According to economists it takes 5 years for a country, any country to get out of a recession. What about Greece though. It never follows any sort of economic trend. Last year during the height of the GFC - Global Financial Crisis, Greece imported more luxury Mercedes-Benz automobiles than any other European country.
This is because there is more than one 'economy' operating in Greece.
There is the black economy which according to some estimates is as large as 40% of the total economy.
This economy not only includes those catchy sounding professions as Pimps, human desperation traders and drug dealers, but it also includes lawyers, doctors, taxi drivers, petrol station and car park owners. These professions are notorious in Greece for not paying taxes and working 'off the books'. Here in Greece its just common knowledge.
The second economy is the Public Sector. 40% of the national budget gets sucked into this black abyss. These people do pay taxes. However they are not taxed on their fringe benefits, benefits that is more than their initial wage. They get higher pensions and their pension funds have never been looted by any government. They have access to free child care the envy of any first world country. Some civil servants can get a fixed home loan at 3%. In the last nine months of the previous administration many civil servants booked 90 hours overtime a month - on days they didn't even turn up to work. Try that anywhere else.
More tragic however is that bright minds get attracted to work here. Sure its dull and boring in the civil service, but 6 hour work days plus the benefits - where else can you get that.
This has left the third economy weak and anemic.
The third economy is the economy that those abroad understand and live in. People selling their goods and services on the dirty market. It is not a free market in Greece. There are restrictions as to who can be employed as what and if so how many hours they can work at what compensation rate. For example, though previously employed as a writer at a large company, i was never officially one, instead i was hired as a mere office employee. If i was a writer the government demands that i be paid extra money and that i work for no longer than 40 minutes in front of a screen etc... While well intended - these do more to hinder the 'free market' than support it. And looking at all the building sites with workers with no safety helmets, more has to be done enforcing laws than merely writing them.
Many professions are closed shop, such as movers and journalists. Red tape can kill small businesses. If you are self employed in Greece - factor in at least 35 days a year that will be lost to red tape.
Despite this there are some companies that are doing well. These include the Mastiha cooperative that is investing in their niche product Mastiha. Korres which is selling worldwide. Intralot which is one of three companies that competes in the world that provide lottery systems. Coca-Cola 3E, a local franchise, that through local hard work and entrepreneurial spirit is now the second largest bottler in the world after Atlanta and operations across the Middle East and Eastern Europe. These are just a few companies - that despite the roadblocks that the other two economies place in their way have managed to do well.
If Greece is to get out of this recession - it is to this third economy that Greece must look towards as being the engine of growth. No more must it coddle the public sector, a sector which sucks the fire out of the real economy. No more can it turn a blind eye to the black economy, which tears down any progress made in the real economy.
The more we wait however, the more anxious we become.
Monday, March 1, 2010
Greece - the addict of Europe
Greek statistics. Those two words are now synonymous with false bookkeeping, and in a way epitomises the state of affairs in the Balkans. The past year has seen the Greek economy and its reputation hit rock bottom.
But how did Greece in particular reach this state. In February of 2009 the then Karamanlis government and Economy and Finance Minister Yiannis Papathanassiou, announced that the budget deficit in 2010 would be 'reduced' to 3.2 percent of gross domestic product (GDP) from a targeted 3.7 percent in 2009. One change of government later the deficit was revealed to be the largest in the euro-zone and projections predict that the deficit will reach 13.7% in 2010.
This revelation has sent shockwaves across some markets and economists across the euro-zone and the world, and has even become a talking point for many politicians in the EU. However when one looks at the statistics and the state of affairs in Greece dispassionately, what is shocking is the amount of pretense that went on when the government first announced the 3.2 percent deficit, a figure market analysts knew would never be reached. One newswire, Bloomberg, would frequently reject the governments own Budget statement because the accounting didn't add up. Analysts and governments the world over knew that something was wrong, but those with the power to speak up, did not.
Now in 2010, the Greek government is sending reassurances to its EU partners and economic teams from the IMF will further investigate. Concern still remains that the pretense will continue in an effort to prevent a further collapse of the Greek economy.
In this way, Greece's partners and financial supporters are acting as its enablers, supporting Greece's addiction.
Because that's what Greece is - an addict. And even worse than that, an addict living in oblivion.
The first lesson in economic development is, never enter a community if you have not been asked to enter. Looking across the world there are many areas that the more developed economies can assist lesser developed countries. Experience however has taught practitioners that success in any development program lies in the willing participation of the locals. If they don't support it, sustainability will never be attained and gone is any chance of change.
The same is true of drug addicts. No matter how many times family and friends help, if the addict doesn't want to change, they never will. And in many cases the addict has to really hit rock bottom before they themselves realise that they need to change.
And that's what Greece is. An addict who has gone through decades of promising change, and while some change has occured, it has been glacial. However structural problems still exist.
Corruption is still rampant and is a way of life - akin to breathing.
Clientalist politics (political patronage) is the way of survival here and has been for most of the last century. In many ways its political structure shares more with the Philippines than it does its northern neighbours in Sweden.
Crony Capitalism is the only form of capitalism. Small companies are created overnight, are awarded government or EU subsidies, then vanish into the ether. Other large companies own media outlets to apply political pressure so that contracts are awarded to them instead of Greece's nascent entrepreneurs.
These problems have been around for decades and Greece's partners in the EU have known about them for just as long, and in many instances, have benefited from them. Because of the power structure here in Greece, the politically disadvantaged have long wished that 'Those efficient Germans' come in and run Greece's economy. Meanwhile they go cap in hand to some political bigwig, cap in hand, to get a job to feed their family.
Now however is not the time for accusations and false pride. Greece must realise that now is the time for change, and their partners in Europe must keep up the pressure and demand that changes be made now while the whole world is watching and not later.
Yes things are bad in Greece, and things will get worse. My only hope is that Greece realises the magnitude of the problem and understand that the problems are home grown. Only then will Greece and it people wake up and actively begin to throw off its shackles of economic beggary.
Today the European Commissioner for Economic and Monetary affairs must keep up the pressure on Greece and demand that measures be implemented immediately.
But how did Greece in particular reach this state. In February of 2009 the then Karamanlis government and Economy and Finance Minister Yiannis Papathanassiou, announced that the budget deficit in 2010 would be 'reduced' to 3.2 percent of gross domestic product (GDP) from a targeted 3.7 percent in 2009. One change of government later the deficit was revealed to be the largest in the euro-zone and projections predict that the deficit will reach 13.7% in 2010.
This revelation has sent shockwaves across some markets and economists across the euro-zone and the world, and has even become a talking point for many politicians in the EU. However when one looks at the statistics and the state of affairs in Greece dispassionately, what is shocking is the amount of pretense that went on when the government first announced the 3.2 percent deficit, a figure market analysts knew would never be reached. One newswire, Bloomberg, would frequently reject the governments own Budget statement because the accounting didn't add up. Analysts and governments the world over knew that something was wrong, but those with the power to speak up, did not.
Now in 2010, the Greek government is sending reassurances to its EU partners and economic teams from the IMF will further investigate. Concern still remains that the pretense will continue in an effort to prevent a further collapse of the Greek economy.
In this way, Greece's partners and financial supporters are acting as its enablers, supporting Greece's addiction.
Because that's what Greece is - an addict. And even worse than that, an addict living in oblivion.
The first lesson in economic development is, never enter a community if you have not been asked to enter. Looking across the world there are many areas that the more developed economies can assist lesser developed countries. Experience however has taught practitioners that success in any development program lies in the willing participation of the locals. If they don't support it, sustainability will never be attained and gone is any chance of change.
The same is true of drug addicts. No matter how many times family and friends help, if the addict doesn't want to change, they never will. And in many cases the addict has to really hit rock bottom before they themselves realise that they need to change.
And that's what Greece is. An addict who has gone through decades of promising change, and while some change has occured, it has been glacial. However structural problems still exist.
Corruption is still rampant and is a way of life - akin to breathing.
Clientalist politics (political patronage) is the way of survival here and has been for most of the last century. In many ways its political structure shares more with the Philippines than it does its northern neighbours in Sweden.
Crony Capitalism is the only form of capitalism. Small companies are created overnight, are awarded government or EU subsidies, then vanish into the ether. Other large companies own media outlets to apply political pressure so that contracts are awarded to them instead of Greece's nascent entrepreneurs.
These problems have been around for decades and Greece's partners in the EU have known about them for just as long, and in many instances, have benefited from them. Because of the power structure here in Greece, the politically disadvantaged have long wished that 'Those efficient Germans' come in and run Greece's economy. Meanwhile they go cap in hand to some political bigwig, cap in hand, to get a job to feed their family.
Now however is not the time for accusations and false pride. Greece must realise that now is the time for change, and their partners in Europe must keep up the pressure and demand that changes be made now while the whole world is watching and not later.
Yes things are bad in Greece, and things will get worse. My only hope is that Greece realises the magnitude of the problem and understand that the problems are home grown. Only then will Greece and it people wake up and actively begin to throw off its shackles of economic beggary.
Today the European Commissioner for Economic and Monetary affairs must keep up the pressure on Greece and demand that measures be implemented immediately.
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