit it a very, very slow recovery.

SYRIZA has not answered the one question which Yiannis Mouzakis asked in December. When all of this is over, the one question which SYRIZA should answer then is: Was it really worth it?


  1. Deeply moving story.
    Tears drip on my laptop.

    So sad, and my God, how will Samaras feel, Venizelos, those, so much accused by this Syriza.
    And who almost made it. Until....

    No, it was not worth it.

    It was worth it though, that the whole world learned to know the truth of Syriza, who they were and are, and that all Greeks who voted for this party, will face the wall that THEY created for all Greeks, and that they, Syriza, will be smashed to this self built wall, and wake up from the Syriza dream.

    Shame on them.

    Without THESE Greeks this would NEVER have happened.
    THEY are to be blamed. THEY voted for Syriza, and made it happen, in a democratic country.

    I hate them for that. Deeply. More than any Greek can hate a German.
    It is clear that even a party with intellectuals, professors, prove to have so much lack of intelligence.
    May Tsipras be remembered in history as the worst and most bad leader of Greece, ever.
    May his complete psychological profile be exposed, everywhere, and that he will not be able anymore to travel, without be spit by others.
    I will, when I meet him, and feel proud of being indecent to a betrayer.
    He does not deserve anything else of me.
    From not anybody.
    Rotten tomatoes. Throw Greeks, throw them. Show your anger. Show your love for Greece. Rise from you ashes and go on.

    Finally, sooner or later, I will be able to forgive who I hate now so intense.
    I know myself.
    But I will never forget. Never.

    1. Antoinette, you must know that hate is very unhealthy?

      Even if you have valid reason for anger and hate, why put your health at risk for political problems far in the south which can only be solved by the inhabitants living there?


  2. Klaus, do you really have doubts that Syriza will have problems finding (or inventing) not one but a thousand answers?

    And as I wrote as a commentary to that article in December (and many times after that):

    "Debt servicing obligations are much easier (close to zero) if Greece declares bankruptcy and changes to Drachma."


  3. Probably SYRIZA had and has no answer to Mouzakis’ question. Perhaps they even think that they do not need an answer.

    I remember something I read in a book written by a Scandinavian researcher, who visited some of the former Portuguese colonies in Africa in the 1990's, and was astonished to find that these countries had no plan for their further development. They had preciously been driven by the idea that it was colonialism that was responsible for all their problems. Once colonialism was gone they would more or less automatically venture into a bright future. A plan was therefor not necessary.

    I wonder if SYRIZA (and also ANEL) have not been thinking in the same magical way: The reason for all our problems is the Troika. So, let us just get away with the memorandum and the Troika, and let us demand and get another haircut, and all our problems will be solved more or less automatically, and we will be able to recreate the wonderland Greece of 2009. Let’s do a reset.

    Now it seems that they are not getting away with it that easily, and they probably are beginning to realize that things will soon blow up into their faces.

    Is that really worth it? If you are an ideological fundamentalist, the answer is certainly YES. If you are an ideological realist, it is certainly NO. I wonder how the proportion of fundamentalists and realists is in this government. ANEL and the radical wing in ZYRIZa might be stubbornly fundamentalist, and would probably even like the chaos created by some kind of ”accident”. Social unrest and disorder is like oxygen for the radicals. Even better if this would push us into a global financial crisis.

    Tsipras is often described as a realist, but is he really? And how strong is his support in this government?

    1. >"Perhaps they even think that they do not need an answer."

      Although Syriza will deny, that is the pivotal argument!

      And since they intended Grexit a few weeks before the elections started, it is not only an argument but a hidden fact.


  4. There was an interesting article in Ekathdmerini today, arguing for the Greek government to look at China as a growth model:

    I also would like to quote one of the commentators. I could not have expressed it better myself:

    "Well said AP...But I really doubt ... Syriza can change. They seem be straight out of some socialist/communist time warp...They are not even aware of how badly the USSR failed as an economic model.

    I would argue that the true models for a better future for Greece (an alternative path of modern economics) are the 100's of thousands of Greek expats who live and prosper under CAPITALIST systems.

    Greece should reach out to Americans, Canadians, Aussies, etc of Greek descent who have lived and prospered under the rules (rule of law, taxes paid, corruption minimal, capital respected, profit earned and wealth desired) of modern free-market economies.

    Frankly, Greece would be better off turning itself over to a trusted outside council of Greek expats to reform the country.

    Oh, and one other request, reform needs to begin with the education system. Somehow the Greek system and universities are still hatching communists like some animal (e.g. the Dodo bird) that evolution should have made extinct long ago....that needs to stop."

  5. The problem with this sort of question that Mouzakis quite rightly posed, is that it has no answer. The first obvious reason is has no answer is that the government of a country in terrible crisis SHOULD have plans (it seems inconceivable that it does not) and at the same time it SHOULD NOT reveal those plans to anyone, inside our outside the country. Indeed, that is what almost all governments do, and it would be foolish to reveal their hand before actually playing it. Thus far, the Syriza government has managed rather better than any previous one in dealing with the aggressive power of Germany and other bully-boys -- determined to protect their banks at the expense of other countries.

    Of course, everyone is disappointed at how little has been achieved. But let me ask: seriously, what did you think anyone would be able achieve here in the face of massive power and obstinate and foolish economic policies called austerity?

    Of course, all those on the Right are so happy with the inability, so far, of Syriza to make a significant dent in neoliberal policies across the developed world. This is a wonderful opportunity to attack "communists" and other deviants, and celebrate the non-successes of their own dogma.

    And as for Greek expats: they have no clue how Greece worked or works. Those who have been successful in other countries have operated in a different socio-political environment, with very different rules. If we believe that "the rules" need to be changed in Greece (and I do) then the revisionism has to come from the Greek people and from political parties. Both ND and Pasok showed themselves determined not to change the system; the open question is whether Syriza will be interested and able to do so.

    1. "But let me ask: seriously, what did you think anyone would be able achieve here in the face of massive power and obstinate and foolish economic policies called austerity?"

      Well, let me be a bit cute and say: if the Greek government and the Greeks had accomplished in the last 5 years what the Chicago Boys and the Chileans accomplished in the first 5 years after 1973, Greece would be up and running nicely by now. And Chilean austerity then was far greater than Greek austerity so far.

      Incidentally, this is the logic which had prompted me to start this blog and which had kept me in a positive and optimistic mindset about Greece for the first couple of years or so.

      You may ask why have Spain & Co. similar trouble if this was only a Greek problem and I answer: if Spain & Co. had been as accomplished as Chile was then, they would be doing well by now.

      I can already hear all the excited reactions why Chile was different than Greece, etc. etc. and I respond: an individual can achieve very, very much when he puts his mind to it. A company can achieve even much more if it has a good leadership and motivated and dedicated employees. A country can achieve literally EVERYTHING if it has good leadership and motivated and dedicated citizens. More details in the book "Why Nations Fail".

    2. Dear Klaus, Interested question to someone, how new the situation: How much would the changes in Chile have been possible without terror and suppression of opposing opinions?
      How fare were the ideas of the chile boys accepted by the people during the hard times?
      And how far was the chilenian economy already prospering in earlier decades?

      I agree with you that the level of changes in greek society is totally disappointing. I still do not understand why.
      But also I think there are limits in the speed you can change a society voluntarily.

    3. Roger, here's what Mr. Kastner wrote back in 2011:

      None of the above will work if the people cannot rally around that new objective and are not willing to pay the necessary price for it. To accomplish that, one needs to make tabula rasa with leadership. Chile had the questionable "advantage" of having an authoritarian regime which, in the economic arena, banked on the right strategy and gave the people who had to execute it unwavering support. Greece has a democratic leadership which has lost the confidence of the people. If the present Greek leadership does not want to run the risk that, eventually, Greece will end up with the same political system which Chile had in the late 1970s and 1980s, they should make room for leaders who are not associated with the wrong's of the past but who can project the vision of a better Greece in the future! That would be the greatest contribution which any government has ever made for its society!

      Now, I don't want to interpret Mr. Kastner's words wrongly, but I'm sure he wouldn't fiercely object to such regime change in Greece if the new "authoritarian" government "banked on the right strategy" and did what it should be done. Why are the Greeks better than Chileans, anyway?

    4. @ Anonymous at 8.05
      On the surface, SYRIZA would come quite close to what I had suggested above. They are not associated with the wrong's of the past and they, certainly as far as Alexis Tsipras is concerned, can project a better vision of a better Greece in the future. I emphasize 'on the surface'. I have yet to be convinced that the SYRIZA crowd is indeed completely untarnished by the wrong's of the past. Some of their first announcements and decisions would suggest that they are very much for public sector and union cronies and, don't forget, much of SYRIZA consists of PASOK cronies who were looking for greener pastures.

      Regarding the 'regime change'. I have always pointed to France in the late 1950s as my role model. The country was about to fall off the cliff. Before it did so, it came to senses and remembered that there was one person whom they could all trust - Charles de Gaulle. If I recall, de Gaulle insisted (and got!) 100% support of the French parliament to rule for 6 months (or even 12; I don't recall) without parliament. Essentially, it was an authoritarian government supported 100% by the democratic parliament and it rested on the trust in de Gaulle. De Gaulle justified that trust. He immediately set out for radical reforms (including a new constitution) and when he was done with what he considered urgent surgery, he called for new elections.

      I can't think that Greeks would ever trust one single person as the French trusted de Gaulle but it ought to be possible to form a government (a government of experts or a government of all parties or whatever) which the Greeks would trust to perform the right 'urgent surgery' and to which they would hand over the authority to implement that.

  6. The strategy not " reveal their hand before actually playing it" is a well-known strategy of communist and similar totalitarian regimes. Not democratic at all, and not very efficient.

    The greek people maybe like the sound-bites of their national-socialist government, but they clearly demonstrate that they do not trust it. Thus they do not pay taxes and they empty their bank accounts.

    1. Excuse me, this is just right wing propaganda. No democratic government of any competence announces its market policies in advance unless they are very general strategies. The Tsipras government gave its very general strategy to the EuroGroup. Anything demanded beyond that is anti-democratic, as it would take control away from the democratically elected government and leave it with no actual role.

      As far as the rich Greeks are concerned, they are the ones who led Greece into its fiscal mess in the first place. Of course they are moving their money around: that is a measure of the law quality of the political and financial elites of Greece (as well as everywhere else). Quite why you think this delegitimises a government is beyond me.

    2. Every democratic government in Europe of any competence which consists of a coalition spends weeks (and sometimes months) to negotiate a coalition agreement before they agree to form a coalition government. Those agreements are not very general strategies but very specific action plans and they are made public, of course. The reason they do that is to improve the chances that the coalition stands together for the entire period.

      The Greek coalition seems to have been a deal between two party leaders and it was struck almost before the ink on the final election results was dry. If there was a coalition agreement, I haven't heard about it (and I wouldn't know when they would have found the time to work one out). Presumably, if they had negotiated a detailed coalition agreement, they might have discovered that they only agreed on giving foreign creditors the shaft and not much more. I am not saying that this reflects zero competence but it is not much above zero. If you consider specific coalition agreements anti-democratic, you are considering virtually all European coalition governments anti-democratic.

  7. Announcement of liquidity problem by end of March. That this is communicated by a letter surprises me...


    1. Maybe it is surprising that this is communicated by a letter; but then, it has turned out that in the case of Greece it is very difficult to understand what is true, what is an exaggeration (or an understatement), what is just a negotiating trick.

  8. I actually wonder what a Graccident in late June or early July could mean for one of Greece's major industries, namely tourism. A breakdown of tourism this summer would make the disaster for the economy even greater.

    One the one hand it might be possible to find ways to do business as usual in the middle of the turmoil. On the other hand, according to my experience, Greeks outside of the tourism business have never been particularly interested in smoothing things out for foreign tourists, by let's say abstaining from strikes or blockades.