Tuesday, September 22, 2015

New Optimism For Greece? Not Just Yet!

For the record, I need to state my conviction that SYRIZA's extraordinary success at the elections is the best possible guarantee for stability in Greece in the foreseeable future. If Greece had not reached an Agreement with its creditors in the summer and, above all, if SYRIZA hadn't been the party negotiating and signing this Agreement, I would feel differently because, then, SYRIZA would have undoubtedly become a source of instability. And notwithstanding that SYRIZA negotiated and signed the Agreement, they would still have become a source of instability if they had ended up in opposition.

As I said above, I am talking about stability in Greece 'in the foreseeable future'. How long that future is foreseeable is the subject of guessing but I maintain that it is now longer foreseeable than under any other constellation. But the issue is not near-term stability alone. The much greater issue is whether near-term stability will be used to lay the groundwork for future growth and prosperity. On the latter I would not put my money at this time.

Said the bricklayer to the passer-by who had asked him what he was doing: "I am putting one row of bricks on top of the other and cement in between". Responded his bricklaying colleague: "Sir, I am building a cathedral!" Will SYRIZA focus on bricklaying or on cathedral-building? The odds are that it will not be cathedral-building, at least not a very beautiful cathedral.

Greece as a beautiful cathedral, in my mind, would be "a modern and prosperous Greece: a Greece characterized by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos" (EU Task Force for Greece). I haven't heard much about this type of a cathedral from SYRIZA; nor from any other of the larger parties. The focus is on the Memorandum and its implementation; in other words: on bricklaying.

If the builders have a clear vision of what the cathedral should eventually look like, it won't matter if a row of bricks is laid the wrong way. The mistake will be discovered and corrected. If there is no such clear vision, the mistakes in the rows of bricks will determine the eventual outcome. And there seem to be quite a few mistakes in the Memorandum.

It does not appear that the bricklayers will be given much opportunity to discuss any mistakes in the bricklaying plans. They will be expected to do the job; period. If one thing has become obvious during the final days of the negotiations, it was that Greece has worn out the patience of its creditors. If Alexis Tsipras thinks that he can start his song-and-dance all over again ("I now have a new mandate from the Greek people and we need to discuss"), he will not find an audience. If Tsipras thinks that he can get by with the trick of alibi reforms (which trick his predecessors often used), he is in for a rude awakening.

Most importantly, if Tsipras thinks that implementing a program which he does not believe in will become a success, he is delusional!

Tsipras can only be good for Greece long-term if he makes a true U-turn. That is to say: a U-turn by intention and not only by default. For that, he needs to move himself at the head of the reform pack instead of acting like its victim. And, most importantly, he needs to form a team which lends credence to such a U-turn.

If I had to pick one economic indicator which indicates whether the Greek cathedral will be a beautiful one or not, it would be foreign direct investment. The Greek economy cannot make the jump into modernity without FDI, if for no other reason than the needed know-how transfer which FDI brings along. There is one question which Tsipras and his team should ask themselves all the time, namely:

"Is what we are doing conducive to new foreign direct investment or not"?

Only when one can begin to answer this question positively can one truly hope that there will be "a modern and prosperous Greece: a Greece characterized by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos".

As Tsipras re-assumes responsibility for Greece's future, he must bear in mind that, so far, he and his SYRIZA have scared foreign investors.


  1. Greece doesn't need someone building cathedrals with dreaming spires, or castles dancing in the air.

    Needs someone to be digging and laying foundation on which the country, that is all the people, not just the privileged few and rent seekers, can build a future. Rule of law, a bicameral parliament, independent civil service, property register etc. Then you might get the long term economy building FDI you're seeking, otherwise all you'll get is the fly-by-night looters and destroyers.

    I suspect that the only thing Greece will get from Syriza 2.0 and its ND silent partner is another house of cards. But I wonder if that's not what most of the people want. Otherwise surely more would vote for Dimiourgia, Xana! whose stated values seem to be diametrically .opposed to the other parties. That includes Syriza 2.0, which appears to be something like PASOK on steroids sans the Papendreou dynasty links.

    Two quotes,

    First from Edmund Burke: Good order is the foundation of all things.

    Second, which seems especially apropos to Greece, is from Eckhart Tolle: Discontent, blaming, complaining, self-pity cannot serve as a foundation for a good future, no matter how much effort you make.


    1. I don't think we are in disagreement as to what brings about ECONOMY BUILDING.

  2. thanks, I wasn't aware of the "Task Force for Greece". Are you following the reports?

    FDI: from my highly limited knowledge on economy, or political economy for that matter, my impression was too that YV had pretty much the same in mind. If you don't mind I come back to the seeker of instant fame once again?

    Paul Krugman minus the Grexit option he now supports--see his interview with the SKAI reporter, context: Athens Democracy Forum--has the same in mind, when he alludes to opportunities even some people on Wall Street see, he tell us, in Greece. "Highly undervalued", may have been the key phrase.

    What I wish I understood though, would it work well under either a heavy haircut or alternatively an extreme restructuring along the lines you suggested hypothetically somewhere?
    Nitwit question, would this have immediately invited foreign investment?
    concerning your comment on YV:
    Klaus Kastner: It seems to me that there was only one choice: to sign or not to sign, and not signing would have led to your Plan B. Are you saying that you would have gone for your Plan B?

    If that wasn't rhetorical, and it may well have been, considering you are the expert and I am the curious nitwit, yes I think he would have opted for Plan B, the parallel tax account related payment system. The New Statesman staff editing the transcript of his interview, understood matters that way too. And it is hard to read it differently.

    YV: Well let me say that out of six people we were in a minority of two. … Once it didn’t happen I got my orders to close down the banks consensually with the ECB and the Bank of Greece, which I was against, but I did because I’m a team player, I believe in collective responsibility.

    And then the referendum happened, and the referendum gave us an amazing boost, one that would have justified this type of energetic response [his plan] against the ECB, but then that very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan].

  3. I have been a champion of the Task Force since its beginning in mid-2011 and I have published tons about it. Below is a link to my last article on it and it includes a link to previous publications of mine. On New Year's Eve 2012 I had recommended to "make 2013 the year of the EU Task Force for Greece". A year later I had to make a sobering assessment. It has been awfully quiet about the Task Force of late. I think it was supposed to expire by Y/E 2014 but was then renewed until June 30, 2015. What is happening now I don't know.


    Regarding FDI, I think Wall Street is the worst place to look for it. Wall Street (or financial investors in general) are looking for shorter-term financial gain. They generally don't add much economic value to an investment (Warren Buffett would be an exception there). What Greece needs is FDI by strategic investors and certainly not only in the top bracket. It's got to be development investment, primarly in the middle market.

    Regarding haircut & FDI: even if Greece had been forgiven ALL of its debt, I doubt that a lot of FDI would have come for the simple reason that investors still consider Greece as the worst place to do business in the EU (Doing Business Report).

    Regarding YV: I, too, think that he wanted Tsipras to refuse signing, which would have led to his Plan B but he has never come out to say this clearly. He is always hedging his statements and this is what bothers me. Strong and intelligent with words but lack of backbone. When I read something like "I was against it (closing the banks) but I did because I am a team player", coming from a top executive, I get sick to the stomach. If YV had such a strong belief in his convictions, he should have told the public "voting 'no' will probably lead to my Plan B and I still urge you to vote 'no'". The Spanish call that 'cochones'.

  4. No matter what parties are in power, the problems in Greece are the same. How anybody can think that Greece would suddenly change from a nation of talkers to a nation of doers is beyond me, but let's assume it could happen. The next hurdle would be the change from a statist to a market orientated ideology, let's assume they could cross that bridge as well. Then they would still have the simple problem of basic skills to build a nation with the appropriate institutions. They don't have the human capital to do so, and they won't admit it.
    Until a majority of Greeks say to Europe, or any other competent body, "Please come and help us build our nation", I will say "mission impossible".

    1. Berliner, what's your expertise on Greeks collectively? Ideas, theories.

      What type of "market oriented 'ideology", by the way, beyond your "they, they, they" are you talking about?

      If the aka Berliner is not fake, can you tell me what exactly makes "them" different from "us"?


    2. But pray do tell us, o wise Berliner, according to the criteria you expertly layed out above, what constitutes THE "true nation"?

  5. I can accept that Greece now has equilibrium, but not stability. A pendulum has two equilibrium. In the stable one the center of gravity is directly below the pivot point, forces can temporarily change it but it will return. In the unstable one the center of gravity is directly above the pivot point, ANY force, of whatever direction and magnitude, will force it to the stable one. Therefore, the foreseeable future is until the next force is exerted, external or internal. Greece does not wish to reach a stable equilibrium, even with some sort of shock absorbers to dampen the swings. They will achieve it if we "starve the beast", alas with some violent swings. We should stop protecting this unstable system of balance from quite natural forces.

    In the building of this magnificent cathedra there are some tasks, Greeks have unanimous answers to all of them:
    Q. Who will pay it? A. The Europeans.
    Q. Who will execute it and lay the bricks and mortar? A. The Albanians.
    Q. Who will plan and decide on the edifice? A. We will, each of us.

    PS. It is not at all like you Klaus, to hit below the belt, I will give you the benefit of doubt and assume it was a play with words. That YV does not have a full set of cojones (I agree), does not necessarily make him a cochones (maricon, gay), even allowing for the different nuances in Spanish and South American uses.

    1. I was not aware of the second defintion of 'cochones', and I apologize for that. But I think it was clear what I meant, i. e. that there are times where one has to assume a clear position instead of doing the trick of economists (one one hand, one the other hand...).

    2. What astute and original observations you make, Lennard!
      But most funny of all is to note how your sense of "propriety" works!
      This blog occasionally takes some bad turns, but perhaps it is to be expected when words like "mentality", "culture" or ... "nation building" get tossed around all willy-nilly ...
      Anyhoo, moralisme seems to be a suspicious train of thought from which right-wingers cannot seem to escape ...

  6. If one types "Greece's saga is far from over" into Google, one gets to the below article (if one cannot open the link directly). After reading this article, one can only conclude that the next 3 months will be rather exciting. What I hadn't known was that Tsakalotos himself was among the group of 53 who warned against signing the deal as late as late July. And now he will have to be the quarterback in implementing the deal!


    1. Surprised you didn't know about ET and the petition, the list of 53 was published somewhere a couple of months ago. I think I had to translate it.

      He'll do all he can to sabotage the memorandum, and he'll have his fingers crossed behind his back whilst doing so.

      As politicians, radical/reactionary ideologues should be kept on the backbench, there 'job' is provide the theatre and make the jokes, i.e. they're tolerated for the entertainment they provide, but they should never be given any authority.

      The difference between YV and ET is that the first will attack you from the front with his xiphos (I hope that's the right word) the second from behind with a syringe full of poison.


    2. So are you expecting Tsakalotos to boycot the agreement which he himself had negotiated?

    3. Not boycott - sabotage.

      At some stage (probably when he's exposed as a shyster) he'll put his Chardonnay Socialist hat back on, and return to his job at the LSE to tell his students all about - "How I tricked the Eurogroup.out of €85bn and made a motza"

      I just cannot see how a lifelong Marxist ideologue like ET can suddenly become an implementer of a neo-liberal economic program. How could he lie in bed straight, unless of course something triggered an epiphany. If that's so why hasn't he told us what it was. Its unlikely he's been to Damascus in recent times.

      Or was/is his Marxist ideology a sham, which would make him no less of a charlatan..


  7. @ Lennard....

    You Must be an engineer.

    @ Berliner AnonymousSeptember 23, 2015 at 9:03 AM

    You have to understand that when you are written off or an under dog, it is funny how the balance of the Lennard equilibrium shows the exact opposite. Greeks in general indeed have a great potential and although our country seems to be completely inefficient, it is not wise to generalize a whole society nor the possible potential outcome.

    What is the difference between this Memorandum is that the 1st priority issues are the restructural issues. and with that we are automatically driven into a new system or way of working. See if the privatizations do go through which are 1st priority, as i have stated in the past, kills 3 birds with one stone. It creates those bloated public companies to be competitive, it indirectly gets public workers off the governement books and creates a new environment which introduces new business as the market guides the needs (Compare 1980 and 2015 telecommunication companies in Greece). Simultaneously the 2nd major problem is the tax evasion. If the tax authority which is 1st priority to be severed by the government it will become like a Greek IRS. Watch out!

    The truth be said that greeks aboard do prove to be and excel in their fields because living and working in structured or more efficient societies. Should this form of "system" be installed on us here, there is hope for a change.

    @ Mr. Kastner,

    Yes indeed these next 3 months will indeed be very exciting. There are many goals to be achieved. Release of already agreed deals of privatizations. Airports and ellinikos property. By November, the issuance of the bid for Trainose and two greek major ports. Athens thessaloniki. Tax adjustments AGAIN! Just this alone can propel 2016 to be very interesting.

    It is funny what i was thinking today driving to a meeting. Look at the greek nationa footbal team. Last in the group for qualifications and lost to MALTA twice. All players in league teams play quite well. Remember 2004? Rehagle. A German coach. Brought the greek national team to win the European cup. He knew the material he had to work with and organized it in a manner as to give the best result that it can give. It wasn't pretty but he knew how to control it and organize it. Rehagal had some luck as well. He was also paid a large sum.

    I though to myself. Who better than to organize something than Germans. Why not?


    1. Well, then I suggest you start a petition that Greece should request a German Task Force for Greece. And thereafter you might as well disguise yourself and join the refugee trek to the North...

    2. I read the same type of ambiguity before he misspelled Rehhagel. Yes, English is a lot easier then German.

      Why not invite the Americans in:
      "1st priority to be severed by the government it will become like a Greek IRS. Watch out! "
      Lot's of available advisers.

      Concerning the last sentence: considering polemics we already have so far, I may consider to campaign that we should please, please stay out. ... Including our professional or academic staff with Greek origin, since ultimately they will be found out to be controlled by Berlin . ;)

      But considering the apparent love-hate relationship with us Germans, I wouldn't necessarily object to the creation of a Greek equivalent to the KfW. Seems there is some interest in that for longer now.

      That said: What's your or was your take--as expert--concerning VY specific privatization money enhancement ideas, I understood as nitwit--privatization scenario in his " Recovery & Growth" plans?

      And, no I didn't like the German Treuhand privatization scenario in East Germany. ...

  8. Goodmorning,

    Yes ofcourse openly stating that we should allow a German to run our country. But as all politicians are apologizing and have this new honesty trend why don't they say what i am saying outloud. Why the hypocracy?

    Why not spell out the obvious that every sector in Greece which has had German influence has flourished. I myself take knowledge from higher output societies like Germany everyday and apply it locally and even further improve it.

    Take Telecommunication. OTE was bought by A German Company. Controlled bills, super efficient has allowed the introduction of more private companies in the sector. Vodaphone, Wind, Hol Forthnet. They even got into the TV business which has also force the TV companies to be more competitive.

    Take Eleutherous Venizelos Airport. Part owner is German Company. Built mainly by German Contractor. It is a gleemingly efficient, well equipped airport which has energy efficient systems and has a pile of its own solar panels. Imagine the Other German Company which is purchasing the 14 peripheral airports. How many Germans in Germany? 80 million? How would you like 20 million German tourist coming to Greece every year.

    Couple the airports with Aegean Airlines. After years of that profusive bleeding company Olympic airways was sold and re sold and final bought by Aegean we have a gleeming and proud private Greek airline company which is a part of the Lufthansa group and is quite healthy.

    Imagine German companies start building hotels in Greece. Simply put Germans see to take the unused potential in Greece. meanwhile help the greeks try to see this potential, while we masturb....

    AnonymousSeptember 23, 2015 at 7:55 PM

    Yes, why not invite the USA IRS to advise on tax evasion. Who is better than the IRS. The only aspect i would consider in having the tax authority as a seperate entity, there is a review of the tax authoriy every 5-10 years. As you do not want a seperate entity becoming more powerful than the government itself.

    ....you don't like the German Treuhand privatization scenario....." ??

    Does Greece have any choice? Meanwhile there is no action plan by any major party in Greece. I hope these first actions fall through. So one day maybe i can see a reduction in taxes which as of next week i will have another 0,6% extra tax on my salary. Why maintain these inefficient public works? I am sorry but at least 10% of all public jobs need to go. I never understood the double and triple evaluation of a public document. The guy after a document is reviewed put a stamp and his signiture after not even reading the document. What a sham. Get a real job for god sake.

    I can also mention at least 3-4 more privatizations that were successful along with another 10-15 more that need to be done. Then maybe we can breathe again.


    1. V, ok, strictly I am no expert on Treuhand, and may be a victim of rumors. ...

      Yes, privatization wasn't bad over here from the perspective of a consumer. Neither was the opening of the energy market beyond the regional monopolies. On the other hand, the scenario now demands adult consumers, that let themselves not be tricked by surface marketing schemes and check the fine print. I am glad I opted for transparency and left my former regional monopolist when matters started to look odd.

      Ok, I have badly proofread my final question concerning YV plans, but it made me wonder. This is the passage from the later document, that Klaus linked in his earlier response on matters.


      I have a very limited grasp concerning leverage, but I understand, if I only invest let's say ten percent and have banks or others contribute at a low fixed interest rate the other 90 percent, it "leverages" my gains.

      When I read this passage, and I have difficulties in finding the respective passage again in the longer earlier document YV put online, admittedly. Some passages reminded me of the German Printing Press (Deutsche Bundesdruckerei) Apax privatisation scheme. First invest and innovate and then sell. Of course the Bundesdruckerei was innovated with federal money. But yes, I am a complete nitwit on economic matters.

      Beyond that I only understood that his larger scenario only tries to guarantee that the state profits, while it is not responsible for the losses. ...

      Please excuse my ill-proofread earlier comment.

      the whole story worries me, apparently not much left on the European utopia in many ways at the moment.


  9. Deutschland, Deutschland über alles,
    Über alles in der Welt,
    Wenn es stets zu Schutz und Trutze...


    1. George Bush, Tony Blair and Gerhard Schröder have a chat at the North Sea. Suddenly Blair says: "We have a submarine, which can stay underwater for 10 days without refueling." Answers Bush: "That's nothing we can stay under water for 30 days without refueling!" Schröder looks quite embarrassed and silent. Suddenly a submarine emerges, the hatch opens and a the head of a man appears, he cries: "Heil Hitler! We need Diesel"


  10. This is good. From former Greek IMF member.


    1. Thank you for this paper. It definitely is one of the best assessments of the situation I have read so far!