Was 2013 "The Year of the EU Task Force for Greece"?

A year ago, my New Year's Eve proposal was that the year 2013 should be made "The Year of the EU Task Force for Greece". Well, what can be said about that in retrospect?

The TFGR had been established by the EU in 2011 so that its resources could be used by Greek authorities to meet 3 great challenges facing the country and Greek society:

1. Supporting growth, employment and competitiveness.

2. Enabling growth through reform of Greek public administration.

3. Maintaining progress towards fiscal consolidation.

Its key mission was summarized as follows:

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 characterised by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos. 

To date, the TFGR has published five reports, two of which during 2013: one in April and one in October.

When the TFGR was established, I thought it was one of the greatest things for Greece since sliced bread. There was, on one hand, Greece, a country which badly needed technical advice and help in all matters relating to bringing the country into modernity and, on the other hand, there were other European countries which had centuries of know-how in public administration and so forth. I thought Greece would jump enthusiastically at the opportunity and facilitate an accelerated transition to modernity.

I recognize that the TFGR has to keep a low profile for political reasons. The impression must be avoided that 'foreigners are showing Greeks how to run their country' (even though that's what the TFGR was and should be all about).

The TFGR's progress reports are diligent excercises in demonstrating and documenting success. There is a lot of talk about 'broadening and deepening technical assistance'; about 'helping to build the administrative capacity to prepare and implement reforms'; about 'helping the Greek administration to better service the needs of its citizens'; etc. etc.

I am certain that there were quite a lot of tangible results accomplished through the assistance of the TFGR. There better be some tangible results after 2-1/2 years!

What I have not seen todate - and this is what I had in mind when I wrote my New Year's Eve proposal a year ago -  is that the TFGR would become a widely recognized and appreciated force of change in Greece; change for the better; change for better public administration. No country can use its potential if there is not an efficient public administration and if there are not strong institutions.

Thus, I propose for 2014 the same which I had proposed a year ago today, namely: that 2014 become "The Year of the EU Task Force for Greece!"

Wolfgang Münchau's Sobering Assessment of the Recent EU Summit

In this SPIEGELONLINE article, Wolfgang Münchau makes a sobering assessment of the recent EU summit. The good news is that, according to Münchau, Chancellor Merkel does fully understand what the Eurozone issues are all about. That surprised Münchau; me, too.

The sobering news is that consequential action based on the correct definition of the problem is not in sight. Merkel allegedly stated that, without consequential action, the Euro would 'blow up in the air'. 

Whether Merkel's proposal is the right one or not should be subject to debate. What should not be subject to debate is that the Euro will indeed blow up in the air if everyone keeps bickering against one another and if no action is taken.

The Very Unusual Year-End TV Address of PM Samaras

Yesterday, the Ekathimerini published an article about PM Samaras' year-end TV address which I was going to comment about today; today I can no longer find the article. Perhaps it was withdrawn as insufficiently newsworthy; perhaps because the government wanted to eliminate any traces of an unfortunate year-end TV address.

Fortunately, I found a report on this TV address in Der Spiegel. The PM had very good news for the suffering Greek population: Greece would return to the markets in 2014; Greece would no longer need to borrow from the Troika; Greece would thus become a 'normal country'; Greece's primary surplus would be used to strengthen the economy; etc. etc.

I can literally see a suffering Greek family watching the TV address in a barely heated living room jumping of joy about this splendid news! "We will become a normal country!"

The PM was confused about his audience. Had he been addressing an audience of foreign creditors, his speech might have been understandable. Still, foreign creditors would have asked some questions like: What benefit is it to the Greek economy if Greece borrows more expensive money from the markets instead of less expensive money from the Troika? How can Greece use the primary surplus to strengthen the economy when it is contractually obligated to use it for paying interest?

The audience which the PM addressed probably asked a much less sophisticated question such as: What the hell does that have to do with us?

Only a couple of days ago, I wrote an article about the government's reckless ignoring of the soft facts while only focusing on hard facts. To use a year-end TV address to talk about returning to the markets, to talk about the primary surplus etc., well, to put is politely --- that is the epitome of bad taste and/or misguided intentions.

Greece's returning to the markets, if it will be possible in the first place, has absolutely nothing to do with the well-being of ordinary Greeks (unless, of course, 'the markets' would return to throwing tons of money at Greece). Greece's primary surplus has absolutely nothing to do with the well-being of ordinary Greeks if it must be used to pay interest on debt. Greece's becoming a 'normal country' again has, per se, absolutely nothing to do with the well-being of ordinary Greeks

And, most importantly, what the heck are these kinds of issues doing in a year-end address to the nation which address should uplift the spirits of suffering people?

I feel bad about expressing such criticism when, in actual fact, the PM and his government deserve praise for some of the hard facts which they have accomplished during 2013. But the government's job is not only to accomplish hard facts.

The main job of leaders is to provide leadership!

Summary of European Bail-Out Facilities

To whom it may be useful:

A Complete Guide to European Bail-Out Facilities - Part 1: ECB
A Complete Guide to European Bail-Out Facilities - Part 2: Target2 & EFSF / ESM
A Complete Guide to European Bail-Out Facilities - Part 3: Banking Union

Observing Greece During 2013

At Christmas 1945, when a war-torn Austria was economically devastated and hunger prevailed throughout the country, the then Chancellor Leopold Figl said the following in his Christmas radio address to the nation:

"There is nothing that I can give you for Christmas. I cannot give you candles for your Christmas tree --- provided that you even have one. I can give you neither bread nor coal. We have nothing! All I can ask you is: believe in your country!"

Historians later described this as one of the most important speeches by an Austrian politician ever. It is said to have had a significant impact on the morale of Austrians during terrible times.

If a Greek politician said something like this over this past Christmas, then I have missed it. We are, of course, talking about soft facts; not hard facts. About compassion (not comisery). One has to bear in mind, however, that a most important instrument to influence the hard facts is to focus on the soft facts in a society. On morale, on motivation and - in times of misery - on compassion.

The Greek economic leadership has accomplished most remarkable hard facts during 2013: a primary surplus, a surplus in the current account and quite a few more. However, throughout 2013, my impression was that the focus was entirely on hard facts with the soft facts being more or less ignored.

My wife and I spent 2 months in the spring in Greece and another 3 months in the fall. I can't say that, living in a city like Thessaloniki, any change in the hard facts, be it positive or negative, was clearly recognizable. The superficial oberserver saw a city at the end of the year which did not seem to be any less bustling than at the beginning of the year. And a bustling city Thessaloniki is!

However, there was a very noticeable change in spirits. Not too long ago, it seemed quite easy to get Greeks excited in conversations and discussions. Only the mentioning of the name 'Merkel' would get some people up in arms. It seemed that someone like Alexis Tsipras had the pulse of Greeks at his fingertips and could arouse disenfranchised people whenever and wherever he wanted to. As the year progressed, spirits changed: passivism, fatalism, depression could be felt all over. My wife has, more than once, suggested that we give up our apartment in Thessaloniki because witnessing all the depression in her family and in society is getting too hard for her to bear.

Regardless which economic policies Greece will pursue going forward, regardless which politician will lead the country --- it will take a very, very long time until an improvement in the hard facts will trickle down to those who need it the most. Yes, there may be bullish periods from time to time when the world (particularly the foreign creditors) will hail Greece as a 'success story'. However, little of that success will be felt by the common people.

When, as I understand, at least one-third of the Greek population are in extremely dire straits, it is simply inconceivable that any economic policy can improve the lot of one-third of a population in a reasonably short timeframe in a significant way. Yes, there may be a little growth in 2014 and, yes, the unemployment figure may go down a little. But what is the difference for a society if unemployment is 'only' 25% instead of 27%? Only if and when unemployment returns to pre-2009 levels will the people feel that 'we have made it!' And that, as I said, will take a very, very long time.

In such a situation, it is almost reckless governance to focus exclusively on hard facts and ignore the soft facts.Yes, one could bank on the hope that, one way or another, suffering Greeks will simply remain passive, fatalistic and depressive --- but no more than that. On the other hand, one might want to read what John Maynard Keynes once wrote about such situations:

"Economic privation proceeds by easy stages, and so long as men suffer it patiently the outside world cares little. Physical efficiency and resistance to disease slowly diminish, but life proceeds some how, until the limit of human endurance is reached at last and counsels of despair and madness stir the sufferers from the lethargy which preceeds the crisis. Then man shakes himself, and the bonds of custom are loosed. The power of ideas is sovereign, and he listens to whatever instruction of hope, illusion, or revenge is carried to him on the air (...). But who can say how much is endurable, or in what direction men (Greeks?) will seek at last to escape from their misfortunes?"

In mid-2013, a NYT-article suggested that 'an unlikely campaign to change the flawed policies that govern the European Union has begun in Greece, a small, proud country that has, in the past, given quite a few ideas to the world — including one, people’s government, that we like to call by its Greek name'. Well, anyone who argues that Greece can and will change the flawed policies of the EU needs to have his head examined, in my opinion.

However, there is, I believe, one area where Greece could set the standard; could carry the torch. Extreme hardships can, if soft facts are well employed, set loose enormous energies in a society which otherwise remain dormant. That requires true leadership.

The EU is a place which, nowadays, is very long on top politicians but very short on true leadership. Or can anyone quickly name a politician who would fit the mold of predecessors like de Gaulle, Mitterrand, Brandt, Kohl, Thatcher, Palme, Kreisky and so forth?

There may be no other place in the EU which needs true leadership more badly than Greece does. Leadership in the sense of bringing people together in the midst of misery; in the sense of setting loose energies in a society which otherwise would remain dormant; in the sense of presenting a vision of a better future which makes today's sacrifices appear worthwhile; etc. etc.

Such leaders are unlikely to come out of an entrenched political system like that of Greece. But they don't necessarily have to come out of the political system. They could come out of the economic sector; the cultural sector; even out of sports. 

Back in early 2011, the HuffingtonPost published an article titled "What Greece Needs Now is a New Hero". There are undoubtedly enough potential 'new heroes' in Greek society except they do not come to the forefront.

My wish and hope for Greece for 2014 would be that those potential new heroes pluck up the courage and step forward to employ their talents for the benefit of Greek society. During the first half of 2014, Greece will hold the EU Presidency and the country will have the stage. That would be as good a time as any for potential new heroes to get on that stage.

It is not in the area of correcting flawed EU policies where Greece can leave a mark on Europe. Instead, it is in the area of leadership where Greece could distinguish itself in a continent which is, for the most part, without true leadership. Greece could set an example how a society, in the midst of misery, can be brought together; how a society can set loose energies which otherwise would remain dormant; how a society can present a vision of a better future which makes today's sacrifices appear worthwhile; etc. etc.

All that is necessary is that those Greeks who have the potential of being heroes pluck up the courage and stand up to be counted!

Merry Christmas!

I wish the readers of this blog a Merry Christmas! Those who have had enough of warm climates may wish to come to Austria and visit the lake where we live! Contrary to Greece where the sun is out most of the time, we have to always wait a long time to see a day like below. We then quickly take a picture because it may be quite a while until such weather returns.

Greece's Current Account --- Cause for Jubiliation Among Foreign Creditors!

Below are the figures of Greece's current account for January-October periods (10 months). I have compared this year's results to the previous year's and, to put things into perspective, I have compared both periods to the same period of 2008 (Greece's worst current account year). The numbers and their trend are remarkable, to say the least!

(in BEUR)

		January - August
		2008		2012	2013
Revenue from abroad
	Exports	16,9		18,0	18,8
	Services (e. g. tourism)	30,4		24,4	24,7
	Other income	4,6		3,2	3,0
	Current transfers	5,9		4,7	6,5
		----		----	----
	Total revenue from abroad	57,8		50,3	53,0
Expenses abroad
	Imports	54,8		35,3	33,4
	Services (e. g. tourism)	14,3		10,3	9,2
	Other expense (e. g. interest)	13,5		4,8	5,4
	Current transfers	3,3		3,2	2,8
		----		----	----
	Total expenses abroad	85,9		53,6	50,8
Net foreign deficit (current account)		-28,1		-3,3	2,2
Trade balance		-37,9		-17,3	-14,6
Services balance		16,1		14,1	15,5
Other balance		-8,9		-1,6	-2,4
Current transfer balance		2,6		1,5	3,7
		----		----	----
Net foreign deficit (current account)		-28,1		-3,3	2,2

Below are some observations:

1) Where Greece had a deficit of 28,1 BEUR in 2008, it now shows a surplus of 2,2 BEUR in 2013. That's an improvement of 30,3 BEUR (or about 15% of GDP)!
2) No one, only a few years ago, would have considered such an improvement possible, in my opinion. Certainly I wouldn't have.
3) One caveat about the 2008/2013 development: the 'nice' improvements are those where revenues go up and expenses go down. The 'not-so-nice' improvements are those where expenses go down but revenues as well. The large revenue decline came in 'services' and here it is the line item 'transportation'. Regrettably, I cannot tell what is behind 'transportation'.
4) The 2012/2013 development is 'nice' in the sense that revenues went up and expenses went down. The improvement in the current account balance versus 2012 is primarily attributable to a significant decline in the trade deficit and secondarily to increases in the current transfers and services surpluses. By contrast, the income account deficit increased.
5) Oil exports accounted for the bulk of the improvement in exports but foods, beverages, minerals and non-metallic mineral products were also significant. The declince in imports resulted mainly from lower oil imports.
6) The significant increase in current transfers was mainly due to higher general government net transfer receipts (mainly from the EU).

What can be said about all this?

This is certainly cause for jubilation among Greece's foreign creditors. A current account surplus means that the national economy cannot only cover all of its foreign operating expenses but, and this is the cause for jubilation among foreign creditors, it can also pay all of its foreign interest expense. Admittedly, Greece's interest rates are well below-market but who would have thought only a couple of years ago that Greece would be able to pay any of its interest expense without having to borrow the necessary money from foreign creditors?

The 2013 results are also cause for jubilation among Greece's economic leadership. They have promised to deliver results and they have delivered them.

The 2013 results would be cause for jubilation for the entire economy if only the price hadn't come so high. The price is essentially domestic economic contraction. Expenses have been driven down with a sledge hammer but there are no clear signals that revenues and economic activity will go up. If nothing happens soon, it could become the classic story of the operation having been successful even though the patient died.

The export growth since 2008 is dismal for a country which has gone through domestic devaluation in order to become more competitive. All statistics suggest that domestic devaluation has been quite substantial. Against that background, one can only assume that the Greek economy does not have enough of a productive sector to benefit from an improvement in competitiveness.

And that, the build-up of a productive sector, should be the number one priority of Greece's economic leadership!