Thursday, March 23, 2017

Dijsselbloem's Dutch Flippancy

I joined a large American bank as a trainee back in 1972. After having gone for over a year through various training programs with fellow MBAs, I was sent into the field where business development was the job description. My first boss was a Dutchman. An unforgettable man. Simply Dutch. The ideal boss to take one down from the academic heights of MBA training programs to the rough field of selling.

His Dutch humor was great for those who could take it and terrible for those who were overly sensitive. The former laughed about the latter for being overly sensitive. The latter asked whether being sensitive wasn't part of responsible conduct.

MEP Ernest Urtasun (Spain): But you apologize for saying, or for implicitly saying, that the South has spent the money on women and alcohol in the last years? Would you apologize for that?

Jeroen Dijsselbloem (Dutch President of Eurogroup): No, certainly not!

My Dutch boss would have fired a guy who gave such a stupid response. And, frankly, I, too, thought - after listening to that exchange - that Dijsselbloem ought to tender his resignation the very next day. Absolutely irresponsible his insinuation! Some, like Nick Malkoutzis, took it with sarcasm by tweeting: "Dijsselbloem under fire for claiming Southern Eurozone spent money on ‘alcohol & women.’ The rest we just wasted."

At the same time, my Dutch boss might have said: "Wait a minute! Something is wrong, here. A Dutchman would never give such a stupid response. Let's look at the source!"

So I looked up the source. It was an interview with the FAZ where Dijsselbloem talked about solidarity and emphasized his well-known position that solidarity must be a two-way street if it's going to work. And then came the crucial sentence: „Ich kann nicht mein ganzes Geld für Schnaps und Frauen ausgeben und anschließend Sie um Ihre Unterstützung bitten" ("I cannot spent my whole money on liquor and women and subsequently ask you for help!"). He then added that this principle was valid in all situations, on a personal level, on a local or national level or on a European level, for that matter.

My Dutch boss might have made the same comment. Most of us would have understood what he meant and some of us might even have smiled at his directness. Those who felt completely insulted by the comment would sooner or later have discovered that they worked for the wrong bank.

The only difference between my Durch boss and the Dutch Dijsselbloem is that whatever happened between my Dutch boss and the rest of us was a private affair whereas Dijsselbloem spoke for the public record.

When speaking for the public record, a senior politician must know that being sensitive is a pre-condition for responsible action.

And there is another thing my Dutch boss might have said to Dijsselbloem: "I am embarrassed that you as a Dutch would fall for a trap which some Spanish politician laid out for you!"


  1. I see no problem with such statements.

    The statement I care about is from Poul Tomsen of the IMF who said during a recent student presentation that the Greek GDP will not recover for 20 years.

    Which automatically raises the point of why the hell Greece listening to Troika to begin with? So staying in the eurozone we will recover in 20 years and outside the eurozone in 5? Are these people(advisers to Greece) crazy or what?

    1. @ AnonymousMarch 23, 2017 at 11:36 PM:
      1. Did Mr. Tomsen explain why he thinks it takes two decades before Greece will regain her pre-crisis GDP?
      2. What do you think Greece (or better Greeks) can do to get there earlier?


    2. Urs:

      I think the answer to your 2nd question ought to be obvious: get Greece out of austerity mode ASAP and begin to invest in growth minus the self-consuming politics of the eurozone. When our ministers spend more than half of their time speaking and negotiating with Troika accountants rather than being out in the field directing/implementing new projects then you know you have a problem. So, in short your answer is: less eurozone more Greece.

    3. Urs:

      If you follow carefully what Tomsen is saying it would appear that the Europeans are in for a rough treatment by the IMF once the final few issues are ironed out with Greece:

      In other words Schauble will be forced into debt relief at precisely the time when he does not want to.


    Main Investing Countries 2014, in %
    United States of America 33.5
    Canada 17.6
    Luxembourg 13.8
    Netherlands 8.0
    Italy 5.6
    Germany 5.5
    Austria 4.1
    Main Invested Sectors 2014, in %
    Real estate 30.6
    Financial intermediation 21.4
    Post and telecommunications 14.3
    Source: Bank of Greece - 2016.

    Form of Company Preferred By Foreign InvestorsConsult Invest in Greece website. Form of Establishment Preferred By Foreign InvestorsConsult Enterprise Greece website. Main Foreign CompaniesCoca Cola Hellas Bottling, Philip Morris Group (Papastratos), Vodafone, Carrefour, Amstel-Heineken (Athenian Brewery), Beiersdorf.

    1. So it would appear that in 2015 more than 50% of the FDI in Greece is contributed by North America (US and Canada) and by far the area most invested in is in real estate. There goes the myth that FDI requires political stability because I know 2015 to be the most turbulant year in recent memory.

      Btw, could anyone explain the Luxemburg participation in Greek FDI at 3 times higher than germany? What is this all about?

    2. And here is the part I don't understand. Ostensibly the above figures from Santander are for the year 2014 which according to the Bank of Greece saw a total FDI investment of 17.75 Beuros. The same source (BOG) reports the total FDI in Greece reaching 21.5 Beuros. You can see the numbers below by clicking into the first table hyperlink "Direct Investment in Greece by country of origin":

      So how is it possible in the year of Samaras "success story" 2014 the FDI to be 17.75 and the the next year when we had the total failure by Syriza in 2015 the FDI to be even greater?

      My own opinion is that what we are told about FDI and political predictability is a bunch of BS. The truth is that investors move when there is an indication of a bargain (risk or no risk). In fact investors in some peculiar way seek riskier situations due to the higher returns they entail. And between us girlfriends there is zero political risk in Greece when you know that germany governs it anyway. Who cares if Syriza or Nea Tromokratia appear to govern Greece when in reality Berlin is calling all the shots?

    3. @ PhoevosMarch 24, 2017 at 4:06 PM

      According to this source 2015 may not be a typical year for FDI in Greece.

      Luxemburg is the centre of the continental fund industry. I guess a number of REITs and other investment funds put some money into Greece infrastructure and real estate.


    4. Urs:

      This is the problem I have the numbers:

      . They stop at year 2015 and go no further.

      . They don't match up with the BOG numbers for the same period. According to the BOG table Luxemburg is by far the largest FDI contributor in Greece, larger than Germany. You then have countries like the Netherlands, Cyprus (if you ignore Cyprus' negative FDI after 2012), Switzerland and USA with very respectable numbers. As an example the cumulative numbers for Swiss FDI for the period 2000-2015 add up to more than 9 Billion euros. So something is wrong with the Invest in Greece numbers; they seem too low and I am not sure how to go about reconciling the two sources.

    5. Perhaps this helps to clarify a bit.

      Careful not to confuse the figures for annual inflow with total stock of FDI. The 2-digit billion EUR figure is stock. The annual flow figures were in the 1-2 BEUR range between 2013-15. There IS a significant difference regarding annual flows between Santander and BoG and in case of doubt I would opt for BoG.

      Here is the link for the BoG's Financial Account summary: The first section ("Direct Investment") is at issue here. Follow the link titled "Non-residents' direct investment in Greece...". The annual flow was a little over 2 BEUR in 2013 and 2014 and a little over 1 BEUR in 2015. It shows exactly in which sectors the investments were made.

      Secondly, I think the bank recap transactions have influenced the FDI numbers quite a bit.

      Finally, the BoG's numbers reflect actual cash flow. If, say, Lamda strikes a deal for Ellenikon in 2013 but no cash flows until 2020, the FDI won't get recorded until 2020.

    6. KK:

      o.k. I see what you are saying. So in this case we could expect FDI impacts from the following projects during the coming years:

      1.There should be an FDI increase due to TAP gas pipeline currently constructed.

      2. FDI increase due to Fraport.

      3. FDI increase due to the COSCO works in the Piraeus harbor.

      4. FDI increase due to completion of motor highways (primarily financed through EU transfers) and similar infrastructure projects.

      5. FDI increase due to large real estate projects relating to tourism hotel projects underway.

      6. Potential FDI increase as banks sell their red loan portfolios to outside foreign specialists who buy such loans in bulk and at considerable discounts.And this is a case where FDI clashes in my mind with meaninful investment. We are told that all FDI is good but when a country converts part of its real estate assets under a huge loss in exchange for new infusion of cash then perhaps FDI is not the panacea for growth we are looking for.

      7. then we have the case of small Greek startups like the taxi app recently sold to Mercedes for 40 Mil. or so but in this case the rechnology transfer was in the opposite direction, meaning from a Greek company to a German conglomerate.

      8. A potential FDI increase due to the Thessaloniki port tender.

      9. Potential FDI increase from the Lamda project in Hellenikon aiport site.

      10. Potential FDI increase from sale of DEH (national electricty provider) network units.

      Anything else we forgot?

    7. And in case the readers are interested to hear of two FDI contributors in the greek economy please see below:


    8. Anything else you forgot? Well, there once was this idea of a formula 1 racing track but I hope reason set in and they forgot this idea which Niki Lauda called "absolutely crazy".

      To me, Cosco is the absolute prototype of a desireable foreign investment. The investment per se adds a lot of value to the Piraeus harbor and, before long, Piraeus is going to be THE entry point towards S/E Europe. It also has a lot of collateral benefits: train connections will be improved; multinationals are setting up shop to manage Piraeus as a gateway to Europe (HP, etc.). I once read somewhere that, by 2018, the direct and indirect consequences of Cosco could add up to 2% to GDP. Cosco is happy, Greece should be happy --- so what else do you want???

    9. Yes I like Cosco too but as we all know the chinese economy is slowing down (or better yet converting into a domestic consumption model vs. pure exporter) and as such there is no great appetite for large Chinese investments overseas. Or perhaps better to say that the rate of Chinese fund absorption overseas has slowed down. And since stock price is a forward value indicator please note that Cosco has lost 50% of its stock price value from 2015 to today:


      I am surprised that Cosco is not bidding for Thessaloniki. Anyway, one of our balconies looks out over the Thessaloniki bay/harbor. For years, one of my economic indicators has been to count the ships waiting for loading/unloading. There were times when there were never more than 2-3. In the last year, I have counted up to 10 on more than one occasion.

      Still, this is moot. A location like Thessaloniki should have harbor activity like a small HongKong. I have seen pictures of 100 years ago when that harbor was bustling like a small HongKong. Let's hope that whoever gets Thessaloniki will realize the potential which that location holds!

    11. It looks like the German consortium with the PAOK football club owner will get it.

      Japanese Mitsui might sue and might spoil the deal.

    12. KK:

      One observation about Thessaloniki if I might. I was there in the middle of January on occassion of a family affair and had not seen the city for a long time. I always liked Thessaloniki far more than Athens. It has some elegance and sophistication that no other Greek city possesses.

      So I was driving a rental car from Athens because I was transporting some family heirlooms for my mother's sister who lives in Thessaloniki and I couldn't use air or train transport due to the size of the items I was carrying (silverware sets which belonged to my deceased mother and which I wanted her sister to have in her memory).

      My first observation as one approaches Thessaloniki from the south (Athens) by car is the complete absence of gas stations along the highway route. Even after getting to the point where your apartment is and following the sea promenade by the harbor I had to pass the White Tower get to the point where the German Consulate is (close to the Macedonia Hotel which is owned by the same guy who is bidding on the harbor) and then turn into a parallel street (one directional and leading back to the White Tower) where finally I found a row of gas stations very close to my relative's home while running on fumes.

      My point is that is very inconvenient for out of towners to know where to fuel eventhough I am sure the locals know precisely where to go.

      My other observation is the amount and number of toll fees that had to be paid along the way. My estimate is that it cost me close to 120 euros in toll fees to go and back(Mind you a trip to Thessaloniki by air from Athens could be had for 39 euros each way or so). The highways were pretty much empty except for a few cars which insisted in racing rather than driving. My first reaction to such experience was to conclude that Greece is rather disconnected than connected by its autobahn network. And now that the new Tempe connection is ready for circulation as of April 1st (longest tunnel connection in southeastern Europe peninsula) I am sure the fees are going even higher.

      So the question posed is that Thessaloniki could be turned into a major harbor with plenty of activity, railroad connectivity and ample freeway capacity for transport but I got the sense that the Greek transportation system is not condusive to economic activity because it provides a disincentive towards commerce and free movement of people. If I as a tourist and occasional visitor had to pay far more in gas and toll fees than the rental cost of the car this means that travel in Greece is not exactly promoted and that the country is split between two large regional parts struggling to integrate with one another.

    13. I can only recommend to EVERYONE to read "Salonica - City of Ghosts" by Mark Mazower. After I had read it, I told Greek friends mine that Mazower had to be the most biased historian ever. Here he wrote a book about the history of Thessaloniki, a city that he is clearly in love with, and one gets the impression that Thessaloniki had much more of a history than Athens. In fact, one could get the impression that Athens didn't even exist.

      Well, my friends educated me. Athens really didn't exist much in the thousand years before it was made the capital. In fact, I once saw a drawing of Athens around independence time: it looked like a bunch of tents where, allegedly, mostly Muslims lived. By that time, Thessaloniki could look back to an uninterrupted history as a city since about 220 BC and It had already been a blossoming metropolis for centuries. A truly fascinating history spanning almost 2.500 years!

      If one looks at pictures of Thessaloniki of about 100 years ago, one can only marvel. A first-class metropolis with avenues, trams, luxury residences, a busy harbor, etc. etc. Totally multicultural (Greeks, Jews and Muslims about 1/3 each). A pulsating place.

      Today, Thessaloniki reminds me of Buenos Aries. 100 years ago, they called BA the "Paris of the rest of the world". Today, one can tell all over BA that there hasn't been a facelift in a very long time. In Thessaloniki, too, the glory of 100 years ago has been replaced by the need for facelifts which is painfully obvious all over the city. In fact, I would say that what has been allowed to happen to Thessaloniki is a bit of a crime. One simply doesn't get the feeling that the residents care about their city, which is still a rather fascinating place (particularly at night when the good things are lit and the other one can't see).

      Tolls in Greece? Unbelievably high! In Switzerland you pay about 40 EUR for the annual vignette. In Austria it is about twice as high. For that amount, you get a round-trip Thessaloniki-Athens and perhaps a bit more, but not much more. And the highway is poor quality in many places.

      East-West, you really get something for your money! The Egnatia Odos (from Igoumenitsa towards Turkey) has got to be one of the best and most impressive highways in Europe. No wonder. It is barely used... In the Western part, the crossing of the mountains is breathtaking. And the stretch Thessaloniki-Kavala is superb.

      Gas stations are another Greek mystery. Cross-country, they pop up all over the place. Apparently there is a EU subsidy for starting a new gas station. Along the highways hardly any but there are plenty of signs which show where to leave for gas stations. And Thessaloniki?

      It seems that when I don't need one, I see gas stations all over the place but it can be terrible when you look for one because many of them are hidden in side streets and only the locals know where they are. The worst thing is Sunday morning because most gas stations are closed. So if you are planning a trip on Sunday and your tank is empty, I wish you good luck.

      Is the Greek transportation system conducive to economic activity? Well, exactly what is conducive to economic activity in Greece? So from that standpoint, the transportation system is typical for Greece overall. But one has to start fixing it somewhere. If a harbor gets going, trains and roads to/from it will start improving. And that, in turn, will lead to improvements elsewhere. A project for the next 3-year memorandum perhaps? Well, I would say a project for the next generation, at least!

    14. I concur with your observations about Thessaloniki.

      It has been the 2nd most important city of the Byzantine (aka East Roman) and its successor Ottoman empires and a very commercial city (aka wealthy).

      Athens is not the most important city in Greece. It was chosen as such because at the time of incorporating the freed Greek modern state Thessaloniki was not part of Greek territory. So Athens grew as a bureaucratic anomaly, not very well planned and very much congested from the beginning. I would take Thessaloniki over Athens as a better place to live any day.

  3. I see Mr Kastner's point but two things still stand out. First of all, Dijsselbloem may be Dutch but he is the president of the Eurogroup, and should therefore be professional and neutral. The fact that he doesn't see what may possibly be wrong in his conduct says a lot about his arrogance, lack of judgement and self-awareness. Second, the point he was making (with or without the alcohol and women example) was simplistic nonsense anyway, buying into the myth that the Eurozone crisis was created by profligate southerners who are taking but not giving. Really? Spain and Portugal engaged in extensive fiscal consolidation ahead of the crisis. Greece may have been fiscally profligate but wasn't this great for the German export market? Dijsselbloem is peddling that tired and divisive "northern" myth that was calculated to avoid domestic political difficulties (which didn't save his Dutch Labour party in the election in any case..) It's a relief that this total lightweight is likely to p*ss off at last.

  4. I take Mr Kastner's point but I nonetheless see a problem with Dijsselbloem's comments for two reasons. First, as president of the Eurogroup, I would hope that he would at least seek to create an impression of being professional and neutral. It wasn't just the fact that he made such a statement but that he refused to apologise for it! This is indicative of his arrogance, lack of judgement and negligible self-awareness. Second, perhaps the use of this example would have been forgivable intellectually if the broader point he was making wasn't itself simplistic nonsense! It recycles that tired and divisive "northern" myth that the Eurozone crisis was created by profligate southerners. Really? So the fiscal consolidation efforts conducted by the Spanish and Portuguese prior to the crisis were just an illusion? And the German export market wasn't a major beneficiary of Greek profligacy?

    Suffice to say, I won't be sad to see Dijsselbloem go - and I'm not even a southerner!

  5. Perhaps Urs and KK might want to double check my numbers. I took the Bank of Greece spreadsheet table showing the FDI by country of origin and I added the numbers (in bold blue - Column R) to give the totals for the period 2001-2015. What emerges is not consistent with the Invest In Greece numbers:

    According to the total sums by country Luxemburg is by far the #1 FDI contributor in Greece (for the said period), followed by the Netherlands, Germany, France, UK, Italy, Switzerland.

    This in my opinion changes the whole picture of the FDI targets looking towards the future.

    Am I wrong?

    1. Well, what you have done was to ADD UP the year-end FDI stock figures from 2001-15, which is why you get the phenomenal grand total of 347 BEUR for that period. The actual increase in year-end stock during those 15 years was from 17,3 BEUR to 21,5 BEUR. The difference in year-end stock from one year to the next ought to be the annual flow but the BoG numbers don't match. On your year-end stock table, the 2015 increase would have been almost 4 BEUR. The flow table of the BoG which I linked earlier showed a flow of 1 BEUR for 2015. I am sure the flow figures are correct and there is something in the computation of the year-end stock which we don't know about.

    2. So you are saying that the FDI yearly figures are not new FDI additions, rather an adjustment of existing FDI by year end.

      O.k. I see what I assumed was wrong.

      Why is it to difficult for Greece to report meaningful numbers in a manner understood by all?

      So, in 2015 a year of total turmoil Greece achieved its best FDI performance. I have difficulty squaring this with the propaganda we are told trying to tie trust in government with FDI.

      What was the FDI in 2016? Better than the 21.5 BEUR record?

    3. o.k.

      KK let's try to do this then. If we know that the end of year FDI stock for 2015 was 21.5 BEUR then we already know the 2016 performace from which is a net 2.781 BEUR of net FDI:

      therefore we could say that the end of the year FDI stock for Greece is expected to be 24,279 BEUR (21.5+2.781).

      Do you agree? Or is yet another way to calculate this elusive Greek FDI which everyone wants to increase but they don't seem to know to what level, how and why?

    4. In theory you are right except that you are mixing 2 sources (BoG and tradingeconomics). That should normally not make a difference but we have seen above that there are discrepancies even within one and the same source (BoG). Yes, in theory the FDI stock for 2016 should be 24.279.

      I link below another BoG report which shows FDI. It is the country's "International Investment Position" which shows all assets owned by Greeks abroad and all Greek assets owned by foreigners. You would find DFI on the liability side under "Direct Investment" and there in "Direct Investment Enterprises". 17.653 in 2015.

      The amounts of FDI are certainly important because they show how much money comes in under that title. But that's only a short-term and one-off item. What matters much more with FDI, in my opinion, is the impact on technology transfer, job creation and perhaps even export promotion. The numbers don't show that. For that, one would really have to look at a list of individual foreign investments. If a NYC fund buys a Greek company to make it profitable by cutting costs, I am not sure that Greece is better off as a result of it.

      Luxemburg? I can only suppose that some foreign investors have their investment vehicle domiciled in that country. Luxemburg itself doesn't have much of an industry.

    5. @kleingutMarch 25, 2017 at 8:43 AM:

      Quote:"If a NYC fund buys a Greek company to make it profitable by cutting costs, I am not sure that Greece is better off as a result of it."

      Well, I am. A company that is not profitable is not sustainable. Sooner or later it will produce losses and will be forced to close its gates. Even if the NYC fund fires the management and 60% of the staff in order to turn the company into a profitable one, the remaining 40% of the staff (and Greece) are still better off at the end of the day.

      Quote:"Luxemburg? I can only suppose that some foreign investors have their investment vehicle domiciled in that country. Luxemburg itself doesn't have much of an industry."

      Don’t underestimate Luxemburg ;-). Arcelor Mittal (Steel, Lux staff 4260), Cactus (Supermarkets, Lux staff 4150), Goodyear Dunlop Tires (rubber products, Lux staff 3250).
      But of course you are right. The investment vehicles are investment funds as many european banks place their investment fund providers and asset managers in Luxemburg because Luxemburg treats them nicely.


    6. Urs, I think you are being dogmatic here. I guess I should have clarified what I meant by a "NYC fund". I meant a financial investor, be in in NYC or anywhere else. With financial investors, it is the exception and not the rule that they add value to a company, that they generate value. Essentially, they are asset strippers. That is not bad per se because it is their business model and they make no secret about it. But asset strippers is the last thing the Greek economy needs. In fact, I think it was a major mistake to essentially sell all 4 large banks to hedge funds. To me, that is a no-no.

      I think what Greece needs are strategic investors, investors with a longer-term view. Cosco is my prototype. No financial investors invests without already having some kind of an exit plan, mostly within a 5-year time frame. Greece should not touch those with a ten foot pole!

      Thanks for the clarification regarding Luxemburg.

    7. @kleingut March 25, 2017 at 2:30 PM:
      Quote:"Urs, I think you are being dogmatic here."

      Yep, I sound like an American Enterprise Institute speaker. Being a miser your "cutting costs to make it profitable" touched a weak spot.

      "But asset strippers is the last thing the Greek economy needs. In fact, I think it was a major mistake to essentially sell all 4 large banks to hedge funds. To me, that is a no-no.

      I think what Greece needs are strategic investors, investors with a longer-term view."

      I couldn’t agree more. Yet it seems to me that long term investors are more appreciated in other parts of Europe than they are in Greece.


    8. Forgive me for stepping into this otherwise lovely conversation of KK vs. Urs but I wish to register my own observation that Greece can not find long term "strategic" investors because such investors willing to enter long term marriages with countries are very few and represent the exception rather than the rule.

      Talking about willingness to undertake risk. Why would a foreign investor get married to Greece for the next 50 years? How many Greek governments would be produced during the same period?

      Greece can not be thinking along these lines that she is such an attractive girl whose marriages last for a lifetime. No, the reality is that for Greece to attract FDI it has to be profitable for the investor. And if profit gets maximized in 5 years vs. 50 years then that's it. It's an equation really and most investors are unemotional about the country's beauty or the warmth (or lack thereof) of its lovely unemployed people. Investment means that I have certain capital and many choices to invest in. So if I pick one choice and that happens to be Greece from an investor point of view is sort of ridiculous for Greece to require vetting as long term/strategic investment.

      What most people confuse as investment opportunities in Greece are basically offers to control monopoly segments of the economy without calling them such because it would be illegal to engage in monopolistic activities. So when Cosco buys into Piraeus we all understand that there is one and only Piraeus and only one entity would control it. The same with Fraport (which I don't consider an investment but I will concede for this conversation that maybe it is; it's not). When Fraport buys the right to manage 14 regional airports is basically given a monopoly to control the airport submarkets of said airports. Because I don't think there is any meaningful way to promote competition against Fraport in the airports they control. The same applies for The Vouliagmeni Astir hotel because there is no other like it. Not to mention that the Hellenikon airport of Lamda development is a submarket which could be penetrated by others.

      So let's not confuse offers by Greece to sell monopoly rights (which Greece previously enjoyed to herself but had no real talent to extract maximum benefit from said monolopies) as long term investments by others. And in case you have not figured it out yet it is the very nature of these monopolistic deals that makes them long term (or strategic if you wish). Absent the monopolistic nature of such offers there will be very few FDI in Greece.

      The problem of course for Greece is after these mini-monopolies are exhausted from her available for sale portfolio what would possibly attract continued FDI in Greece. The answer is: not that much. The hope is that around sold monopolies their would be other businesses that spawn but that's a big IF. Retail developers use this logic: they construct large shopping centers where the key tenant gets a rent of 8 euros per m2 (because the create traffic) and all peripheral smaller shops pay 40-50 euros rent per m2. So the money in commerical retail development is made through the smaller tenancies because larger tenancies are basically close to being offered for free due to the impact they produce.

      The question for Greece though is what power does the state has after selling monopoly licenses (for lack of a better word but you get the spirit of the transaction) to compel others to set up their tents around the monopoly kingdoms. And the answer is very little or none.

      So do we want to re-think FDI for Greece and transition into a smarter conversation of highest and best use or do we want to pretend that if poor greece does a-b-c steps then it will rain GDP growth in a form that would make Noah's cataclysm a walk in the park?

    9. And here is an example of a monopolistic deal passing as new "FDI" for Greece. There is no other hotel in the area that could compete with Astir. So when the National Bank of Greece sold the project to a Turkish investor with preference towards luxury it basically sold a monopoly type deal. Monopoly type deals attract some long term investment because by definition shield the new owner from meaningful competition. Problem is that the rest of the Greek market is not made up of such monopoly situations.

      It sounds easy to say let's attract FDI in Greece but how unless it has a quasi-monopoly guarantee attached to it?

      In others words attracting FDI in Greece is easier said than done. Take a look at this piece and tell me who would be foolish enough to compete against it? Projects like this make their own market.

    10. @ Phoevos March 26, 2017 at 6:32 PM:

      Quote: "Talking about willingness to undertake risk. Why would a foreign investor get married to Greece for the next 50 years? How many Greek governments would be produced during the same period?"

      Spot on. The answer to political risks would be strong institutions like the ones in the US. As long as you have independent courts, a free and (mostly) independent press and a house and a senat that has indpendent represantatives that serve as a counterweight to a populist government the political risks are not such a big issue. But if you lack these strong institutions ...

      Quote: "So let's not confuse offers by Greece to sell monopoly rights (which Greece previously enjoyed to herself but had no real talent to extract maximum benefit from said monolopies) as long term investments by others."

      Again, spot on. I think the current FDI in monopolistic infrastructure and real estate reflects the pitiful shape of the Greek economy right now. Greece needs FDI in producton facilities that help to bring down joblessness. Went to Pilsen, Czech Republic the other week. The town has a hugh industrial estate full of subsidiaries of Japanese, German and South Korean companies. Quite impressive. Agreed it’s location helps at lot and a direct comparison with Greece is probably a bit of a stretch but still it shows the way. How does the current Greek government encourage this kind of FDI?


    11. Urs:

      You are asking how does the current Greek government encourage this kind of FDI. Well, the short answer is by removing its influence and protective attitude towards the public sector which is grossly inefficient, bureacratic and which constantly slows down and discourages the permitting process.

      Then we have the known obstacles for underperformace which are geographic location and weak institutions.

      Then we have a broader issue in Greece:

      "It is clear that there is resistance to the resolution of the FDI issues and one might even say that some forces in the political and economic terrain are blocking the solutions. This is not simple "resistance to change" that a management expert might be able to handle using well established techniques. Greece has been for many years (let's start from 1945 to make things easier) a "closed" and tightly controlled bureaucratic economy. There has not been a "free market" in Greece, and I say this in the mildest possible way for the free market. The all powerful State controls economic activity through a regulatory, tax, and legal framework that is impossible to cope with, unless you have the "inner track". And the "inner track" has a logic that goes against the "free and open market". Any one familiar with complex bureaucratic structures knows well that they are an almost autonomous center of power, and this is the reason why the Greek political system has established over the years a working alliance with the bureaucratic State.

      The failure of the "Troika", the three lenders of Greece in the period from 2010 to date to implement a real "reform" of the Greek State is indicative of the extent of the problem. A bold and audacious approach is needed in order to tackle the bureaucratic anomalies and malfunctioning of the Greek State. Reform is not good enough. What is needed is a massive and radical restructuring program that will free the economy and the society from the deadly hold of the State by reducing significantly its powers and abilities to control and block anything that goes against the breakdown of the "closed" economy and political system.

      FDI is the arch-enemy of this "closed"system, because by its very nature it forces the country to "open up" to the world, face the realities of global markets and competitive advantages and disadvantages, and take the required actions. There are of course risks involved, but there is no free lunch.

      Instead of opening up to the world, the dominant bureaucratic State-controlled system we currently have in Greece, acts consistently in a way that blocks FDI, creates a multitude of problems for any foreign investor, and maintains its stranglehold over the economy and the society."

      The above statement in parenthesis is an opinion of Nikolaos Moropoulos a US based consultant and you can find his thesis here:

    12. @ PhoevosMarch 26, 2017 at 7:55 PM:

      Quote: "There is no other hotel in the area that could compete with Astir."

      What’s your point? Mallorca is full of the finest Golf resorts and marinas. Do you think the existence of one top class golf resort would have scared away the competition? Quite the contrary. And then you can still try to built something that appeals to another audience, like families who seek rather a 3 than a 5 stars accomodation.


    13. Urs:

      I am not sure you understood my point. You don't have to go to Spain or Italy to find competition for this project. There is an even better one in Greece, called Costa Navarino but it's 3-4 hours from Athens:

      The monopolistic nature of the Astir hotel is that is situated in an area where real estate prices are about 65,000 euros per m2. So when this project executes and sells the bungalows component facing into the Saronic Gulf basically the sale of these units will pay for a good portion of the aquisition price of hotel which was around 400 Million euros resulting in a net profit for the seller National Bank of Greece of around 130 Million euros. In other word, NBG sold for peanuts.

      So now to understand why this project has a monopolistic advantage is that there is no other hotel like it in the Athens area similar or close to it. No one can build around the coast line and get 65000 euros per m2 or higher.

      Its competitor Costa Navarino close to Kalamata (I was there last November) before it temporarily hybernates for 3 months (it's open now again) only cost 200 Million to construct but the developer got a 50% refund from the government because he developed a 5 star hotel which is preferable for the greek tourism model and therefore whoever builds such projects can apply and get the state subsidy which varies by region.

      So to summarize: Costa Navarino is a better project than Astir. The Costa Navarino bungalows available for sale start at 1.5 Million and up. However despite the fact that Costa Navarino has a subsidized cost basis which is much lower than Astir's, better location and view corridor, nevertheless there is no other hotel in the athenian Riviera that could charge such prices for its bungalows. That what I mean by monopolist rights. By virtue of the fact that the Astir package comes with the ability to introduce new luxury units in a market notoriously difficult for permitting such new activity and at premium prices is something no other hotel in the area could replicate. If my calcs are correct the Astir bungalows would start at 7 Million for 100 m2. At such pricing Costa Navarino (its other regional competitor) needs to sell 5 of its bungalows for each bungalow Astir sells. In the business language we refer to this as a real barrier to entry.

  6. I think you will find more truths in looking to Greece through American eyes. This is a very factual analysis:

  7. How many of you would be eager to try this new product from Alexandroupolis, Thrace region?

  8. I don't know Piet, your Dutch boss, or anything about banking for that matter. I imagine him managing a big name bank but with local savers, businessmen and farmers as clients. Maybe in the mid west, if that was the case some of his high risk clients would have been oil wildcatters from the second wave in the seventies, they were paying high risk premiums at their loans. The other clients knew it and did not mind the risks, after all, it contributed to the good conditions for their savings and loans. The wildcatters were basically honest people, they did not get their loans because they had other dealings with Piet, they put their own money (and efforts) where their mouth was, they did not take the loans with the intention never to pay them back, they did not get their loans unsecured. They, and Piet, were not to know that in a few years the oil rigs they had given as collateral would be worthless, not only were they worn out but they were obsolete, as the market had collapsed.
    In that culture I find Piet's supposed words reasonable and correct. Is it conceivable that with the culture of today's high risk clients Piet would like his loan officer to send other signals? Like:
    -To those who behave like this: We do not wish you as clients. You will not get away with this scot free.
    -To those who contemplate behaving like that: See above.
    -To the great majority of honest clients: We will do anything in our powers to protect you from this sort of clients, because you are the bank.

    PS. I know one of Piet's clients, the year after Piet's repossession he went to the scrap yard where the rig was parked and sprayed "his" rig with Wax oil, For 2 seasons he scraped by and rented the rig from Piet. He changed to tool pusher for one of the majors and is today an executive in one of the majors. Whenever I reminiscence about that time he says "hell, I was there, but that was then and this is now".

    1. I don't know much about banking either eventhough I am eager to learn and master it if I am given an opportunity in my next life appearance.

      My pedestrian observation on banking is that usually loans end up to those who don't really need them or pretend that you are doing them a favor for allowing you to lend to them.

      The people who really need the money, those hungry for achievement and an implied promise to work hard for success rarely get them because they are not credit worthy. In reality they might be credit worthy but the criteria and relationship verification metrics bankers use by definition shrink the available pool for lending to very few familiar faces who borrow large sums and the bankers feel they could manage the situation better with them in minimizing lending risk. In reality lending is a good business during the good times of growth and prosperity. During the bad times its prety much an awful business with pretty much zero societal contribution. During the bad times banking basically selects and targets the elites for the next growth cycle; in other words the familiar "go to" gus who don't need the money so that bankers have to work very hard to convince them to use their loans because they think that these are "their people" and therefore agreeable in business mannerisms.

      I know now that I am going to get a lecture from KK but as I said my tolerances reach into my next life and hopefuly not in the eurozone.


  9. And speaking of banks and debt, Fraport Greece is starting with 1 Billion debt.

  10. Why do I have a sinking feeling about this?

    1. This is a most interesting article. I was not aware of this financing situation.

      Almost 50 years ago, the Frenchman Jean-Jacques Servan-Schreiber published his book "The American Challenge". An immediate bestseller! One of his major themes was: Americans are buying up Europe and they are doing it with European money. What he meant was that most of the American acquisitions were heavily debt-financed with the debt coming from European banks.

      Why am I reminded of this book when I read this article???

      This is an interesting financing portfolio. The only 'normal' bank (presumingly charging 'normal' rates) is Alpha Bank. All other banks are in one way or another subsidizing banks (i. e. they can charge below-market rates).

      Actually, it's only the 285 MEUR which come from Alpha which fit S-S's case: here a foreign investor is using Greek money to buy a Greek company. The remaining financing comes from abraod, i. e. it is cross-border and good for the balance of payments.

      A cynic might (correctly) say that Alpha is using 285 BEUR of good Greek money to finance a foreign investor instead of Greek middle-market companies.

      No one would expect an investor to finance the entire investment mit equity. Obviously, a large part is always financed with debt. What makes this case different is that for any other 'normal' acquisition, Fraport would have had to raise 'normal' financing. Since the investment is in Greece, it gets subsidized financing in a big way.

      Not dumb. Not dumb at all!

    2. KK:

      I would agree with what you say yet the "subsidy" issue looms large.

      So Greece attracts deals which are either mini-monopoly situation (based on the way the state was running the for sale enterprises) or heavily subsidized in order to attract investment interest.

      I am sure that ugly girls with large dowries might actually pass as beautiful and as quite a catch. But do you see the problem there? There is no depth in potential Greek FDI deals.

      And the opposition is foolish to suggest that by selling the cream of the crop deals has any significance for the economy. Pretty soon the new "owners" realize the benefit of a closed system rather than an open market system and actually want to perpetuate the closed system because by doing so they maximize value.

      Can you see now how the state ends up with the wrong end of the stick through such sales?

  11. Greece is going for Olympic gold again. Almost 60% undeclared income from the self-employed. Wow!

    1. To me, this is one of the best examples why I consider Greek society as one of the unfairest I have ever seen. I think close to 50% of Greek earners cannot cheat on taxes because they are taxed at the source (wage earners, pensioners, etc.). Well, I guess the article says that they, too, are now cheating a bit.

      But then you have all the others, many of whom probably better off than wage earners, who do not carry a fair share of the burden at all.

      That is simply pitiful and not deserving the attribute of a "civilized society".

    2. And also a "civilized country" does not sell its key assets for nothing.

  12. What we are lacking in the discussion of Greek FDI are discoveries of substance versus appearances.

    We all agree that FDI is good for Greece and should be pursued in the greek case. That FDI is good is basically a motherhood statement. We all know that FDI is good and desirable by every country and we all love it in the same manner we love to eat apple pie.

    However it's the details that count and what we see in Greece's case is disturbing.

    Take the Fraport case for example. Fraport Greece is proposing to spend something close to 260 Million in airport facilities upgrades over the next 5 years.In my book such an ammount is peanuts and points to a bad negotiation about the value of the rights sold. And the problems don't stop there. Fraport Greece is now a heavily indebted entity comprised of about 1 Billion euro debt and about 650 Million euro equity. Fraport Greece has to pay the Greek state 1.2 Billion euros for the rights of managing the 14 regional airports for 50 years and make the necessary repairs and maintenance. In other words Fraport Greece has gotten into heavy debt (some of it from a Greek bank) which would probably make its task of delivering new investment and jobs in Greece very difficult. The first pre-occupation of the new management would be debt service rather than investment into the Greek economy. Obviously the first priority for Fraport Greece is to collect net revenue (gross revenue minus operating expenses, taxes and insurance) from the airport fees charged to users and whatever is left to basically decide how much profit to keep and the minimum required to put up for the investment facade. I have difficulty rating this transaction as more than a C- from an FDI perspective.

    Let's turn into the Thessaloniki harbor for sale. There are now 3 bidders and the second round would select the finanlists and ask them to raise their bid. The obligation of the selected winner would be a mere 180 Million worth of improvements at the port (again peanuts in my opinion since this is the same price for building a 5 star hotel anywhere in Greece, the difference of course being that Greece could have 10 new 5star hotels a year and only one port sale every century). So here again we have an example of a pitiful FDI output for Greece, yet some people want to encourage FDI at any cost and under any circumstances. The FDI grading for the Thessaloniki port deal is a mercyful D if not an F.

    It is one thing to force a reluctant country into privatizations in search of elusive FDI potential and it is quite another if circumstances are forcing you to strike a series of bad deals which produce minimum FDI and a great deal of unintended consequences down the road.

    To me trying to promote FDI which quickly degenerates into trying to put lipstick on a pig is neither efficient nor beneficial management of your asset potential. Acting under duress should never be confused with smart and deliberate action. Acting under duress - like in the Thessaloniki case - it is rather an act of a very bad surrender which does very little to promote economic growth in Greece.

    I am not against privatization but once engaged it has to be done with skill and knowledge which is currently lacking in the Greek case.

    Promoting FDI for Greece? Sure. Promoting dumb FDI for Greece? Another disaster waiting to happen.