Thursday, March 26, 2015

Mohamed El-Erian: The Five Mistakes of the New Greek Government

Mohamed El-Erian writes in the FT: "The new government led by the leftwing Syriza party was elected with a manifesto that contains three policy changes that many economists agree on: reducing excessive austerity, revamping structural reforms to unleash broader economic dynamism, and removing crippling debt overhangs that undermine existing productive activities and discourage the stimulus that comes with new investments. But in translating intentions into actions, Greek officials with little or no governing experience have mishandled five issues that now risk eroding their credibility".

Here are the five issues.


  1. Unfortunately the link goes to Financial Times: as soon one is on their website one has to chose for an expensive subscription, to be able to read the text you recommend here.
    So, I copied the title of the article, and searched on the web. Found:
    Missteps and miscalculations that could cost Greece the euro

    There it is, but one has to fill an option in a menu, I took the last one, because I do not belong to one they mentioned.
    Then the entire article is there to be read.....

    Thanks for posting!

  2. I am one of the stubborn Eidgenossen who refuse to surrender to any form of access restriction. Neither the link from Klaus nor the one from Antoinette gives free access. And I wonder why Google has surrendered and gives links for this text, which too do not work :O
    H. Trickler

  3. Working link, until FT get's it removed:


    1. I apologize for giving above the wrong link...

      is the appropriate one.

  4. Slightly off (this) topic, but an interesting article from Die Zeit in English:

    1. A welcome change, to be able to read an intelligent non-nationalist and undogmatic article from Germany. Maybe they would not dare to publish it in German, though.

    2. @Guest(xenos)March 27, 2015 at 10:43 PM

      You seem not to have looked at the text which shows right below the photo:

      "Lesen Sie _hier_ die deutsche Version des Artikels."

      which links directly to the text in German.

      BTW: Your idea about how German media operate is as wrong as many other ideas about the world you showed us here.


    3. You must be either Varoufakis in disguise or the most uncritical SYRIZA fan-boy. That would explain your strange prejudices.

      The article was of course also published in German. You can read a lot of stuff like that in German magazines. Perhaps you should re-read the blog-owners "In defense of Germany (and Germans":

  5. This style of argumentation showed by the two respondents here is rather worrying. It indicates that you are very keen to (a) attribute skills to others that they have not claimed; and (b) decry the absence of such skills as evidence that other actual or claimed skills or knowledge are defective.

    This style of argumentation does not feature in philosophy or logic, but is mainly found amongst the worst politicians and the gutter press.

    I have and claim no expertise in the german media. My view about Syriza is that its conduct thus far, along with its objectives are far superior to those of the two former main political parties of Greece. Its ability to deliver tangible results has not yet been established, and like most people I worry about what is possible.

    Of course, I am not a pure-bred bigot, like many of the anti-Syriza (and possibly anti-Greek) commentators here. Sorry not to fit into your club.

    1. SYRIZA's conduct so far superior to predecessors? Let's recap:

      Six months ago, the Greek economy had crossed its lowest point since 2010 and was beginning, however slightly, to grow again. Shortly before then, Greece and Greek banks had successfully tapped capital markets. Particularly for the banks, that was quite a sensational accomplishment. State coffers were overflowing with cash and, by November, the primary surplus had reached 3 BEUR.

      Today, all thought of a primary surplus for 2015 is gone. Bank deposits have fallen below 150 BEUR, a negative record, and with a declining trend. Greece is totally cash-strapped and a default in the future highly likely. Finally, Greece has become totally isolated within the Eurozone; if there are still friends of Tsipras/Varoufakis left, they are in hiding.

      What happened during the six months in between? First, Samaras had started with this silly business of trying to exit the program. That was bad but far from being the end of the world. But then Tsipras decided that it was high time to start gambling with the entire country. There was no Troika (or German) measure during this time which could be held responsible for this dramatic deterioration.

      I link below the impressions I had of Greece in early December of last year after having spent 3-1/2 months in the country. For the first time since 2010 did I feel that things had not gotten worse; instead, here and there I got the strong feeling that things were getting better. I will return to Greece in a couple of weeks. My fear is that I will find a country which is headed for disaster.

      Oh, I forgot the positives. A few dozens of cleaning women were re-hired in the ministries, so I understand.

      Thank you very much, A.T.!

    2. Klaus: this is just disingenuous: I expected better from you. It was very clear from before the last elections were held that (a) money was flowing out of the Greek banks, people were not paying their taxes, and a primary surplus would be either small or impossible for 2015. THIS WAS CLEAR BEFORE THE ELECTION. And (b), that Syriza was elected with a clear mandate to confront the Troika and specifically Germany on the eurozone strategy of austerity -- which almost no serious economist in the world supports as a reasonable policy for indebted countries such as Greece.

      The political context of Greece is that, and the political context of the rest of Europe is something quite different -- namely, one of extremist neoliberal policies that can only damage Greece. You can make your superficial points about governments across the eurozone not supporting Greece, but this was known in advance. You can make your technical points about certain macroeconomic variables looking less negative than in the recent past -- and this has little meaning. Greece was not in recovery: only a deluded person would claim such. It continued to be in a very serious condition, which worsened with the elections. Not with a Syriza government, but with elections.

      Now is the moment to show some wisdom, and not make premature judgements and allegations. History will be the judge, not you or I.

    3. @xenos. You should be ashamed of yourself!

      This was one of the most aggressive and uncivilised attacks on Klaus I have read for a while. You call him a "deluded person", and that you "were expecting better from" him. Who are you to write things like that? His teacher? His father? His supervisor? You are arrogantly putting yourself in a position of superiority. That is preposterous.

      You criticise Klaus for making "premature judgments and allegations". And you are shouting: "THIS WAS CLEAR BEFORE THE ELECTION". Why are you shouting? It was not clear before the election. SYRIZA was not talking about things like that, and Varoufakis was always referring to how comfortable it was for post-election Greece to go on by its own because it had a primary surplus.

    4. @Anonymous. I speak my mind, honestly and sometimes politely and sometimes not so politely. I have that in common with the Germans.

      And you will note that I was not repeating the position adopted by Syriza or Varoufakis: I was giving a detached and logical analysis of the situation, which I thought Klaus was well aware of at the time.Hence my irritation with his comment here.

      I see no need to apologise, any more than Klaus should apologise to me. We are all elderly adults and have the right of free speech. If Klaus wishes to censor his blog, to avoid being criticised, he is of course able to do so.

    5. Hi...

      Both Xenos and My Kastner hav valid points. It is a nice debate but it depends on what view point you are looking for.

      From the troika creditors POV Syriza is a disaster. From a greek people POV, they are the best governement seen from quite some time. 80% in the latest polls prove it. Xenos speaks from a greeks POV and mr Kastner speaks from a creditors POV (with concerns for the greek economy which is the reall issue.)

      Time will tell. I am quite hopeful.



    6. Hi Again,

      I would like to also add that I have supported and advocated that the previous government did do substantial changes. Some good and some bad, but less in interests of the greek majority. I have also wrongly jumped to many bad conclusions of this new Syriza government such that in regards to the increased wages of DEI, a last minute law brought in by ND and PASOK government. After a few days (of this news) the new government threw out the law. The school system as well, some changes made immediately showed some negative "old ways" but again in retrospect the changes implored are for the good of all students and the system without weighing down any further economies of the public schooling system.

      It is easy to jump to conclusions so fast when the whole "game" has been set up to throw out the new government as fast as possible by the previous government with help of our collaborators fromt he "Brussels group." Varoufakis, public dialogue and rhetoric has also been curbed.

      Syriza is here to stay for better or for worse. The Greek people support it by 80%. I believe it will be for the better and we will remain in the EU. And it is based on two aspects. Continued changes that the government will do to make structural changes, while also refinancing the debt which you, Mr. Kastner have stated so many times. The 1st will be done, the 2nd is in the acceptance of our collaborators.

      When all the hoop jumping is completed and new deal is made, Greece will be on a new road and i believe in a healthier direction for both Greece and its creditors.

      The next weeks will prove this and untimately in June we will all know. Everything else is just propaganda.



    7. @ V at 9.23
      I need to correct you. You may perceive me as speaking from the creditors' view but I am actually speaking from the viewpoint of Greece's continued membership in the EZ (which, of course, has many similarities with the viewpoint of creditors). As the SYRIZA MP Costas Lapavitsas correctly points out: SYRIZA's Keynesian policy proposals are not compatible with membership in the EZ. I think it is high time to explain this to the Greek people ("there has to be a genuine public debate at last") and only when the Greek people truly understand this, should one measure their support of current policies.

    8. Thank you for your reply Mr. Kastner,

      I do not perceieve you as a person on the side of the creditors but more of a "devils advocate to greeks" so to say. I know your intensions are not bad but that with real truth and concerns for greeks finding the solutions from within. "Or a father scolding his kid."

      As for Mr. Lapavitsas, i am pretty sure greeks very well understand that that both syriza policies and what the Eu troika brussels groups are incompatible. Everyday greeks believe/hope that there is a middle road and it must be negotiated as best as possible and austerity where necessary is to be applied by a fair greek government. A fair governement that has never existed. Above all staying within the monetary union. The 74% of syriza supporters 80% of them say stay within the euro monetary system. I am one of those people.

      It is also why i have been saying for some time now, now is the time to hit those who have not paid, now that the peope are behind them. Even a few days ago a new law is in the works for transfering inheritance to your children etc can not be done until all debt is paid off. (inheritance and wealth transfers can not be made now and are frozen) An old trick greeks use to use to avoid payment. Now this out of the door. Those who have paid can transfer their wealth and inheritance to their children. Those who have not paid their debt to the government can not.

      It is changes such as this and also Syriza coming to the table with the ship owners to pay more and example of taboos never realized int he past by other governments.

      I wish our counterparts would look beyond the rhetoric and let the noose free as to see what these guys can actually do. Ofcourse there will be some sloppiness, but it is expected by young governements.

      If the brussels group does not allow any leeway, then yes, what Lapavitsas has to say needs to be addressed and Syriza will use this only as a last resort. Greeks know this as well. Greeks very well know we can not go on with the austerity in the current for nor pay debt under the current form. If it is not adjusted then end game will come. I doubt it ofcourse though.

      On a personal note during the meeting Tsipras had with Madame merkel i can honestly say the meeting gave me a warm feeling towards mrs merkel. It looked and felt real and not just theotrics.


    9. @Klaus: when you say that you are speaking from the viewpoint of Greece's continued membership in the EZ, this is potentially misleading. I say this because it assumes that the EZ will continue ad infinitum with its foolish austerity policies, and is not able to change direction. This is likely true in the short run; it is far from clear in the medium run. Indeed, all it will take is a change of government in Germany and the whole EZ will change policy.

      Therefore, compatibility of current Greek policy with the EZ is largely determined by compatibility with the opinions of a few politicians in Germany, who currently hold power. This is very far from the structural incompatibility that could be read into your comments: Greece (with Varoufakis's expertise) is arguing for a change in EZ structural policies -- as opposed to a special case to award more money to Greece.

      If you accept my comments, then you must also accept the conclusion that you are speaking from the viewpoint of creditors as opposed to debtor nations. It also follows that you are speaking from the viewpoint of pro-austerity advocates, who currently dominate the debate.

      As far as Lapavitsas is concerned, he has always been opposed to euro membership from an ideological point of view -- as opposed to the appropriateness of Greek membership. I do not agree with him, since I think the eurozone should have worked if it had not had incompetent political direction from the outset. And continues to have it.

    10. @ Xenos at 3.21 1 of 2
      I think our conversation would benefit if you focused more on presenting your arguments and less on explaining what the arguments of others are and why they are wrong. Please allow me to accept those conclusions which seem plausible to me instead of those which you intend to force upon me.

      For the Eurozone to have worked, there would have had to be a lot more monitoring than only 3% for the budget deficit and 60% for the debt. Those yardsticks only relate to the state as an economic agent. By far the largest economic agent but by far not the only one. The Spanish state, for example, had behaved very solidly according to those yardsticks.

      I fail to understand why all those neo-Keynesians only talk about state spending and state austerity when Keynes, to the extent that I have read him, had his focus always on entire national economies. When an entire national economy experiences way-above-average increases in asset prices, wages, salaries, pensions, etc.; when this leads to a situation where foreign products/services become much cheaper than domestic ones; when this leads to the decline of many domestic industries which can no longer compete; when this leads to unemployment which can only be covered up by state hirings; etc. etc. - well, then the system is not going to be successful forever (instead, only as long as the foreign funding flows). I don't know how one could have counteracted those developments within the Eurozone with the latter's 4 freedoms but since it wasn't counteracted, we have the mess that Greece is in today.

      The wealth of a nation, its living standards are in the long run a function of the quality and amount of products and services which it delivers. To deliver those products/services requires employment and employment leads to the purchasing power for products and services.

      If I recall, the national economy of Greece was quite fine around the time of the EU membership: little unemployment, a controlled budget and a totally manageable state debt. Of course, there were limitations to national living standards: imports were more expensive with a cheap local currency and tariffs did the rest (I recall 100% tariffs on cars). Compared to Germany or Austria at the time, Greece was a poor country in the 1970s. My first visit to Greece was in 1977 and I recall that, outside of major cities, etc., I was baffled by the low level of wealth and living standards. In my eyes it was poverty but in the Greek context it didn't look like poverty. People seemed happy and satisfied. In fact, many people today seem to miss the Greece of then.

    11. @ Xenos at 3.21 2 of 2
      Now, for Greece to regain a living standard which is somewhat reminiscent of the first 10 Euro-years, the national economy simply has to produce more products and services in quality, quantity and price so that others, including Greeks, will buy them. I have a bad memory and perhaps you can help me out but I do not recally having heard much about this from SYRIZA ever since June of 2012. What I hear from SYRIZA is the distribution or redistribution of wealth that's already there (or borrowed) but I don't hear much, if anything, from them about creating new wealth for the nation.

      You are a firm believer in Varoufakis' expertise (most Varoufakis' followers are believers in the biblical sense...). In one of my first exchanges with him back in 2011, I expressed to him admiration for his expertise on Eurzone matters, for his eloquence in English and for his charismatic communication skills. At the same time, I criticized him for always trying to solve other people's problems (like the Eurzone's problems) and not spending one minute on solutions for Greece's problems, solutions which Greece could handle on its own without support from others. In the week before he became FinMin, we had several exchanges. He asked for my advice. I, again, advised him that what Greece needed was not really expertise in handling its debt but, instead, expertise in putting together a Long Term National Economic Development Plan. He agreed with me 100% and said this would be the first thing he would work on. Again, please lead me to it because if there was such a plan, I have overlooked it. I don't know how many times I have said it since I started this blog: in any financial crisis, one has to start with a plan and then structure the financing around it. If it is a good plan, there will be financing. In Greece, the process was reversed and still is reversed: one spends all energies on structuring the financing and will afterwards probably make the plan around it.

      If you go back to my writings of 2011/12 (there is a section on the right hand side of my blog), you will see in me a fervent optimist that Greece could achieve all that within the Eurozone, albeit it, perhaps, with some temporary 'instant industry protection'. Six months ago, I thought that Greece might still achieve it. Not because the economy had become so successful but because there were indicators that the bottom had been crossed. Even Paul Krugman admits to the fact that, also under austerity, the bottom will eventually be crossed (it just involves unnecessary pain, according to Krugman). Had the economy become successful, one could have expected a rapid turn-around. Since it had not become successful, I wrote 6 months ago that it will take 'a very, very long time'. By that I was thinking more in terms of decades than years and I wondered if Greeks would have the patience for decades.

      Greece alone will certainly not be able 'to make it'. By 'making it', I mean turning Greece into a value-generating market economy within a foreseeable future. Greece will need foreign investment and foreign know-how for that. And foreign investment will only come if there are policies which inspire confidence and trust that the investments have a good chance of becoming good ones. I let you judge whether SYRIZA is making much progress towards that aim.

      Back in 1919, Keynes made a most interesting analysis of Germany's 'economic value creation capacity'. He did not talk about fiscal or monetary policies or budget deficits. He talked about the productive capacity of the national economy. I would be interested in seeing such a comparison between the economies of Greece, FYROM, Bulgaria and Romania. And what would really interest me is whether the economic value creation capacity of the Greek economy is indeed so much higher than that of the other countries to explain the much higher standard of living.

    12. @Xenos and Mr. Kastner,

      Xenos, i have to agree with the majority of what Mr. Kastner has to say. Firstly, indeed in the early 1980's when i fell in love with Greece as a child, growing up with my grandparents in a "poor" village, life was much simpler. But there was indeed true happiness. Nobody lived beyond there means. You bought what your respective purchasing power was by comparison in America everyone was in debt. In the same period you can see though that greeks living in greece envied foreigners vacationing in Greece believing that dollars and d-marks grew on trees. They did not know that much of it was based on debt or a debt system which indeed had a higher purchasing power but was unrealistic. Moving on into the 1990's this ideaology of debt was transfered to Greece and suddenly, Greeks became rich in debt. It was irresposible to open the dorr so quickly in Greece with cheap money, credit cards, home loans, past expensive cars at cheap prices, all while globalization was in a full turn. Then followed Eu currency admission and the explosion of debt.

      Without the proper foundations the Greek tragedy which we live today was the inevitable to happen. There was no grounds for greeks to have such a huge increase of living standards, through debt ofcourse. This coupled by the old "shadow" system and cronysim way of the system lead to the current collapse.

      I am not for reforms. And greeks are not as against as well. I am against the fact that those trying to live the simple 1980's simple lives, can not be achieved under this system as the value of everything is now much more expensive than in the past. Hence the real poor of today.

      I would also agree that there our now sound, logical and highly educated people in Greece to indeed help build Greece into a healthy economy. I am hoping aside form the private sector the current government provides a plan which Mr. Kastner is stating. A long term plan which will provide trust in the Greek economy to bring in wealth and investment.



    13. ....continued

      Our creditors are not completely wrong in what they instill on us. The only wronging from the start was naming all of these changes as austerity rather than logic. The creditors are wrong from their side as they failed to come into greece and study the problem and force specific downfalls of the greek system to be stamped out. The Eu is a major blame for this, throwing us tons of cash and debt without help solve the foundations. Meanwhile if Greece was at the bottom of the barrel the EU did nothing to help "massage" ND to keep change going. (They left him out to dry giving the impression that the troika, really does not care for greece other than that they get their money.

      An excellent example of this was satyred on the zdf die anstalt german channel.

      It was a breathe of fresh air seeing this. These are the Germans i love. These are the germans which indeed show the greatness of the fatherland. And to be completely honest i believe that more Geramns love and have concerns as friends to greece, than greeks loving germans. The show made me cry not for the for the idea of the show behind it and the stresses that i feel, but for the greatness of germans who actually do care for the wellbeing of greeks and Greece as a whole.

      I only wish more powerful germans on a political and financial level can actual care for greece in the way that they expressed this. If this was the case, the "greek problem" would be solved indefinately.

      Germans need to know one thing when negotiating with Greeks and that is to show care and concern. A greek will give you everything then.

      ....Even back in the 80's and today i live like my grandfather lived. Frugal and happy, but i had the previlage of growing up in the USA and having the time to see and understand the negative aspects of debt over a long period of time.

      @Xenos, don't get me wrong i also agree with many things you state and you both have nice imput on this blog.

      From the trenches in Greece,


    14. @Klaus and V: What you both have written is appropriate for a national economy, with its own currency and its own political management. This is also all that Keynes (to my knowledge) ever considered. His paradigm was the national economy within an international framework.

      This view completely ignores everything that has happened since 2000.The result of eurozone membership -- controlled and pioneered by France and Germany -- was to construct a political framework (highly inadequate, of course) for economic relations between the eurozone member states, with its own central bank (the ECB) to issue currency and supposedly control monetary issues.

      Such a framwork can work in only one of two ways. Either you set the membership criteria so tightly that the economic differences between countries are minimal; or, you accept the idea that the monetary union is also a fiscal union of sorts, and should be seen as analogous to the USA or any country with massive regional differences. In the latter case, the weaker regions (owing to low competitiveness and/or innovation) will exhibit declining production alongside increased consumption, increased unemployment and a balance of trade deficit.

      Since Germany and France chose to ignore the expert advice to select the first option, it was and remains their responsibility to manage the eurozone appropriately. They refuse to accept any responsibility at all for their actions. What were those actions? Let us be clear: they knew full well that was has actually happened was more or less inevitable. They knew that the weaker economies of the eurozone would fail, while Germany would reap the benefits of a lower currency. France had the usual grand delusions about a new Roman Empire, with a common currency.

      When we reached this inevitable point -- triggered by the global banking corruption crisis -- Germany chose to blame Greek politicians for what had been expected. This was their first reaction, subsequently dropped when more than half the eurozone failed, and now revitalised as a left Greek government demands a rethink of the terrible eurozone mess.

    15. /cont
      In this political crisis of Europe, Greece is addressing a political crisis of Europe. As you point out, it is not very concerned with reforming its economy -- seeing that as either medium or long term, or maybe not even an issue. If Greece were outside the eurozone, this would be the most pressing issue likely to confront them. At this time, it is not.

      The option of euro exit -- with Greece going it alone -- is not a feasible one. I cannot see any hope for the country down that route; the only choice would be to leave the EU and form a dependent alliance with a powerful country such as Russia or China. That would create a geopolitical crisis of such magntitude that the Greek economy would be a side-issue.

      The option that you are proposing, which is to conform to Germany's demands, is not an option. Germany has preyed in a parastic fashion on the weaker countries of the eurozone. This actually happened owing to the neoliberal dogma that politicians from all of Europe were vomiting and continue to vomit at every opportunity. One element, for example, was the belief that by pegging monetary policy to Germany the weaker economies would all be disciplined into becoming like the German economy, else they would deteriorate. No actual mechanism specified -- just this stupid propaganda. Indeed, this remains the underlying axiom of the Troika and the German government -- that all it requires is "reforms" and then economies will compete with Germany. The "reforms" consist of little else than selling off of state assets (for no clear reasons), deregulation of markets (again, for ideological reasons), massive cutting of wages and pensions, reduction of the state sector; massive increases in tax collection and state revenues, etc. None of these makes any contribution to economic development, nor in my opinion to help create an environment where FDI would see Greece as attractive and stable.

      The primary problem with the Greek economy is political -- both European and domestic. Solutions to economic problems will not come about with technical fixes, since the underlying structures are now so unstable and negative. Syriza seems to be addressing only the political problems -- partly for these reasons, and partly because there is probably no agreement within the party about what to do with the domestic economy. That is the basis on which they were elected, and that is what they are doing.

    16. In continuation to the above....

      i miss wrote and really wanted to write. "I am not against reforms..."

      I would like to also add some thoughts based on personal experience. Working for large multinational, i was transfered for some time to a small subsidiary within the group. As most of the top managment. What we tried to do is to apply large multi national managment and ways of working to the small company. The result was great organization but failed end result. The way of working for a large company simply can not be correlated to a smaller business. My thoughts of this also brings me to a question i have had in my mind for quite some time.

      Troika, Germany, USA, France, UK and experts from these countries trying to advise or help Greece. I can not help think of the correlation of my personal learning on a country level.

      Can reforms, ideas and managment of a large country be applied to that of a Greece? Ofcourse everything is analogical scaled but is this a practical method of understanding?

      I guess that zdf program also implies something similar, or at least that there is no real understanding of the greek economy.

      It is also why i agree with Mr. Kastner's stament to Varoufakis, that he should formulate country plan. Who better than a Greek who knows our system better. meanwhile he should then explain the why's and why not's and do's and do not's to his counterparties. Something Kapodistria did in his time.

      As a whole i like what Syriza says, that reforms should be owned by us. Not by foreigners. It remains to be seen how successful they will be.



    17. @ Xenos at 11.54
      When I read your lecture (which, in theory, is not a wrong lecture), I suppose a feel a bit similar as 18 Finance Ministers feel when the 19th of them lectures them on how the Eurozone should work. And I can see how they tire and ask "Why don't you tell us how Greece WILL work".

      Varoufakis' standard answer is well known: during the US depression, there is nothing that Ohio could have done on its own. I think one ought to be a bit careful when comparing the Eurozone to the USofA as a currency union. There are a couple of major differences. One is that Americans are geographically much more mobile than Europeans because when they get on the plane in Boston to fly to San Diego to take up a new job, they are still in America when they get off the plane in San Diego (same language, same TV programs, more or less the same infrastructure, etc.). In fact, the American who lost his job in Bosten may be enthusiastic to move to a better job in San Diego whereas the Greek who has to leave Greece hurts.

      And then there is the acceptance of different living standards throughout the US. Do you hear Americans in Alabama complaining that they are not as well off as Americans in Arizona or Florida? Not much, because if they felt that way they would move. But bear in mind that there are HUGE differences in living standards among areas of the US. And as regards poverty: there are areas in the US where there is real poverty and humanitarian strain. Not as much as right after sub-prime blew up but still. I don't know how often I have been asked by Greeks why a Greek doing the same job as a German should not be able to afford the same living standard. Well, you ought to answer his question. The tragedy of the Euro is that it gave Greeks the illusion of a living standard which the Greek economy was far from justifying. It's my old story of the poor man who hit a jackpot. Just keep re-reading it.

    18. @xenos,

      I enjoyed your last thread very much. well put.

      @ Mr. Kastner

      Nice thoughts and comparisons.


    19. @ both Xenos and Mr. Kastner,

      I would like to bring a point which xenos mentioned in his above rebuttle. Greece not being competative. In general sense and on paper the greek economy may not look like it is competitive when you look at imports and exports. I have stated this many times in the past that we should get a real analysis of what is being imported and what is being exported.

      From my personal experience the truth is much further away from what this generalization states. Unfotunately, i can not go into detail as to substantiate this, but i am well aware that there are numerous sectors in Greece which are very compatitive through studies made.

      Through these studies (cost crunching) it has been proved in specific sectors that we are indeed more compatitive that our high end industrial strengths of German, UK, Italian and French. Likewise we are more competitive than our "lower industrial competitors of Bulgaria, Turkey, Portugal and Poland.

      It is these sectors which are "pulling the weight" of exports and are providing real jobs in the privat sector. If these sectors can continue with political stability and left alone to grow further the outlook of Greece would look very strong in the next 3-5 and 7-10 years down the road.

      It is in these sectors where knowledge and efficiencies copied by our counterparts, coupled with low wages allowed us to grow. Further infrastructure and new businesses created can help this further growth. Even though Greece does not have or has very little own "raw material" manufacturing and needs to import these goods, does not mean that the manipulation from the specific industries do not make the Greece sector non competitive. Based on this fact alone we have proven that we are even more efficient and even more competive with this drawback. Something like Japan on a smaller scale.

      Granted these sector only represent a fraction of the whole GDP of Greece, but it is a good basis. And with coupled structural changes and some large investment projects like OLP, Cosco further enlargening their hold on the container ports and the sale and rebuilding of the OSE (trains), nothing will hold us back. These two last infrastructure investments are key for Greece and i have stated this multiple times in the past.

      Why? Well if we are more efficient in manipulation of end products and saved from imports through trains from EU rather than trucking and shipping, meanwhile using the same transport to export, no multinational company would dare not invest in factories in Greece. The logistics of products is a key factor in costs. Especially when you deal with trains you deal with less beuracracy less worker, less worker costs. Actually it would force trucking industries to become even more competative.

      I really wonder if real governments look at such aspects of business on the real economy rather than just talking.

      The day OSE (public trains) and Cosco get that 2nd port, is the day (plus 1-2 years) Greece will begin to see the light. debt at 180 or not.


    20. @V: Thank you for your kind words. I have the Greek habit of usually siding with the underdog, against powerful interests.

      @Klaus: I do not disagree with your last comments about the tragedy of the euro (and some delusions that Greece acquired with cheap capital and an over-valued currency). Nor do I disagree with your comment that the EU (or even the eurozone) is not anywhere near as integrated as the USA in certain respects -- of which labour mobility is clearly one.

      What do I think should happen? Setting aside the unlikely event of a full fiscal union, with richer countries transferring their surpluses to the poorer... The primary issue is for Greece and others to have a stable political and economic environment. That is not possible until the debt issue is sorted out. It is very clear that the majority of right wing eurozone governments do not support this idea -- despite the fact that debt forgiveness is normal and inevitable where the borrower cannot realistically pay. In fact, the northern countries are concerned ONLY with protecting their banks and the euro itself. They have no concerns for the Greek people.

      The solution? The only solution is for the debt to be managed (there are several options, but I am not expert on this issue); for Greece to provide some safeguards that it will not engage in massive borrowing again; for emergency measures to protect against poverty (which Syriza is sort of doing); for the creation of a stable environment; and for a number of focused select reforms that would benefit both the average working Greek and employers. These doubtless are the reforms that are needed -- not the ridiculous marketisation blanket reforms of the Troika.

      Maybe you are saying that Varoufakis needs to develop such ideas: do not expect it from him, this is not his area. There are others in Syriza with more experience with domestic economies and issues such as competitiveness and development. I imagine that they are all waiting for the political issues to be resolved -- because as every development economist knows, stability of the general environment is a basic premise for serious economic reforms and attracting FDI.

    21. @ Xenos at 2.53
      Allow me to give you some education how sovereign debt ought to be handled, whereby this education would be best used by EU elites who, back in 2010, had simply no knowledge of sovereign debt problems elsewhere in the world. Before 2012, it was absolutely unheard of that sovereign debt of a first world country would be forgiven after only a couple of years of crisis and without one-time destruction. The long-term cost in terms of principle and precedent of Greece's haircut cannot be estimated at all at this point. So let me correct you. Forgiveness of sovereign debt of a first world country is absolutely NOT normal (there is no precedent for it) regardless how bankrupt the country may appear. Sovereign debt always needs to be 'regularized'. When a country is bankrupt, regularization means stretching maturites until forever and lowering interest rates towards zero (i. e. a haircut in disguise).

      I would argue that the Eurozone has for months now given signals that it is prepared to do that with Greece. But where I could agree with you is that the EU elites don't have all that much concern for the Greek people.

      Please name to me specifically those Eurozone countries which you deem to be governed by right-wing governments.

      The debt issue will probably not come to peace until there is some promise that a Greek government has a credible plan. That applied to the previous governments and it will apply to the current one. Let me suggest the following: if a Greek government came forth - with full support of the opposition - with the unisono, irrevocable and convincing commitment to implement the McKinsey plan "Greece ten years ahead", I think Greece could have from the Eurozone everything it wanted to have.

      It doesn't have to be the McKinsey plan but a plan it has to be!

    22. @ V at 2.47
      You must have been reading my passionate articles about Cosco a few years ago...

    23. @Klaus. Of course, I have no competence in the issue of sovereign debt, and I readily defer to your knowledge. The only question I would raise is this: although there are no precedents for first world sovereign debt forgiveness, is this not because of unprecedented circumstances? First, and foremost, Greece is barely a first world economy. Secondly, the handling of the global banking crisis created conditions that have not been seen since the 1930s. Economic textbooks do not even cover the issue of deflation (unless recent ones have been amended) since depression and deflation were thought until now to be historical issues, or confined to the LDCs.

      As for a credible plan, I do support the idea (as I have stated on many occasions). There are two issues here, perhaps: would the Germans actually play ball if such a plan was proposed? And is the Syriza government politically able to put forward such a plan, without actually disintegrating as a party and government? My fear is that the answer to both questions is in the negative.

    24. Postscript; the political framework of Europe is very right wing indeed. There is a pathetic centre left government in France, which is incapable of doing anything -- let alone solving the eurozone crisis. There is another centre left government in Italy, which most Italian academics seem to disdain. Even including these two, almost all governments across the EU are neoliberal in orientation. We await the inevitable rising up of leftist intellectually based parties like Podemos, or indeed any anti-austerity new parties. Sadly, there will also blossom anti-European parties and very right parties such as the Front National.

      But left? No, Syriza is on its own, for the moment.

    25. @V

      I just read your last post, about competetiveness (I had missed it, in the wealth of information here!).

      I agree that Greece has competitive sectors; I also think that some Greek agricultural produce is of phenomenal quality and value for money. We have had these discussions here before, actually. My view is that Greece has always lacked government institutional frameworks to promote exports and production -- largely owing to the primacy of politics over economics. There is also a serious problem across southern Europe of lack of economy of scale, with too many small family firms, and not enough medium and large ones. Greece is the worst case in the eurozone for this, I think.

      Neverthless, there is a lot of potential for the Greek economy -- as there always was. Realising that potential when political parties are not interested, or even see it as against their own interests, is the big challenge. This requires socio-political change -- not economic reforms. This is where the Troika failed to understand anything at all about Greece.

    26. @ Xenos,

      I agree with you that regardless of the political parties of the eu nations being "socialistic" "center" or "right/left center" there actions are indeed neo liberism. I am also always routing for the underdogm but you can't help admire the true powers as well.

      @ Mr. Kastner

      Ofcourse i read your articles on Cosco. I have contributed to them. I have even believed in this before the crisis. meaning i always believed Greece can become a port hub for europe. easily. One good thing did come out of the crisis is the sale to cosco. And especially cosco, because from all the actions of countries in the the crisis of Greece only china "cosco" has submitted a formible weapon for Greece in relation to infrastructure. Sure the Chinese cosco will profit from this but they have provided growth in this sector IN GREECE and provided jobs and have the patience to wait out the political instability to further grow on this. If i had the time or if i was a part of the government i would focus 100% of my energy and time in the sale of the 2nd port of pireaus and the one in thessaloniki. Publiclly own ports simply can not be handled on a private sector environment. I can state a minimum of 100 positive aspects simply off the top of my head what greatness the sale of the ose and ports would provide for Greece.

      I do not know why they are doing Malakies and wasting time. It is so key for Greece and we are focusing on all problems and even the problem of debt is small by comparison. SO MANY POSITIVES just so many. Greece over night would become a powerhouse in europe. Sometimes i fear this is simply not wanted. Not just by our politicians but by our competitors in europe. Make a new thread on cosco and OSE and i will find the time to contribute my ideas. Real world ideas in relation to this. Mr. Kastner i am unaware if you have the "weight" to throw your opinion in directions which affect Greece but if you do. Please tell them the NO 1 priority for greece is nothing which they are discussing. Selling of the 2nd port of pireaus, 3d port in Thessaloniki and selling of OSE to a company that wants to transfer goods through greece to europe is. If the technocrats or the politicians or wealth managers do not care about greeks but do for their pockets this actions is worth their investment. Greece will improve in competiveness, be a hub for europe, meanwhile the advantages created by this will provide economical sources to the people to pay off their debt to other countries.



    27. ...continued

      fom xenos point of food industry.

      well this is good export but not a powerhouse. It can be a major point but not now. Swat analysis. Excellent produce and fish quality at a low price, short ime period before consumption and high transportation cost in relativity to the value of the product, advatages our 9 month good weather for all year production, threats eu regulations of exports limitations.

      See we have all the greatness to produce good food. the draw back is the actual value versus the size of products is very small. we are restricted to send product by trucks and boats which reduces the life of the end product. also there is some lack of knowledge to consolidate large quantities for big sales as farmers are still not grouped properly. One value item of the produce is olive oil but still there huge room for improvement.

      One infrastracture that would help this industry.... ha ha ha is the building up of OSE train and cosco ports.

      Lets make a map. Crete one of the large exporters, need to issue ships to be loaded, with climate control all timed at the point of ripening of the products. To fill a ship of tomatoes and time it properly is quite huge task. Then the ship goes through the medi up into the atlantic and ends up in the uk or northern greman ports. Totally inefficient.

      By comparison with a Cosco port and A private OSE train depot going to eu. We reduce the need to ship full ships. Each producer can be allowed to ship a refrigerated container to pireaus onto the train hub to eu. To all customers. Good product, in a good time, allowing for longer shelf life of product and creating a consumer demand for greek products. With this infrastracture many will realize the need to invest in agricultre for sales to eu or exports. increasing this market size will allow for more train units to increase efficiency of the train costs themselves. more trains runs more turnover. so on and so on.

      Until then greek producers of food goods will remain a smal markt share in europe. demanded for good quality but rarely found.



    28. conitnued....

      Sell of the secondary airports of greece and the small ports. I guess as to better manage the flow of tourists into greece. yes i am for this. but this not huge. The secondary ports are. Airports bring the masses but the secondary ports on each island bring the Yachts. Where there are yachts there is money which left in the greek economy.

      I get quite annoyed that i see the port of korthion Andros nearly finished, paid by greek tax payers only to be fire saled to a private owner, but if this brings in wealth then it will all be worth it.

      Faliro Airport. This is just disgusting site. It really needs to be sold off and used for toursim and commercial use. This will help the attika turnover to boost growth. Meanwhile doing this will push the contractors of Attikh odos to finish the unfinish roads to Glyfada and to rafina to be finished allowing tourists and local citiezen to zip around not only athens but all of attiki.

      Toruist sitting in a hotel in glyfada coming in from the airport 20 minutes away, going to the acropolis and the delfous on the 1st day alone. Road infrastructure allow better time managment of tourist agencies to handle their flocks of people. In and out fast and to the islands.

      Just so many things.

      Now i am annoyed, we are really inefficient. so many opportunities and we are discussing BS. maybe i shoudl run for a politicians or an advisor of some party. All the run after are big fish when the little fish is what feed you provide growth and probability of success. a big fish can get away.


    29. @ Xenos at 9.48
      I don't believe you have ever answered my request to name those right-wing EZ governments you referred to. Other than Greece which has a right-wing, nationalist/populist (if not racist) party in the governing coalition, I can't think of any other EZ government which has right-wing elements but, then, I don't know all of them.

    30. @Klaus: this is a terminology issue. From my earlier career lecturing comparative politics as well as economics, I consider all of the governments across the EU to be right or centre right. This is on the basis of economic and social policies, rather than nationalism-populism (the latter can be left or centre anyway). The historical evidence is that most of Europe has shifted to the Right in recent decades. For example, I would not anymore cast the UK Labour Party as Left; I would be more inclined to place them as Centre or Centre-Right even. (Of course, there are elements in all parties which are to hte left or right, but I am talking about the leadership and controlling interests that would form a government.)

    31. @V: I agree with all of this. What is interesting for Greece (in most countries actually) is to read the older history of economic structure and management, and see the patterns and cultural continuities. I have managed to collect some rare texts on Greece authored over the period 1832-1920 -- and marvel at how so little has changed! This continuity can be a good thing, but usually it impedes rational solutions to major problems -- a sort of socio-political stubbornness or inertia. Conservatism, I suppose.

    32. @ Xenos at 1.32
      Read this and tell me how much has changed since 1911:

    33. haha! Well, I hesitate to say that none of that has changed-- but certainly there is a high degree of continuity with today. I was actually referring to management of economic and political issues -- where the resemblance going back to the mid-19th century is just so strong...

      I must say, though, that my readings led me to the conclusion that in the 19th century and turn of the century the most independent and incisive analyses of polity, society and economy usually came from Americans. The British accounts are either too deferential to the Greek monarchy, or too arrogant and snobbish (like the EB article of 1911). The French accounts also suffer from arrogance and nationalistic beliefs; the Germans seem far too detached from the Greek situation to make any sense of anything.

      So, the continuity applies not only to the Greeks :-) The greatest difference maybe is with the USA, which seems to be a pale version of its former strongly independent and critical thinking.

    34. @ Both Xenos and Mr. Kastner.

      I really enjoy reading your debates. It is really interesting.

      On the downside, i am feeling quite depresse today. Although the reform lists has a multiple amount of measures which will fight tax evasion, that which is not stated is how they will do it. Syriza that is.

      two points listed are the evaluation of the known tax evader list and the 2nd are the inter country agreements with switzerland to open accounts in switzerland to tax money that has not been taxed.

      The first point there where some programs and news last night depicting the SDOE, (tax office which chases tax evasion.) only has 30 person working cases. they have only 11 cases in the work out of 12,000. With the personel that they have it will take them 24 years to review all cases. This is a good point as to why our creditors do not believe in this stated figures. What syriza should state is that they will get these missed taxes by employing a minimum of 200-300 new personel at this office to combat tax evasion. otherwise nothign will come from this.

      As for the swiss accounts, all countries have gone and made agreements with swiss banks have collected missing taxes. greece has yet to do this. Instead of going to russia to make deals, they should be going to switzerland to speed up the process.

      If both of the above plus other tax evasion chasing methods are not addressed, i am afraid we will be at square 1 or even -10, once again where the average "shmo" will foot the bill and bailouts will continue.

      very frustrating.

      a deal will be struck up but i fear it is i and the average guy who will pay once again.

      Thanks guys for your nice dialogues.


    35. @V. I spoke with an old friend in Athens yesterday, who confirmed the general depression of the country. With SDOE, what has always amazed me is that no Greek government ever creates jobs for actually-needed tasks: they persist with this nonsense that state jobs are political favours rather than a functional thing that is essential for the State.

      I had hoped that Tsipras would be able to break away from that tradition: so far, it seems not.

    36. @ Xenos,

      I hpoing as well, because the media right now is now starting a war against Syriza although they are also trying to "sound" nice because the approval rating of the people for Syriza is very high. I have jumped many times to conclusions for Syriza and in the end they prove that their actions are appropriate. I am hoping indeed what i state above will be strongly supported as to attack tax evaders.

      The war of the media suddenly started on Syriza has just begun because Syriza openingly stated that one of the biggest tax evaders of all are the media itself. One mp stated on a MEGA tv new show that MEGA owes huge taxes to the goverment leaving the presenters flaberrgasted. Basically they shit their pants, because no government ever stated this openly.

      I was listening to Trangas this morning, he is extreme right but he supports the gorvernments actions because he says things as they are.

      What has been openly said is that the media from 2009 has not paid one cent. Neither for the permits to run their media corps, nor back taxes. It is estimated that the whole media sector owes over 1 billion to the government. Basically most are hugely bankrupt. Media is required to pay 2% taxes annually on generated turnover, which amounts to the above stated figure.

      The reason other gorvenments have not done anything is because if they bankrupt, their tax burdens would disapear meanwhile 1000's of media workers would go to unemployment. How to handle such a case? The whole thing is proprsterous.

      As i am aware only one company booted and that was ALTER channel. It was made an example of but the rest are doing nothing. Only Skai and Real fm are fairly run businesses. The rest are bankrupt.



    37. @V. Yes, I can also recall in the 2000s that the tv stations (including ERT) had not paid any social insurance for their employees for about a decade -- and neither Pasok nor ND did anything at all about it.

      Basically, all of these state revenue issues (and of course excessive borrowing) are explicitly the behaviour of the Pasok and ND governments of the last two decades. What is so disgusting is that the world media (in cahoots with politicians) has chosen to attack Syriza which has no culpability at all. They have inherited a massive structural problem -- which the eurozone has no interest in helping to solve -- and the attacks on them are primarily ideological.

      And now the Greek media turn on Syriza, too. I hope that Tsipras takes them to the cleaners, and makes a serious attempt to establish the rule of law that Pasok and ND deliberately undermined. That might give the right wing governments of Europe (along with their own promotion of tax evasion and criminality) something to worry about.


  6. From Twitter:

    Yanis Varoufakis @yanisvaroufakis

    "Every time the negotiations heat up, some new rumour of my resignation, demise etc. springs up. Somewhat amusing..."

    A quote:

    Nassim NicholنTaleb @nntaleb

    "Dr Varoufakis, a lesson from old traders: "Rumors of resignation are always untrue unless denied by the persons concerned."

    Is there a mistake here? And by whom?