Friday, December 16, 2016

Uproar About A 616 MEUR Christmas Present

According to the Ministry of Finance's State Budget Execution Report, Greece's primary surplus for the period January-November 2016 was budgeted at 3.553 MEUR and it came out at 7.449 MEUR. That's a surplus in the surplus of 2.896 MEUR, or 110%. Greece has now decided to take 616 MEUR out of that unplanned surplus in the surplus of 2.896 MEUR, or 21% thereof, for a one-time payment to recipients of low pensions.

In the world of business, this would be called a bonus. Management exceeded expectations by 110% and the board decides that management is deserving of a bonus in the amount of 21% of the excess. In the world of investment banking, management would not be satisfied with only 21%.

If the EU had been smart, it would have anticipated events and acted pro-actively instead of reacting later. That the State Budget would have a significant surplus over the planned surplus has been in the coming for months. And one does not have to be a prophet to predict that, when there are unexpected surpluses, voices will come out claiming a piece of the action. Particularly when there are battered pensioners. Particularly at Christmas time.

If the EU had been smart, it would have proposed to Greece something like the following: "Your State Budget has seen a terrific development this year (that would be the praise part). We think that a portion of this unexpected surplus should go to the most needy in your society instead of your creditors (that would have been the bonus part). We propose 25% thereof."

The way things happened, the EU has fallen into a trap laid out by PM Tsipras. He did the right thing (reward the most needy in society at Christmas time) but he did it in such a way that the EU would have to violently object to it (by not consulting them beforehand and, thereby, violating the agreements). The net result of this: it is now Tsipras who is the human politician to whom the most needy in society are more important than greedy creditors. And it is the EU who are the bad guys. Well done, EU!

Below is an article which I had written about the distribution of the primary surplus 4 years ago.


  1. Mr. Kastner,

    Here is an example of short sightedness of our leaders, because i would expect that all political parties would do the same. Maybe the new ND would do the investment which you mention in your article linked from the above link.

    Tsipras did this for the obvious reasons which are completely selfish and his parties maintenance in power. I am quite unsure if his approval ratings will budge even with this gift. But as we say in Greece "beware of Greek bearing gifts."

    Without reading what is to come or even the rumors i can without a doubt know that in the coming months of the new year we will have more pension cuts. Without a doubt and i am sure it will affect all more or less.

    In this view, to a plain ordinary pensioner, his conclusions will be you put it in my pocket and took it from the other. In actuality, you took a lot out of my pocket yesterday, gave me some back today and took it all tomorrow. In the long short term it will only further enrage the pensioners and he will lose more ground.

    Likewise maybe he is already preparing for snap elections as he expects troika will ask for more "reforms." And is preparing the groundwork for the rhetoric of... "See i got things turning around, I started to give back, and ND government is still agreeing with hardliner Schauble and troika."

    Whatever the case the responsible rhetoric would be:

    "We have a surplus on our surplus. As so the whole of the society is helped, we would like to provide a employment stimulus which creates new jobs as so x,000's of people can reenter the workforce. By this actions the government will gain more income tax and more funds for pension servicing from this new work force. This will equate to better account balances and troika will not ask for more cuts or more taxes. If this stimulus is successful and with our current growth rate we may be able to re stimulate our economy which will help by 2018 a reduction in taxes which ND is mentioning in their rhetoric."
    "All this will help our long term and reduce the latest short term pain of increased taxes and further pension reductions."

    As far as the EU and troika on this, they were sleeping indeed and if they were not sleeping they would be able to have an open discussion with Tsipras and advise him of alternative options and sway his opinion to better use the funds. Which will help easier future negotiations. Unfortunately come January we will be at another standoff and repeat the idiotic Greek debacle.


  2. What specific agreements did he violate?


    2. None, but he violated Schauble's principle, that a colonial administrator, must always inform the Crown, before executed previous agreements.

    3. Thanks for the swift reply. It`s just as i thought: nothing is being violated and the "European " reaction is just Berlin wanting to ascertain its grasp in view of the upcoming german elections. "Vati" Schauble wants an easy win and those sweet nationalist votes.

    4. Dear sir, 2:45,

      In an almost amusing twist of fate, this is evolving into a win-win. Schauble makes now Tsipras appear as a hero, who stands up in defence of the rights of the poor. Tsipras today spoke of the opposition, as "yesmen". The same "yesmen", are those who made Schauble sign the agreement on the 40% extra surplus in the first place. Not even Tsipras himself would have imagined this unexpected gift.
      So Schauble can reap his fruits in Germany, by receiving public acclaim for being a true rock and Tsipras play the champion of the poor inside Greece. Until they find the diplomatic formula to make everyone save face.

  3. What you seem to completely ignore, is that what Tsipras did, is nothing more than what Samaras previously did, because in the terms that Samaras had signed with the creditors, in case Greece would have a surplus beyond the one agreed for a year, 40% of that surplus would go for social sustenance.

    In the case of Samaras, the bonus was 300 million.

    So who's barking now? According to greek press, Moscovici told Tsipras that "there is only one country that opposes this" (guess who!). The difference is, that Samaras waited for March to give this "extra surplus", while Tsipras wants to give it now, reducing the "safety cushion" that he has planned to last him up to March. Because in March, the official Eurostat report will come out, about the primary surplus. And instead, Tsipras is practically saying "i know i will have extra suprlus in March, so i give the social bonus now".

    So this is why Tsipras went to Berlin today, where Merkel of course told him that the decisions aren't taken in Berlin (but of course).

    So, as you see, the EU has "anticipated" this event, at least since 2014, when it first happened with Samaras.

    1. Whether the EU anticipated this event or not, their reaction was not a smart move, in my opinion. The reaction would have been understandable if the primary surplus were more or less in line with plan. But if is more than TWICE the plan and if the bonus is only 21% of that excess, then the EU is only giving its critics ammunition for further criticism.

  4. Very nice analysis, Klaus. I agree with your point of view.

    Of course, it begs the question. Did Tsipras do what he did wittingly or unwittingly?

    If this move was carefully planned to gain Tsipras/Syriza precious political points in Greece, while making the EU crowd look like fools, it was a masterstroke. However, there is a big risk with this tactic since it now places the debt relief issue in some jeopardy, if such relief was really on the cards.

    If this was just an accident of bad timing and short-sighted thinking, then Tsipras may find himself on tricky ground in the EU and his wonderful gesture to the poor struggling Greek pensioners could soon be forgotten as Greece finds itself evermore isolated and ignored in the EU club.

    That said, I am still glad that he did it. Finally he shows a bit of courage to do something really beneficial for his people, who have borne the brunt of the hardships for so many years.

    1. Tsipras, had made public and known to the Eurogroup too, that he intended to divert the 40% of the extra surplus to a "Fund of Social Solidarity", since May 2016, as per standard agreement:

      Now that he sees that he is sinking in opinion polls, he preferred to ditch the fund and just give the money one off, directly. He also says that if he was to delay, then he couldn't give them anymore, as they would fall into the next year's budget.

      Just to be clear: As Tsipras repeated in the past days "what i did, was my right to do, as per the agreements". There is nothing heroic in it, this clause was agreed by the previous goverment, Tsipras simply carries on. Ironically, when the previous goverment did the same and gave 500 MEUR one off (the 300 was a typing error), SYRIZA voted against, accusing the Samaras goverment of deception and humiliating the people with breadcrumbs.


  5. Dear Greece,

    Free school meals? No more debt relief for you.

    Merry Christmas,
    The Troika

    1. Dear Troika,

      Not even the IMF believes in your debt relief. We may as well laugh at the term.

      Merry Xmas,
      Your Colony soon to declare independence.

    2. Amen colony. With God's speed.

    3. Greece's economy has always been a tale of 2 cities. A dark period lasting from December to May when Greece generates negative current account positions and then a sunnier period from June to November when Greece generates enough positive current account figures to wipe out the negative part and end up with an overall positive yearly performance.

      The so called "lenders" know this cyclical nature of Greek economic performance which makes Greece look tall at the end of the fiscal year (such as right now). So lenders typically avoid to make decisions in December (invoking holidays and the like) and always like to render decisions around March (when Greece is in its most vulnerable with only negative current account to show for) but no later than May-June. So that's the game played currently. Eventhough Tsipras wants to close the 2nd Assessment now, it looks more likely that Brussels' inaction would drag the matter to March or beyond.

      And during such delay hypocritical ND would be asking again and again and again why is not the government concludes the negotiation and capitulate to the lenders so that "the economy would start humming again". Well the answer to why the economy never hums before May is right in front of you captured in this graph and it's always the same reagrding the underlying trend.

  6. Actually the bad guys are both Brussels and ND but for an entirely different set of reasons.

    The EU's problem is quite obvious: the need of controlling Tsipras (both real and ostensible need).

    But ND's problem is a bit darker with an added twist. You see when Tripras went through the hellish and humiliating experience of having to bow down to Troika in the summer 2015 he felt betrayed. Especially by a particular class of citizens who tend to gravitate around ND. The Greeks have two composite words for such class which are hillarious and with a lot of humor: The first word is "menoumevropaioi" which losely translated means "we stay in Europe" which was the slogan of the Yes people (the equivalent of Remainders for UK). The other word is "euroligourides" which means those very hungry and with an unsatiable appetite for the euro.

    So when Tsipras eventually lost to Berlin which overturned the NO referendum to a Yes, Syriza's cold calculation became the notion that these supporters of ND had to pay the highest taxation burden via the tax collection and redistribution mechanisms. In fact so alarmed became ND with such announcement of such deliberate missalocation of tax burden to disproportionally hit typical ND voters (as the more wealthy) that ND for a year now wages a desparate campaign of trying to cause new elections in Greece for the main purpose of coming to power and immediatelly overturning the current taxation regime and replacing it with one that preserved their voter base and shifted the burden towards Syriza voters.

    So when Tsipras actually takes some of this overcollected tax revenue (primarily overcollected from ND voters) and distributes it to his voter base (those with pensions below 800 euros per month) of the not so well to do is a double affront for ND. Not only hated Tsipras has the balls to collect more from ND voters in taxes but then he gives Syriza's voter base a "bonus" with essentially ND's money. An ingenious plot indeed and Tsipras is known for being a shrewd tactician.

    So ND in the face of this double humiliation decided not to vote for the the bonus in Parliament and thus became clearly a party of special interests and not of the people.

    To me this domestic aspect of Tsipras victory (paiting ND in a corner) with the returned money is far bigger than the perceived loss of control by Brussels. And this is why Brussels (because it needs to control the next government of Greece by cashing in on favors) is coming to the aid of a totally outclassed and outmaneuvered ND.

    The monies involved are peanuts but the symbolism huge. And the whole thing very entertaining especially as ND loses again to an "amateur" (per their own propaganda)

    1. Dear compatriot,

      Tsipras, raised the hell out of every indirect tax a man could think of, as well as demolished the ultra low pensioners that were receiving EKAS. To my knowledge, indirect taxes, like VAT, are the most socially unjust taxes, which every left party is supposed to hate. So who are the "ND voters" that Tsipras took the money from? The EKAS pensioners? The rest of the pensioners, 40% of which are, by Tsakaloto's statement, below poverty line that have to deal with the same indirect taxes? According to all opinion polls, Tsipras is left with 15% right now. You think there are many pensioners left in there?

      But i forget, Tsipras took the money from those in the Lagarde list (oh no, he didn't) and took the money from the shipping magnates (oh no, he didn't do that either).

    2. Addendum:

      Dear compatriot,

      Since i like to backup with facts what i say, i will remind you who voted SYRIZA in the last elections:

      For SYRIZA, compared to ND, voted:
      - 2% more of the farmers.
      - 2% less of the self-employed
      - 9% more of the public sector employees.
      - 14% more of the private sector employees.
      - 25% more of the unemployed.
      - 21% more of the students.
      - 6% more of the housewives
      - 3% less of the pensioners.

      With the rain of indirect taxes, who are exactly the "ND voters" he took it from and who are the "SYRIZA voters" he gives them to? If he REALLY wanted to give it to his voters, he should give it to unemployed and students. But, the pensioners are a LOT and he had gained the vote of roughly 50% of them. Which is more than 1 million. The unemployed and students, traditionally vote left, so they won't leave so easily to go to ND.

      On the contrary, the pensioners, who he attracted by warning them that ND would axe their pensions, while he would give them 13th pension, are more likely to jump ship and abbandon SYRIZA for ND. So he gave the money to the pensioners...

      I don't know if it's as noble as your version or more macchiavelli-like, but that's what i read in this.

    3. Anonymous @ 12:39:

      I think your list proves my point. Let's examine it a bit further.

      For SYRIZA, compared to ND, voted:
      - 2% more of the farmers - Farmers of northern Greece tend to be ND. Farmers of southern Greece gravitate more to the left. A 2% more is not a significant difference to make a dent.
      - 2% less of the self-employed. Self employed are traditionally ND voters and tend to basically claim no taxable income due to business cost deductions. This is where most tax avoidance occurs.
      - 9% more of the public sector employees. You could say that Syriza is the party of the public sector employees that's correct. But public employees don't generate significant tax revenue becuase their salaries are peanuts with the exception of senior management which tends to vote ND.
      - 14% more of the private sector employees. You could safely assume that the workers of private sector companies are Syriza voters. But again these people hardly make anything worth taxing since anything below 9000 euros income per year is not taxed at all.
      - 25% more of the unemployed. Sure you would expect the unemployed to vote Syriza but unemployed generate no tax.
      - 21% more of the students. Same here. Those who have nothing or no taxable income would propably vote Syriza.
      - 6% more of the housewives. No conclusions here except that Tsipras' youthful looks might appeal to housewives - desperate or not.
      - 3% less of the pensioners. Pensioners as a whole are conservative therefore ND materail. However, pensioners w/incomes below 800 euros per month are Syriza folk and pay no taxes on such income anyway (remember the 9000 euro threshold per year).

      So if you take a step back and look at your list again the Syriza voters are normally not tax generators due to low incomes. Therefore we must and should assume that 90%+ of Greek taxes are paid by folk which belong to the wealthier and private classes and such voters tend to be ND type voters.

    4. I don't know if you read anything about the indirect taxes or EKAS or whether i should seriously take your assumptions that 90% of tax payers are ND voters, however this leaves your theory with a big gap. Then why is Tsipras at 15% of the vote in all opinion polls?

      Anyway, i understand the figured differently than you, apparently.

    5. Addendum:

      I would also like to inform you, that the 9000 tax free threshold, exists only for pensioners and public sector employees.

      Now read again what you wrote, and try to explain :
      1) Why he gives the money to pensioners, 2) Are the EKAS pensioners rich? , 3) Of the 15% that is now left to Tsipras, how many do you think are pensioners? Seriously...

      I won't comment anything else, because i was trying to be serious.

    6. Anonymous at 5:21:

      So, let's take your questions one at a time:

      1. Why is Syriza only scoring 15%? Well, the polls that you see are primarily ordered by ND and naturally there is a hardening of ND preferences among ND voters. What these polls show you is that those already ND have decided to vote ND during the next election. But 20% of all voters remain undecided and as we have seen in previous Greek elections including the referendum apparently some people refuse to remove their undeclared/undecided status until the last moment. Maybe these people are angry and purposely mislead the pollsters. I don't know. What I know with certainty is that Greek polls are notoriously off the mark because of large undecided segments. My own opinion ( and I don't have scientic evidence to share with you on this) is that the distance between ND and Syriza is in the 4-6% range with ND ahead a margin easily overcome when Syriza begins to score better economic numbers in the future. ND's current pre-occupation with elections here and now is based on the fact that Syriza is now at its lowest (worst poll position) but soon sentiment will change once debt reduction talks are well under way. So Syriza has plenty of time to improve its % by 2019. And not to belabor the point but I am not a Syriza supporter but a true concervative who dislikes ND and their wretched record of past performance.

      2.) Re: EKAS I don't know much about it but my impression is that EKAS has to do with emergency type pensions which are temporary in nature (due to the emergency status once the emergency is gone so is this type of funding) and that the government has been ordered by Troika to eliminate such pensions as part of the restructuring problem. So I am not sure you can blame Tsipras about EKAS because it is precisely this type of program that makes the lenders fume and wish it gone.

    7. Anonymous at 5:38:

      You ask: Given the 9000 euro annual threshold exemption from taxation why then give money to the pensioners?

      My best answer in case you didn't get it from my original comment is that people with pensions of 800 euros a month are automatically under the 9000 threshold and therefore considered low income and consequently Syriza type voters. If a pensioner makes let's say 3000 euros a month obviously they have to pay taxes and most likely such voter is an ND type voter (fat pensions = ND, skinny pensions = Syriza). So by Tsipras returning to the skinny pesioners money (for lack of a better word) he actually as accurately as he can is benefitting his own voter base. The pensioners making higher than 1000 euros a month you could reasonably assume that is difficult to segregate as to who belongs to ND and who is not.

  7. I have been telling you this for ages. The euro is a disaster and Greece will not see any foreign investement of any consequence under the euro regime.

    "Europe is in a “disastrous” state and Germany should quit the euro zone to enable the E.U. to survive, one of Germany’s best-known management consultants and government advisors, Roland Berger, told Handelsblatt.

    “The cause is primarily the euro. I think this crisis can only be solved through radical steps and not through continued muddling through,” said the 79-year-year old founder of the company that bears his name, one of the world’s foremost strategy consultancies."

  8. This a very revealing story about the American College in Athens, an institution whose aim was to promote meritocracy and instead over the years became "Hellinized" and turned into a playground for the elite which ended up ruining Greece.

  9. I strongly believe that Mr. Tsipras' objective is not to remain in power, but to maintain SYRIZA's relevance in the Greek politics after the next elections. Given that SYRIZA will be defeated in the next elections (whenever they may happen), Mr. Tsipras can only hope for a percentage higher than 20% which will prevent his party's disintegration.

    In 2015 SYRIZA was elected because of the support of 6 groups of voters: 1) owners of property (buildings and land) for the abolition of the ENFIA tax, 2) indebted to banks businessmen for the favorable arrangement of business loans, 3) freelancers for tax issues, 4) pensioners to bring back the Christmas pension-bonus, 5) young voters for the excitement of anti-establishment stance, and 6) civil servants to avoid being fired.

    Of all these groups' wishes, only the civil servants’ wish has been satisfied. Therefore it is unlikely for SYRIZA to be voted massively by the other five groups. Hence, Mr. Tsipras can only hope to be voted by civil servants, who are afraid of the existence of a hidden Mitsotakis agenda to lay-off many of them.

    Apparently, Mr. Tsipras believes that this conflict with the creditors will gain him some popularity among the pensioners who have suffered severe cuts during his administration.
    That's why I believe that he has made up this conflict: to show to the pensioners that he is fighting for them. Moreover, to bring the ND and other opposition parties in a difficult position either to engage with populism or to displease an important group of voters.

    It remains to be seen how successful this new trick by Mr. Tsipras will be.

  10. Here is another example of empty rhetoric usually found in the Greek sterile politics.

    The hypocrites of the opposition always complain for lack of foreign direct investment in Greece. Typically their voices get the loudest when actual numbers show dramatic improvement lest some low IQ voters actually are lead to believe that it was the strong voice of the opposition that caused the actual direct investment to increase.

    In other words a dramatic theatrical performance because the conditioning of the voters demands it. Imagine a Greek minister actually joining these sterile TV panels of endless discusions about nonsense and actually presenting graphs and real figures. My gut reaction is that at least half of the panel and the audience would faint because it would expose the lies on which they professionally depend for their own existence.

    So, what Greek politician has the courage and stamina to begin cleaning the Augean stables? Probably none; why destroy the misinformation framework which took decades to build and which party apparatus needs for self-justification?

  11. Here is the problem I have with Greek politics de jour. They tend to be dishonest and full of lies. Take the case of foreign direct investment in Greece as an example.

    Let's look as an example at the Austrian FDI in honor of our esteemed blogger Klaus Kastner:

    Forgive me for any indiscretion but when you have an FDI that oscillates so widely between negative and positive positions you need to use a grain of salt when you offer to Greece advice on FDI performace albeit the fact that such well meaning advice comes under the best of the protestant reformist traditions known to mankind.

    And now let's look at the claim that a certain rephensible head of German-Greek Chamber of Commerce laid recently that somehow Greece is losing severely to Serbia and Romania due to the existence of special trade zones which eat Greek lunch.

    Where exactly the biased head of the German-Greek chamber of commerce gets his figures from? Because Serbia looks unimpressive:

    and so does Romania:

    and as far as Bulgaria is concerned (where most Greek businesses flee for tax safe harbor) looks even worse:

    Of all this cases Greece looks the most dependable case of all. It follows a solid and steady pattern which is dependable as well as consistent with its historical average (actually above its historical average). And talking about the FDI historical average of Greece wasn't this formed under the ND and PASOK governments? So how is it possible for ND to claim that they would unlock FDI for Greece when the historical record formed under their own direct administrations says otherwise? What sort of lie is this and how naive is the Greek voter to believe such false manifestations that somehow ND knows better about how to attract new FDI?

    So, enough with the political lies of expedience and if we really want to help Greece let's do it by the numbers vs. some emotionally inflamed nonsense that leaves the public dazed and bewildered.

    Thank you for your attention to this matter.

    1. Regarding FDI, it does get a bit more complicated than your black-and-white description. Why have I adamantly supported foreign investment in Greece for years? The primary reason: transfer of know-how. The Greek productive sector simply does not have the know-how to grow fast. And, secondly, money. Greece needs capital from abroad and the more capital comes in form of investment than debt, the better.

      Austria, on the other hand, has an extremely efficient productive sector. So much so, that the Austrian productive sector has made enormous foreign investments on its own in Eastern Europe. Also, Austrian banks invested heavily all over Eastern Europe. From these standpoints, Austria is almost the reverse of Greece.

    2. o.k. so Austria is good and Greece bad. The problem is that as good as Austria seems to think of itself to be we do not want to turn Greece into Austria. How do you say "back off" in Austrian?

    3. Kleingut:

      I am sorry but I don't see any evidence of technology transfer from this attached graph. All I see is a domineering Germany collecting the best Greek assets such as telecommunications at preditory pricing and thus creating a disincentive for others in entering the Greek market since all the bon fillets are owned by Germans already. Why would an American company with superior technology ever want to enter Greece where Gernany holds near monopoly power? So I don't buy the technology transfer argument. The minute Germans become dominant in any sector of the Greek economy they force upon you some Siemens technology which is not the best in the world by any strech. When a German monopoly power player enters Greece it brings with it a whole team of German suppliers which make Greek trade balances worse and have little beneficial residual in the Greek economy as well as increase dependence on German imports (of which God knows we can do without)

    4. Oh yes, the OTE investment was so good that Deutsche Telekom had to write down the value of the asset a few years ago. Put differently, they highly overpaid.

      You don't immediately have to go to high-tech when I talk about know-how transfer. Perhaps how to produce quality toothpaste would be a start so that I don't have to buy toothpaste made in Brazil anymore. Perhaps how to refine agricultural products to finished products would be another start. And so. Start with the basics because Greece doesn't have a lot of basics.

      Don't present Greece such a poor victim of everyone else, particularly Germany. If Greece wants to live without foreign investment, perfectly ok. Just become accustomed to a low living standard.

    5. It's not an issue of Austria being good and Greece being bad. That reaction only reflects the widespread (but really not justified) inferiority/insecurity feelings Greeks display relative to foreigners.

      Regarding the 2 countries, the difference is: Austria is one of the most developed economies and Greece is an underdeveloped economy. Plain and simple.

    6. Kleingut:

      I like this sound of music coming straight from the Austrian Alps about Austrian superiority. Are you sure that is Greek inferiority and not the unjustifiable boasting of some of our lesser European cousins that is not without merit?

      Have you fogotten that among the Greek flaws, an unyielding admiration of statism is not a Greek characteristic? For the Greeks the state exists to serve them and not for the Greeks to serve the state.

      Your boasting about Austrian production produces large yawning gaps in my jaw. Who cares if Austria is more productive or not? People don't benefit from state performance; they benefit from their own ingenuity. That's why these calls of how to improve Greece are falling on deaf ears. Your priorities and our priorites are diffent and you have to take this into account. Otherwise you are bulding sand castles.

      Please buy me a ticket for the Vienna Opera house because this Austrian superiority explosion is bringing tears in my eyes and that's a show I don't want to miss.

    7. Good thing you pointed it out. The Austrian state is very inefficient in terms of size and structure. That is more than made up for by a very efficient private sector and private enterprise. Still, the point of this blog is not to talk about Austria and certainly not to talk about any Austrian superiority feelings.

    8. Kleingut:

      I don't get your comment that toothpaste bought in Greece is made in Brazil. The Colgate toothpaste I buy at Vassilopoulos supermarket says in fine print that the production is made in Poland.

      And why do you assume that producing Colgate toothpaste in Greece makes any sense? Why not in Turkey?

  12. It would be nice to know
    1.which actual industrial direct investments you are talking about for technology knowhow transfer. Specific examples please, not generalities and vague wishful thinking and possibilites for the brave new future free economic zones would bring to Greece.
    2.what would the median paid be in these imaginary investments? Cause if you're offering €100 montly jobs...

    Among other things Greece is in the middle income trap group you know, it is far from large markets (at least relatively), there are much cheaper countries next to it, etc.

    In essence foreign "investors" are mostly interested, if interested at all, in a firesale of the Greek public family silver and own-country exports to Greece through market "liberalisation" like dumping Northern European "fresh" milk to Greece and crashing Greek relevant dairy production industry by redefining "fresh milk" through the extention of the relevant prescribed time periods after production.

  13. P.S. And other changes in what constitutes "fresh milk".

    1. Forget it. No point in arguing with you. Just look to your neighbors in the North (FYROM). They are making a terrific effort to attract foreign investment. They don't talk like you. The speak the language of foreign investors and not the language of conceited amateurs. Forgive me for bowing out of this conversation.

    2. Below is my t-shirt, by the way.

    3. o.k. we get it. Greeks are conceited amateurs and Austrians sophisticated Harvard graduates. I wonder who really has the inferiority complex!

    4. Kleingut at 9:15:

      Where do you see the tremendous effort?


  14. Terrific indeed .

  15. Btw you do know that e.g. FYROM has more or less the same unemployment rate with Greece absent membership in the €Z, absent such an existential macroeconomic crisis etc, do you?

  16. Boys! Boys! Boys! Stop throwing stones at each other and calm down a little.

    Don't you think it's a bit naive to expect the Greeks to be exactly like Austrians.

    Read the attached article for my explanation:

  17. Peter Smith:

    I find any articles addressing a class of citizens such as the Greeks on a genetic basis (in other words that things are happening to the Greeks because they are Greek) as bordering racism.

    In a free trade zone such as the EU we are told that each participant country seeks prosperity by trading with other participants. So instead of you saying how ridiculous is to compare Greeks to Austrians and vice versa let's try to examine the nature of the Greek-Austrian trade by numbers.

    Accrding to this detailed table of Greek exports and imports by country ("kata chores" in Greek) we have the following figures for the 9 months ending in September:

    Greece exported to Austria 154 Million euros of merchandise showing a 5.5% increase over 2015 figures.

    During the same period Austria sold Greece 336 Million euros of merchandise showing an 11% increase over the same period for 2015.


    The conclusion is that Austria outsells Greece in excess of a 2:1 ratio and the ovious question is why? What sort of Austrian goods Greece needs or ever needed in its history? So here we have an example of another preditory country like Germany (in fact arrogant Austrians call themselves the "better Germany") which uses this unholy construct called the EU to take advantage of Greece. The notion of course that if Austria and Greece did not trade they might go to war with each other (which is the whole basis of the european free trade zone) is absurd.

    Normally when you ask Austrians and Germans: why don't you buy more from Greece in an effort to assist the Greek economy instead of creating this permanent import dependence for Greece which is the cause of collapse for any consumption based economy, the insolent idiots would reply that "why don't you make products we want to buy?" which is a total BS answer.

    And we know that this is a BS answer because Greece is running now for 3 years in a row a trade surplus with the most sophisticated country in the world, namely the United States of America, as the numbers clearly show below:

    So fair play to Greece and fair play to America which accepts conditions of advantage for Greek trade as a means of supporting an ally and a friend.

    So instead of asking the rhetorical question of when the Greeks would behave like Austrians(with the correct answer being never) you should be asking what is the purpose for Greece to get into these abusive trade relationships with EU member states which instead of promoting Greek well being they seek to cement years of dependence for Greeks with trade junkie countries with a catastrophic impact to the Greek economy.

    1. Anon:
      I understand the economic theory well enough and, of course, the facts tell their own story which we cannot deny.

      In essence, in the long run, the construct of the Eurozone will just never benefit Greece. That is also a fact.

      When I say Greeks will be Greeks, you completely miss the point. It's not about genetics or racism,it's about history, culture and the entire social system. And I am not putting the Greeks down either.

      As a matter of fact, I have supported the Greeks 100% in their struggle to make a place for themselves in Europe. I like their culture and the way that they do things. They should not be forced to change just to be able to fit into the system. The system is at fault. It should be able to accommodate the people/nations within it.

      And that's the problem - we have a dysfunctional supranational economic system in Europe that cannot be fixed, it seems.

      And while the band plays on, the ship is slowly sinking!

    2. @Anonymous at 5.26 pm
      Your comparing the US and the UK as export markets misses reality. There isn't a government official in the US or in a EU country who determines "we will be fair to Greece and buy Greek products". Export/import decisions are taken by the multitude of exporters/importers in every country.

      I have always argued that one major reason why Greece doesn't export a lot is that there is not much of a structured approach to promoting exports, not much of an export lobby (because the import lobby is such a good franchise). The Greek government organization for promoting exports is very large but very inefficient, if not incompetent (so a Greece trade expert told me). And Greece hardly has any representation in key foreign export markets.

      The result is that many Greek exports simply "follow personal relations". You have Greek Americans in the US who like feta cheese and try to sell it to Americans - and boom, feta cheese exports to the US explode. You have a large Greek community in Munich - and boom, the Greek Viktualienmarkt is full of Greek products.

      A structured approach to promoting exports consist of a domestic effort and a foreign effort. The foreign effort is that one has trade representations in all major foreign embassies. Austria, for example, has over 100 such trade offices world-wide. Their job is to seek out opportunities for Austrian products in these markets and to promote them.

      The domestic effort would require a lean and mean marketing organization but I don't think Greece is anywhere near having that. So special interest will continue to determine that Greece, producer of the finest olive oil, will continue to export such oil in bulk at cheap prices to Italy so that Italy can turn it into shelf-ready products (which Greek consumers may then even import from Germany...).

    3. SmithPeter999:

      o.k. I can hearyou clearer now. Sorry for the misunderstanding.

    4. Kleingut:

      I am ok with the concept of better promotion. No argument there. So if Austria has such a developed product promotion system why don't you offer your experts for a short vacation to help their Greek counterparts.

      If Austria wants to help then why don't you put in the sell order for Greek olive oil and then ask the Greek producers to fill it. If you already have the customer base and the correct tactics then let's have an agreement that for every Greek product you sell through your network of contacts you get a 10% commission.

    5. This is where your idea about how the business world works fails. It is NOT the consumers who drive the products on the shelves. Instead, it is the purchasing agents of the large chains. If they list you, you've got it made. If not, you're gone. Obviously, the consumer decides eventually but first you've got to convince the in-between and that requires effort. Austria requires food chains to always list the foreign country of origin. There is produce from all corners of the world (mostly Europe but also other continents) except from Greece and, personally, I think Greek produce is the best.

    6. If Greek produce is the best (and I have to agree that is quite good) then how come is not displayed in all Austrian supermarkets as the first choice?

      You mean to tell me that Austrians would step all over themselves to get the fancy car so that their neighbors think of them as of higher status and when it comes to feeding themselves which of outmost importance to one's health Austrians would opt for lesser product because some evil in-between made the choice for them?

      When would Austrians get their priorities straight and turn into the Greek Mediterranean diet with force?

    7. Kleingut:

      But here we have a real case of an Austrian residing in Mani and he (Blauel) can't even sell to Austria in sufficient numbers.

      We all agree that Greek olive oil is the best and here we have an Austrian trying to sell it while he displays full knowledge of the mechanics involved. So why Blauel Greek olive oil is not a household name in Austria? Because of the Greek bureaucracy and the usual nonsense? Of course not. So what is the real problem with the Austrian consumer? Perhaps biased against the Greeks who you consider inferior when all available indicators make the Greeks far superior to begin with?

    8. I have no idea what Blauel's problem is. Perhaps "Global Greece" can be of help:

  18. First, although the euro—the currency that Germany shares with 18 other countries—may (or may not) be at the right level for all 19 euro-zone countries as a group, it is too weak (given German wages and production costs) to be consistent with balanced German trade. In July 2014, the IMF estimated that Germany’s inflation-adjusted exchange rate was undervalued by 5-15 percent. Since then, the euro has fallen by an additional 20 percent relative to the dollar. The comparatively weak euro is an underappreciated benefit to Germany of its participation in the currency union. If Germany were still using the deutschemark, presumably the DM would be much stronger than the euro is today, reducing the cost advantage of German exports substantially.

    Second, the German trade surplus is further increased by policies (tight fiscal policies, for example) that suppress the country’s domestic spending, including spending on imports.In a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem. Several other members of the euro zone are in deep recession, with high unemployment and with no “fiscal space” (meaning that their fiscal situations don’t allow them to raise spending or cut taxes as a way of stimulating domestic demand). Despite signs of recovery in the United States, growth is also generally slow outside the euro zone. The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits.

    Persistent imbalances within the euro zone are also unhealthy, as they lead to financial imbalances as well as to unbalanced growth. Ideally, declines in wages in other euro-zone countries, relative to German wages, would reduce relative production costs and increase competitiveness. And progress has been made on that front. But with euro-zone inflation well under the European Central Bank’s target of “below but close to 2 percent,” achieving the necessary reduction in relative costs would probably require sustained deflation in nominal wages outside Germany—likely a long and painful process involving extended high unemployment.

    Systems of fixed exchange rates, like the euro union or the gold standard, have historically suffered from the fact that countries with balance of payments deficits come under severe pressure to adjust, while countries with surpluses face no corresponding pressure. The gold standard of the 1920s was brought down by the failure of surplus countries to participate equally in the adjustment process. As the IMF also recommended in its July 2014 report, Germany could help shorten the period of adjustment in the euro zone and support economic recovery by taking steps to reduce its trade surplus, even as other euro-area countries continue to reduce their deficits.

  19. Setting aside the fact that Europe never held its end of the bargain towards Greece, here are a few tools in Berlin's disposal in curing the persistent German Problem Europe has since 1871:

    1. Investment in public infrastructure. Studies show that the quality of Germany’s infrastructure—roads, bridges, airports—is declining, and that investment in improving the infrastructure would increase Germany’s growth potential. Meanwhile, Germany can borrow for ten years at less than one-fifth of one percentage point, which, inflation-adjusted, corresponds to a negative real rate of interest. Infrastructure investment would reduce Germany’s surplus by increasing domestic income and spending, while also raising employment and wages.

    2. Raising the wages of German workers. German workers deserve a substantial raise, and the cooperation of the government, employers, and unions could give them one. Higher German wages would both speed the adjustment of relative production costs and increase domestic income and consumption. Both would tend to reduce the trade surplus.

    3. Germany could increase domestic spending through targeted reforms, including for example increased tax incentives for private domestic investment; the removal of barriers to new housing construction; reforms in the retail and services sectors; and a review of financial regulations that may bias German banks to invest abroad rather than at home.

    Seeking a better balance of trade should not prevent Germany from supporting the European Central Bank’s efforts to hit its inflation target, for example, through its recently begun quantitative easing program. It’s true that easier monetary policy will weaken the euro, which by itself would tend to increase rather than reduce Germany’s trade surplus. But more accommodative monetary policy has two offsetting advantages: First, higher inflation throughout the euro zone makes the adjustment in relative wages needed to restore competitiveness easier to achieve, since the adjustment can occur through slower growth rather than actual declines in nominal wages; and, second, supportive monetary policies should increase economic activity throughout the euro zone, including in Germany.

  20. Here is the verdict on the EU:

    It is unreasonable to talk of Europe as if it were one entity. It is not, in spite of the existence of the European Union. Europe consists of a series of sovereign and contentious nation-states. The European Union is a schizophrenic entity. It has created a free-trade zone and a European currency, which some members of the free-trade one use and others do not. It has failed to create a political constitution however, leaving individual nations sovereign – and there never has produced a united defense or foreign policy. Underneath the surface of the EU, the old European nationalisms continue to assert themselves.

    The European debt crisis, which began in late 2009, has exposed the ineffectiveness of the European Union’s governing institutions. Germany uses the EU to secure markets for its exports and when Germany does not get what it wants, it reacts because of its own national interests and with little regard for the economies of the countries on which its export economy is dependent. In 2015, there was some talk of Greece leaving the European Union because it could not afford to pay back its debt. That crisis has been averted for now but continues to loom on the horizon, to say nothing of other states like Italy with worrying economic numbers. Refugees from the Syrian civil war have completely overwhelmed the European Union not because the EU lacks resources to deal with the issue but because the EU’s governing institutions have not come up with a way to deal with the crisis that is acceptable to all members. The Czech Republic, Poland, Slovakia, Hungary and Latvia have all fought attempts by the EU and Germany to force refugee quotas on member states. Freedom of movement even disappeared, with fences being built and border controls reinstated on the Austria, Hungarian, Slovakian borders just to name a few.

  21. Nice try with your analogy Klaus, but not quite sound.
    It is not normal for management to grant themselves bonuses and take them from the till, and certainly not when bylaws require that it should be agreed with BoD. How useful it is for Tsipras domestically is to be seen, internationally he has again proved himself unreliable, it may influence ECB's decision on the inclusion of Greece in the QE program.

    1. Some BOD. You never ask idiots to approve reasonable actions.

  22. @ Anonymous December 21 at 2:15 PM.
    For once clear talk. Greece cannot export because the world's consumers are prejudiced and inferior.
    That's the way. Damn the passengers and freight, we run the worlds best railway without, and save the marketing.