Friday, March 2, 2018

Enforcing Austerity Does Not Suffice???

Theodore Pelagidis and Michael Mitsopoulos have written a book titled "Who is to blame for Greece?" and they published a short summary thereof in this article. Here is a key paragraph:

"So maybe simply enforcing austerity does not suffice. Maybe the way day-to-day economic and social activity is organized, from licensing to policy debates, from the rule of law and court decisions to the protection of the freedom of the press, are more important after all. They determine the extent to which people take initiatives, create economic activity, and thus generate taxable income."

A simple (and rather convincing!) narrative had developed early on in the crisis: reckless overspending had kicked Greece's cost/price competitiveness out of the water and the way to repair that was to re-establish cost/price competitiveness. In the absence of the devaluation tool, it had to be internal devaluation. In short: austerity.

That might have worked if lack of cost/price competitiveness had been the only (or even the major) problem of Greece; if institutional strengths, regulatory efficiency, judicial efficacy etc. had otherwise functioned well.

I have always argued that the Troika should not be misinterpreted as an institution out to help Greece. Instead, the Troika was/is a creditors' committee watching the interests of creditors and to expect more from them is an illusion.

However, there WAS a vehicle whose task it would have been to help Greece in the process of reforming the country. That was the EU Task Force for Greece which in its mission statement listed the following noble objective:

"The Task Force is a resource at the disposal of the Greek authorities as they seek to build a modern and prosperous Greece: a Greece characterized by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos."

Even Alexis Tsipras (and SYRIZA) in his early days spoke romantically of the New Greece he and his party were going to work towards: "Meritocracy, transpareancy and equal opportunity will be the trademarks of the New Greece", Tsipras promised in February 2015. And, he added, "We are building an effective public administration with respect to the citizens and the taxes they pay.

It pains to remember all those noble objectives when looking at the actual result. At least so far, the actual result was pain, only without the New Greece that would have justified the pain. Or as the Dutch Ambassador to Greece recently phrased it:

"We need meritocratic decision-making in Greece, be it by left- or right-wing governments, and both in the public and private sectors. More than debt relief, Greece needs meritocracy. This is not something that we can translate into a specific prior action. This is not something that you can order from the Eurogroup. This is something about a political and governance culture of responsibility and a mentality that needs to continue to be developed. Many Greeks have suffered during the economic crisis. The price they paid should not be for nothing."


  1. Well, Brookings has posted quite a few topics on Greece:

    But, how can one draw useful conclusions when the authors' approach is to spread the blame equally between the Greek cleptocracy and shaky EU? Saying both are to blame for the crisis (the cleptocrats from bringing it to fruition and the EZ being unable to respond to it due to its internal flaws) is not helpful at all.

    Who did the vetting when Greece was admitted with such well-known pathologies and why Greece joined a group (EZ) with such pronounced inabilities to respond to its crises?

    The only explanation that fits the various narratives of who, what, when and why is that the EZ saw in Greece a strong consumption client (consumption of European, meaning 90% German goods) and Greece saw a benefactor in the making; both assessments being errors of judgments of the highest order. It's like the blind leading the cripple; the worst combo imaginable.


  2. "We need meritocratic decision-making in Greece, be it by left- or right-wing governments, and both in the public and private sectors. More than debt relief, Greece needs meritocracy."

    These are nice words for a politician but quite empty words from a practical point of view. Of course every country wants its best people to emerge during a crisis. But Greece is a nation of small shopkeepers and family owned businesses with meritocracy being their last concern. Also to implement meritocracy to the public sector you need to shut down the government, fire everyboby and then re-hire based on new meritocratic rules. Easy to say but very difficult to implement. Not exactly sure what the Dutch Ambassador to Greece had in mind because this speech of his you quoted applies to all countries, even his own. And we all know that Greece does not need generalities but rather targeted specifics. Quite frankly, I fail to see the rallying call. I am for meritocracy but not for empty speeches. Only action counts, the rest is idle talk and of that we have plenty in Greece to the point we can comfortably export it to Holland and elsewhere.


    1. Reducing the government, "public employees" is an indirect approach which in the many instances has proven fruitful.

      However, privatizing has many other drawbacks which can affect the greater good of the country's interests.

      What you propose above is impossible. Even if theoretically. That is why privatization indirectly solves a part of the problem.

      Aside from water, i am for full privatization. Then you acquire a small well paid government body with merit, which regulates the private sector and pass laws which suit the greater good of the country.


    2. V:

      Public employees in Greece includes the Church. Are you saying that you are in favor of privatizing the Church? Because if you are I have a better idea for you. Fire all priests and force the church to pay real estate taxes (ENFIA) on its vast portfolio of undervalued properties.

      You better read this if you don't understand the seriousness of the church problem in Greece which by the way your party the uber corrupt New Democracy refuses to touch (talking about hypocrites in Greece where ND gets the gold, silver an bronze metals)


    3. Yeah... forgot about the church. And the defense forces for that matter.

      My statement refers to that aside from those sectors. Those sectors need special handling. Church especially needs an overhaul of modernization.


    4. V:

      You maybe interested in this:

  3. Speaking of energy as a pillar of growth for Greece (my previous thesis in 2 recent blog entries here), Mytilineos Group (a quality Greek group) just announced at the Delphi Forum a new 650 MW gas fired electric generation power plant (Please use your translator because I have not yet found an English version):

    Regarding the existing Mytilineos energy portfolio, known as PROTERGIA please refer here:

    Bottom line: new growth for Greece and the Mytilineos group emerging as a key provider of electricity for the Greek network (in other words a DEH competitor which DEH is currently acting as a quasi-monopoly in the Greek electricity market). So, perhaps a move in the right direction.


  4. "It appears that the main factors contributing to the lack of funding for infrastructure projects in general, are their poor planning, the slow formation of the necessary political consensus and further delays."


  5. Lennard:

    Especially for you. Preview of the Greek Energy plan from the minister himself (starts at minute 45):


  6. An example i wrote before a few months.

    And yesterday

    Mr Koutentakis is a lecturer (sic) and was general secretary for Fiscal Policy. But appointed in PBO to judge and his own job?

    Someone may say that Stournaras also left ministry of finance and appointed to BoG or Liargovas of PBO was a member of a political party.
    Both Stournaras-Liargovas were professors with publications. Stournaras was also accepted, generally, from IMF,ECB and people in europe.

    I don't know in Austria do you have such trading-hirings?

    But the issue here:

    None one have compare the Cirriculum Vitae of 9 other contenders for PBO in relation to Koutentakis.

    About general practises

    Professor (Public Administration) Karkatsoulis from Potami party says:
    1) Exclusive responsibilities for ministers eg of health increased to 611. This, in relation and with Novartis case.
    2) Polynomial or multi legislation is increasing considerably at the expense of entrepreneurship.
    3)He also observe: "66% of the papers they have brought are accompanied with a report by the State Treasury that says "the provision is causing a cost that can not be calculated because the Ministry did not send details".

    What council of europe says

    About refugee crisis, before a year. Not much changed.

    As far as the top financial elites their businesses are getting better or even for some of them flourishing. All criticised in words but only some of them usually aged or with bankrupt companies are facing rightly financial consequences.

    The effort against meritocracy, transparency and refugee crisis practises got much worse the last years.
    Thousand hirings (≈ 50.000) with complicated tactics operated in central government organitations, munincipalities and regions, where usually it is difficult to evaluate the feasibility of projects or hirings.

    Decisions sometimes refer to future structures that have NOT yet been created.

    The moto is still here:

    "If we want things to stay as they are, things will have to change."

  7. From the Greeks I talk to, it is not my impression they want "things to stay as they are". Sadly, most want to go back to the future of 2008.

  8. These two narratives are not equally convincing; in fact, they are deeply contradictory. There is not such thing as a "creative destruction" - at least not outside the minds and mantras of the ideologically fervent and / or the politically hypocritical. I'm sure that when the next narrative comes it will be through (not so supple)changes to the preceding ones, weaved around the only story that really matters : Euro works if you work it!

    As for the Dutch ambassador I'd be more interested to know how he reconciles his noble (and so generic as to be undisputable but essentially inconsequential ) values with the status of his country as practically a tax heaven. What narrative would he have spun to iron out these contractions, I wonder…