A six-month break from austerity!

Wow! This report by the Ekathimerini, if confirmed, will really be good news for Greeks! No new austerity measures for 6 months? What a noble gift! Celebrations all over Greece can be expected!

And what a non-selfish gift, too! Or is it perhaps not? Somewhere in the middle of the text I read that this offer was 'also attempting to ensure that Greece and its debt problems do not become a pre-election issue in Germany, which is gearing up for polls in September, sources have indicated'. Aha! 'I can see', said the blind man, took the hammer and saw...

'Austerity' is a relatively new expression. It was not really used before the Euro-crisis began about 3 years ago. In the old days, like during the Latin American debt crises of the 1980s, the expression was 'economic adjustment'. Personally, I think 'economic adjustment' is a much better description of what is necessary than 'austerity'.

The economic adjustment which Greece requires is brutal austerity in the public sector and massive stimulus in the private sector. I certainly cannot prove this but I will make the argument, nevertheless: a good portion of every stimulus Euro which is chanelled through the public sector will end up as waste and/or as private deposits in foreign bank accounts. I doubt that there is any waste or misuse of stimulus Euros when they are chanelled through the private sector. Why? Because private investors do generally make sure that their money is used properly.

Will private investment happen automatically? Probably not. At least not yet. There will have to be some very significant incentives at this stage for private capital to come voluntarily to Greece. To figure out the right incentives, that is the public sector's job. Or rather: that is the government's job.

I cannot emphasize enough the imporance of the 'herd instinct' when it comes to the movement of private capital. Let the story make the rounds that the Greek government is working out tremendous incentives for private investors. If that is done well, a process of foreign investment could begin which then feeds on itself.

Where does the EU stand on the Lagarde list?

Some time ago, I posted an article titled "Much ado about a list". I still stand by its content. I thought at the time that I would never again spend time on this issue. Recent developments have changed my mind.

Objectively, this list is 'peanuts'. If I recall correctly, the total sum involved was about 2-3 BEUR. However, it seems that this list has assumed an entirely different connotation than one could originally suspect. Suddenly, it appears that this list might be the key for unlocking the door for much greater corruption schemes having gone on in Greece in recent years (Siemens & Co.). And it has become the prototype example of how the Greek political elite deals with such issues.

What role does the EU play in all of this? Deafening silence! Should the EU play a role? Based on previous precedents, yes it should!

In early 2000, two democratically elected parties of Austria, which together represented an absolute majority in parliament, decided to form a coalition government. As it happened, the EU did not like one of the two parties. The EU thought that this party did not meet the high common values which the EU shared. For a while, it looked like the EU would proceed with a process aiming at expelling Austria from the EU. After long negotiations, the EU could be satisfied that a 3-person team of 'wise men' should visit Austria and pass judgement whether Austria could still be regarded as a civilized country. The 'wise men' passed positive judgement.

Having said this, what seems to be going on in Greece's 'triangle of power' (politicians, media, oligarchs) does not come as a surprise to anyone. The debates/votes around the Lagarde list have only highlighted this situation. It is certainly an unacceptable situation; a situation which can under no circumstances be reconciled with EU values. Finally, a situation which makes the common man and woman of Greece the fools; the fools who have no choice but to pay for the corruption of the mighty.

In my opinion, if the EU is worth any salt at all, it should involve itself in this issue. Yes, it is a domestic issue in Greece and the EU has no business in meddling with domestic issues. However, it has become much more than a domestic issue. It has become a question of who stands up and lets himself be counted to support those Greeks who desperately need support.

I think that if the EU decided to send three 'wise men' to Greece to examine how power is exercised there, taking the Lagarde list as a first case in point, a very large part of the Greek population would develop new sympathies for the EU.

So, where does the EU stand on the Lagarde list???

And the next one iiiis... Henkel!

In the blogosphere and twitter world, commentators are competing with one another for the best arguments as to why no foreign investor can really have an interest in investing in Greece in the foreseeable future. The convertibility risk and the political uncertainty are two of the reasons which are cited most frequently.

A look at the real world is quite encouraging. I have already written extensively about HP, Unilver and Cosco and it is excellent news that one can now add Henkel to the list. Perhaps there are other new foreign investments which haven't hit public awareness yet.

Henkel will produce detergents for the local market. Come again? Henkel will produce in Greece detergents for the Greek market? That has got to be impossible because every pundit in the world has explained in the last years why Greek production can never be competitive with foreign production. Is Henkel wrong? Or are perhaps the pundits wrong?

Facts speak louder than words and we will see what the Henkel-facts will be. But if 'big guys' like Unilever and Henkel with their huge economies of scale in production elsewhere still come to Greece to satisfy local demand with local production, one can only guess how attractive Greece could become to smaller foreign investors who do not have such economies of scale elsewhere.

Perhaps I will live to see the day when the toothpaste which I buy in Greece is also produced in Greece (instead of being produced in Brazil and imported to Greece via a German distributor)!

"Greeks are perfectionists in the realm of ideas!"

One of my readers, a passionate Greek who always gives me and my views a hard time, offered a description of the Greek character which I reproduce below. His conclusion is: "Greeks are perfectionists in the realm of ideas. That's the essence of being Greek: A Greek is a German perfecting ideas instead of automobiles".

I then asked two of my best friends in Greece for a reaction. One of them is a Brit with over 40 years of living experience in Greece and the other one is pure Greek. I also reproduce their reactions. 

Description of Greek character (by Phoevos) 

As far as Greece and the past, keep this in mind: Greece always survived because it was so divided. It's almost impossible to conquer divided people. Which is the antithesis of an empire. In an empire setting you capture the central authority and then your control what's underneath it.

There is nothing more anti-Greek as the concept of an empire. The Greeks fought against the Persians because they were an empire. The Greeks fought against the Romans who were clever enough to put Greek life as the pinnacle of their civilization thus neutralizing Greek resistance. Even Byzantium (despite what the Church says because Greek Othodox religion has all its roots in divine authority with the emperor) is anti-Greek but try telling this to the Greeks today when religion is nothing more than a modern adaptation of the Deities of the past. And the whole idea of Alexander the Great (the first globalization guy of this world) is that he marked the decline of Greece contrary to the popular opinion that he was the apotheosis of Greece. Because the minute he came face to face with the riches of the East he became seduced by them and so did his successors of the Hellenistic world leading to the Roman domination. Alexander and Philip are the sort of guys the Spartans always fought against. Sparta fought Athens precisely because Athens was so powerful and therefore so anti-Greek for one Greek state to dominate others.

My point is this: Whoever chose Greece as the start of the experiment for European unification made a grave error. Most likely Greece and what happens to Greece from now one will destroy rather than re-enforce the empire based inspired themes.

A True Greek is a great individualist, an urbane enough person to blend with all civilizations but one who has no room for equals in his heart.

If Merkel understood this simple fact, she would have chosen someone else for the experiment.

But maybe good things would come of it. Maybe individualism would triumph again against the empire concept in a way that only the Greeks know how to teach. Mind you we are not a destructive force. We are the sort of people that always make you and force you to think. That's our craft. Debate, debate, debate....and then debate again just in case you missed something. Greeks are perfectionists in the realm of ideas. That's the essence of being Greek: A Greek is a German perfecting ideas instead of automobiles. 

Reaction 1 (from a Greek friend) 
Rather simplistic and biased analysis. 

My feeling is that Greeks are overwhelmingly pro-European and also see their future within a unified Europe. 

Don't try to unmask a (British) Trojan Horse in the EU - that's not Greece, surely! 

Reaction 2 (from a Brit friend living in Greece)

The views do not surprise me. He has some good points. You know as well as I do that 'teamwork' is not exactly a Greek attribute. For instance, I remember when I first saw the Greeks play soccer. ..... great individual skills - but 11 players all trying to score a goal!! It took a German coach to knock heads together and show them what teamwork means - and they won Euro 2004!! Suffice to say that the fallback to individualism returned as soon as he had departed!! 

As you also know, except for young internationally alert Greeks, they can't be trained - it's 'Oh, I already know that'!!! Just look at the problems of the EU Task Force ! ....or, for that matter, the messing about on the whole reform issue. Need I say more?!

Additional reactions are welcome! 

Is Greece reforming or not?

My British friend was, for once, wrong: he had predicted a Grexit for Friday, January 11, 2013 at 22 hrs, but it didn't happen.

True to form, he sent me the following defence of his position today:

"Read today's 'Comment' in Ekathimerini entitled 'Samaras and the madhouse'. A true reflection of how I see the insurmountable problems in Greece - which can only be resolved by a return to the Drachma and a sole concentration on Tourism, Agriculture and Shipping together with an abandonment of true reforms across a myriad of professions. I.e. the Greeks will never change - except to be encouraged to enhance their activities in the three areas that I have mentioned".

Personally, I am at a loss. For quite some time now have I read reports how much progress Greece was making on just about everything and now the Executive Editor of a major newspaper writes that this is not so. 

Who in the world knows what's really going on in Greece? 

Can The Left save Greece?

A blog by the name of New Left Project published an article titled “Can the Left save Greece?”, as well as an interview with Yiannis Milios who is a Professor of Economics at the Polytechnic University of Athens. Prof. Milios heads a group of economists including Yiannis Dragasakis, Giorgos Stathakis and Efklidis Tsakalotos, who collectively shape SYRIZA’s economic policy (according to the article).

The article impresses because it is quite balanced. Put differently, it is not demagogic, which is what one might expect articles from such a source to be. It is the interview with Prof. Milios which I find particularly interesting, at least interesting enough to comment on Prof. Milios’ statements.

“They (EU countries) are mostly governed by neoliberal parties, while their socialist parties are actually neoliberal as well. There is obviously intensification in class struggle, not just in Greece but also in Italy, Spain and Portugal, which slowly de-legitimizes the neoliberal spin on the crisis. Therefore, it’s the class struggles themselves that change the circumstances and create this new situation in which the Left perspective steadily gains ground” – I have trouble seeing it that way. Certainly France is not governed by a neoliberal party and there are many, many Conservatives in Germany who criticize Merkel for having moved even left of the center. The whole idea of a ‘neoliberal spin’ is far-fetched to me. I think what we have seen in Continental Europe for much of the post-WWII period is the unfolding of Keynes-policies. Except that Keynes, I believe, recommended deficit spending only during parts of the economic cycle with a balance over the entire economic cycle, whereas most Continental European countries have had uninterrupted (or only briefly interrupted) deficit spending for decades now. And what made matters worse: the spending was, to an excessive degree, ‘true spending’ (on consumption) instead of investment in the future. Yes, I agree that there seems to be a new perspective for The Left but that is more the result of ineffective leadership of cozy political establishments than the consequence of a failed market system.

“The Left has a very clear position: only through reshaping the social and production models can European societies get through this crisis” – I wish members of the established and cozy political elites would make statements like that! This is assuming that Prof. Milios means what I think he means, namely: a common market (particularly when a large part of it has a common currency) cannot be sustained when investment, production, employment, etc. move into one direction and loans flow into the other direction to finance consumption there.

“The model of a social co-operative economy, operating in a more democratic context, is the one that can take our societies out of this crisis” – the so-called ‘Genossenschaften’ represent an important part of the economies in the German-speaking countries.  The concept for such ‘Genossenschaften’ was developed by Friedrich Wilhelm Raiffeisen in the second half of the 19^th century. Essentially, they are somewhat closed systems where the customers are also the owners. The owners’ profit motive becomes of secondary importance: if they earn less as owners because the ‘Genossenschaft’ makes less profit, they make up for that as customers who pay lower prices. Such ‘Genossenschaften’ are clearly interesting alternatives to capital market based ownership.

“Back in the 1980s, PASOK favored capitalist interests over the interests of the vast majority of the people.  Our lead is what society needs and not the imaginary ‘foreign ties of the country’ to its lenders. We say ‘people over profit’" – well, that is a statement for populist consumption. It would lend more credibility to SYRIZA if they didn’t use such statements which have general appeal but no specific meaning.

“We represent the social front created in Greece against austerity policies and our ambition, together with the affiliated forces of the European Left party and others who will join in the process, is to enable the establishing of a European front against austerity” – sounds like milk & honey! Prof. Milios should explain that there is not one Eurozone country which can print its currency. Thus, and to the extent that the above involves deficit spending, a country must be able to borrow. If it can’t borrow and if it doesn’t have the above-mentioned ‘foreign ties to lenders’, the country is caught in extreme austerity.

“We will call for an international forum to discuss the viability and targets of Greek and European debt and budgets. We also intend to take up initiatives in the direction of re-examining the European Union treaties that make up the pivotal points of what brought us to this" – well, I think Angela Merkel could live with that.

“Wages, for once, will be decided through free negotiation between social institutions that represent the productive classes” – I presume Prof. Milios means that wages should be freely negotiated between employees’ representations and managements of a company. That would be a dream come true for many entrepreneurs who despise dealing with central union dignitaries who have other things on their agenda than the well-being of the entrepreneur’s company.

“SYRIZA considers increasing revenue from taxation to be a major priority. We will use tools like the newly established assets list, we will establish a code that will discourage tax-dodging and we will achieve a dramatic (according to current data) increase in revenue” – all I can say to this is: more power to you!

“It’s unthinkable that in a society facing a humanitarian crisis, expenditure is directed towards military spending instead of covering basic necessities like feeding the population and heating schools and hospitals” – all I can say to this is: more power to you!

“It’s certain that the prosperity they (powerful lobbies) enjoyed for decades, the immunity from taxation, has created enough “stock” the powerful could and need to share in order to restart our society” – all I can say to this is: more power to you!

“There certainly need to be new ways to finance our dying economy. For instance, apart from the savings from structural adjustment, special purpose banks will be founded, to operate essentially as investment funds” – Prof. Milios is blowing smoke again because he leaves the impression that all Greece needs in order to finance new productive investment are special purpose banks. As pointed out above, Greece needs the money from those ‘foreign lenders’ because Greece doesn’t generate enough savings on its own in order to finance the necessary growth. Even a new special purpose bank can’t do any lending if it doesn’t have the funding.

“If we define ‘investment’ as a fund coming to buy up businesses which have found themselves in a tough spot because of the crisis, downsize them, fire staff and sacrifice its long-term prospects for short-term profitability, then we are categorically against this” – all I can say to this is: more power to you! Greece does not need asset strippers as it tries to turn-around its economy!

“If we define ‘investment’ as providing capital for the development of activities that respect our society as a whole, that in order to produce profit make use of what modern technology can provide, that respects the worker’s rights and the natural environment, if they cover basic social criteria like jobs creation, then yes, we are for that kind of investment” – all I can say to this is: more power to you!

“If a left-wing government is backed by the people who, in the past, flooded Syntagma square and demonstrated their dissent against austerity policies in every city in Greece, then we have nothing to fear. This negotiation will prove to be of benefit to the vast majority of the Greek society” – all I can say to this is: power away from you!

Conclusion: I am reminded of a previous interview with Mr.Yiannis Dragasakis of SYRIZA. He, too, had given a rather reasonable interview only to blow it with his last statement. Prof. Milios repeats that experience: by and large a reasonable interview but with his very last statement he confirms all the fears that some people have of SYRIZA.

Previous posts on SYRIZA/Tsipras

Lest ye forget HP, Unilever and Cosco!

Positive news have a way of being forgotten so quickly when there is such ample supply of negative news. Thus, I want to bring back to memory two important events of the last couple of months.

Last November, it was announced that HP had chosen Piraeus as the site for its central distribution center for products destined for Central Europe, the Middle East, North Africa, the Mediterranean region and the former Soviet republics. HP products will be distributed by sea from the terminal that Cosco controls in Piraeus and by rail via state railway service operator TRAINOSE. That then rekindled Russian interest in Trainose which will transport a considerable share of that volume to other European countries.

Also in November, Unilever announced that 110 of its products that are currently imported to Greece from elsewhere in Europe will soon be produced in this country, in a much-needed boost for the local economy. Even a high school student will quickly understand that this move will have some positive impact on employment.

There is no new employment without new investment and there is no new investment without demand for logistical support. Thus, at the center of all this is a good infrastructure and outstanding logistical resources. That, of course, brings Cosco to mind again, an investment which I have already praised several times as the prototype of a good foreign investment in Greece.