Today i woke up and not only has Greece yet to decide on an interim Prime Minister but that the front runner was steam rollered.
The obvious choice of Papademos was vetoed at the last minute by current deputy PM and Finance minister Eleftherios Venizelos. (He denies it but sources close to him confirm it.)
Papademos was insisting that the interim PM not only sign cheques and get the loans, but stay on to actually implement the reforms that accompany the money tranches that are being sent here to Greece to bolster the corrupt public servant based economy.
He was also rejected because there was a fear that he would actually succeed in carrying out the reforms. "Him" (and i quote the source again) "a mere technocrat actually doing the job when he isn't even trained as a politician."
(Yes - people here think that a politician is a career that one can actually train for)
This concept - implementing reforms - is anathema to the political system. They have based their whole political careers at playing 'the big man in town' dispensing favours and jobs to those whom they deem worthy enough or just want to sleep with. This is how Greece's public sector was built. Its not uncommon to find accountants in the tax office who don't know accountancy, but only got the job because they turned up to political rallies. If reforms are carried out - where will they work? All they know how to do is to go out on the streets and protest. There is another job that also demands that the worker goes out onto the streets which they are also accustomed to, but the hours are a lot later and longer.
The corrupt political system is once again digging their heels in and those on the left and the right are jubilant at the prospect of returning to the drachma. What left or right. The blancmange of political parties under the rainbow are ecstatic!
No longer will they have oversight as to where and how they spend money. In the drachma they can throw as much money as they want around. The economic situation will be so bad that people will sell their sons and daughters to a politician just so they can survive - just like they used to before Greece entered the Euro. And in the drachma, politicians can once again make people millionaires! Here have a million drachma - so what - it will only be worth 40 Euro.
But remember that. All the politicians and the political parties remember the good old days of the drachma - it was not that long ago.
Which was one of the 'good' things of the euro. It started to accustom a whole nation that there was another way to live their lives without this corruptocracy. Unfortunately the other reforms that were needed to accompany closer integration - such as reforming the Justice system etc were not implemented, not did the EU do anything about - other then sending a letter and posting it on a website to voice their disapproval.
So here i am. A graduate in economic development, having worked on EU projects promoting innovation in the developing regions of Europe and the world, having helped promote Greek businesses abroad, watching my own country being deliberately led into economic ruin because of a few politicians. I see the chasm opening up before me. I know that two years ago i opposed the bailout saying that things have to get worse before they can get better - but i never advocated a removal from the euro. Under the drachma things will be worse, but the bad practices will be reborn again - something that under the euro were slowly being done away with.
Wednesday, November 9, 2011
Monday, August 29, 2011
...but how did Greece get itself into the financial mess?
A lot has been said about the financial crisis in Greece in recent months, speculation about the future, but little about how Greece got itself into the position its now in. A lot of what has been said has been inflamatory and in some cases down right racist.
Which is why i was pleased to read an article on Economia titled The Greek deficit and debt crisis: an end or a beginning? written by the esteemed foreign correspondant for the Economist Robert McDonald.
The first part of a series, Mr McDonald traces the root of the crisis back to the burgeoning public sector debt of the 80s and explains the various attempts at economic reform that have taken place since then.
The following is an excerpt from the article.
At this juncture it is worth a brief historical review to see how Greece arrived at the present impasse. The country has, since WWII, been aid-dependent. In the early days – during the Civil War of the late 1940s and the Cold War of the 1950s, 60s and 70s -- this was military aid provided by the United States but it freed national resources for domestic development programmes.
Since Greece’s entry into the European Economic Community, in 1981, Europe has taken over where America left off with various civilian aid programmes. Through the Integrated Mediterranean Programmes and three Community Support Frameworks, Greece has received to date some €55bn in structural fund aid and, under the fourth community support framework, Greece stands to receive a further €24bn by 2015. That is to say, by the middle of this decade Greece should have received nearly €80bn in development aid from the EU.
Despite such assistance, successive Greek governments have continued to run up massive debts -- particularly under the socialist governments of the 1980s under the Panhellenic Socialist Movement (Pasok) headed by the party’s founder Andreas Papandreou (the late father of the current prime minister).
A fact on which the present government tends not to dwell is that in 1980, the year before the socialists first came to office, the Greek debt to GDP ratio stood at just 39%. Nine years later, when Pasok was voted from office, the debt stood at 104% of GDP. The level has never since fallen below 100%.
The servicing of this debt has been a huge drain on budget resources cutting deeply into the potential for development investment. So long as the economy was growing, the cost was sustainable, albeit with difficulty. Today, interest payments absorb one in every four euros of net ordinary budget revenues and there is a primary deficit.
The primary balance is the budget balance less interest payments. Once there is a primary surplus the government will be in a position to begin to pay back some of the debt. As it is, the aggregate level keeps mounting.
Ordinarily the government would be able to keep ticking over by borrowing small amounts to cover new debt and large amounts to roll over old debt as it matures. But, in present circumstances, the cost of doing this is prohibitive and, because of recent changes in EU accounting procedures, the aggregate debt level has been mounting rapidly. It is officially forecast to reach nearly 160% of GDP by next year. That’s a little under €30,000 in debt for every man, woman and child in the country.
The present recourse to the European Union is not the first time that Greece has been helped by Brussels with loans as well as with aid. In 1985, the public sector borrowing requirement had risen to 17.9% of GDP and national reserves had dwindled to the equivalent of just five weeks of imports. The government could only obtain expensive, medium-term credit and so turned to the Community for a cheaper loan. It was granted Ecu1.75bn but under the strict condition that it should reduce the public sector borrowing requirement and cut the current account deficit to a level that would be sustainable by non-debt inflows of foreign capital.
The economy and finance minister of the day was Costas Simitis, a reformer who in the mid-1990s succeeded Andreas Papandreou as prime minister. Simitis implemented policies which met the Community’s conditions through a15% devaluation of the drachma and an incomes policy that produced a real reduction in the earnings of salaried employees of 11% over two years. Simitis wanted to extend such measures for several more years to try to restore skewed economic fundamentals. However, Andreas Papandreou, with an eye to the possibility of early elections, forced Simitis to resign and appointed a more tractable successor who oversaw a return to laxity.
The conservative New Democracy government elected in 1990 found itself confronted with an even higher public sector borrowing requirement equivalent to 21% of GDP. It too turned to Brussels for assistance. It was granted an Ecu2.2bn loan facility in exchange for a rigorous consolidation programme which included many proposals that sound familiar today such as, for example, a) a 10% reduction in public sector employment, b) caps on public sector wages and c) a halving in subsidies for public sector enterprises. This was to be coupled with an extensive programme of privatisation.
The EEC loan was to be disbursed in three tranches: the first of Ecu1bn and a second and third -- each of Ecu 600mn. Release of the latter two was contingent on implementation of the consolidation programme. At the end of the first year, the government was quietly advised by Brussels that its performance had been so abysmal that, if it applied for the second tranche, its application would be rejected. The government did not apply and instead tried to muddle through with domestic programmes until it fell in an early election in 1993.
In 1992, the ND government had signed up to the Treaty of Maastricht which transformed the European Economic Community into the European Union and set the framework for a common currency with a unitary monetary policy to be administered by a European Central Bank (ECB). Those countries who wished – and were able – to subscribe to conditions laid down in the Economic and Monetary Union (EMU) were eventually to be allowed to deploy the Euro.
The criteria for the EMU included basic rules that deficits should be no more than 3% of GDP and debt should be equivalent to, or headed towards, 60% of GDP. In addition, there were other criteria related to exchange rate stability, inflation, and long term interest rates. In 1998, when the European Council decided which countries were entitled to become members, Greece was the only one of the twelve that wished to join, that did not qualify. The Greek deficit stood at 4.6% of GDP and its debt at 108.5% of GDP while its inflation rate was more than double the reference rate and its long-term interest rates were nearly 2 percentage points higher than the reference rate as well as being unstable.
The Pasok government of the day – by this time headed by Costas Simitis – devoted all its political energies for the years 1999 and 2000 to meeting the criteria to join the Economic and Monetary Union. To do this it used accounting practices which it claimed were sanctioned by Eurostat. These reduced the estimated general government budget deficit for 2000 to less than 1% of GDP (0.8%) and brought down the general government debt to 104% of GDP. Inflation was squeezed through a series of administrative measures and interest rates fell below the reference level. In March 2000 Greece was declared to have met the membership targets and on January 1, 2001 it became the 12th member of the EMU.
Member states of the Economic and Monetary Union are required each year to present a so-called Stability and Growth Programme to the European Commission detailing the policies that they will follow in the medium term in order to continue to adhere to EMU membership criteria.
For three years, the country produced programmes which appeared to show that it was abiding by the rules. I say appeared, however, because when the New Democracy party was restored to government in March 2004 it undertook what it styled a “fiscal audit” which claimed that Pasok had only achieved the target numbers through creative accounting. Among other things, ND contended that the socialists had kept down deficits by keeping off-balance-sheet many items of expenditure. By ND’s calculations, the 2004 deficit, which had been officially forecast to be 1.2% of GDP, was actually 3.2% of GDP and debt levels, which were supposedly contracting, were actually on the rise.
The full text including annotations can be read here
Which is why i was pleased to read an article on Economia titled The Greek deficit and debt crisis: an end or a beginning? written by the esteemed foreign correspondant for the Economist Robert McDonald.
The first part of a series, Mr McDonald traces the root of the crisis back to the burgeoning public sector debt of the 80s and explains the various attempts at economic reform that have taken place since then.
The following is an excerpt from the article.
At this juncture it is worth a brief historical review to see how Greece arrived at the present impasse. The country has, since WWII, been aid-dependent. In the early days – during the Civil War of the late 1940s and the Cold War of the 1950s, 60s and 70s -- this was military aid provided by the United States but it freed national resources for domestic development programmes.
Since Greece’s entry into the European Economic Community, in 1981, Europe has taken over where America left off with various civilian aid programmes. Through the Integrated Mediterranean Programmes and three Community Support Frameworks, Greece has received to date some €55bn in structural fund aid and, under the fourth community support framework, Greece stands to receive a further €24bn by 2015. That is to say, by the middle of this decade Greece should have received nearly €80bn in development aid from the EU.
Despite such assistance, successive Greek governments have continued to run up massive debts -- particularly under the socialist governments of the 1980s under the Panhellenic Socialist Movement (Pasok) headed by the party’s founder Andreas Papandreou (the late father of the current prime minister).
A fact on which the present government tends not to dwell is that in 1980, the year before the socialists first came to office, the Greek debt to GDP ratio stood at just 39%. Nine years later, when Pasok was voted from office, the debt stood at 104% of GDP. The level has never since fallen below 100%.
The servicing of this debt has been a huge drain on budget resources cutting deeply into the potential for development investment. So long as the economy was growing, the cost was sustainable, albeit with difficulty. Today, interest payments absorb one in every four euros of net ordinary budget revenues and there is a primary deficit.
The primary balance is the budget balance less interest payments. Once there is a primary surplus the government will be in a position to begin to pay back some of the debt. As it is, the aggregate level keeps mounting.
Ordinarily the government would be able to keep ticking over by borrowing small amounts to cover new debt and large amounts to roll over old debt as it matures. But, in present circumstances, the cost of doing this is prohibitive and, because of recent changes in EU accounting procedures, the aggregate debt level has been mounting rapidly. It is officially forecast to reach nearly 160% of GDP by next year. That’s a little under €30,000 in debt for every man, woman and child in the country.
The present recourse to the European Union is not the first time that Greece has been helped by Brussels with loans as well as with aid. In 1985, the public sector borrowing requirement had risen to 17.9% of GDP and national reserves had dwindled to the equivalent of just five weeks of imports. The government could only obtain expensive, medium-term credit and so turned to the Community for a cheaper loan. It was granted Ecu1.75bn but under the strict condition that it should reduce the public sector borrowing requirement and cut the current account deficit to a level that would be sustainable by non-debt inflows of foreign capital.
The economy and finance minister of the day was Costas Simitis, a reformer who in the mid-1990s succeeded Andreas Papandreou as prime minister. Simitis implemented policies which met the Community’s conditions through a15% devaluation of the drachma and an incomes policy that produced a real reduction in the earnings of salaried employees of 11% over two years. Simitis wanted to extend such measures for several more years to try to restore skewed economic fundamentals. However, Andreas Papandreou, with an eye to the possibility of early elections, forced Simitis to resign and appointed a more tractable successor who oversaw a return to laxity.
The conservative New Democracy government elected in 1990 found itself confronted with an even higher public sector borrowing requirement equivalent to 21% of GDP. It too turned to Brussels for assistance. It was granted an Ecu2.2bn loan facility in exchange for a rigorous consolidation programme which included many proposals that sound familiar today such as, for example, a) a 10% reduction in public sector employment, b) caps on public sector wages and c) a halving in subsidies for public sector enterprises. This was to be coupled with an extensive programme of privatisation.
The EEC loan was to be disbursed in three tranches: the first of Ecu1bn and a second and third -- each of Ecu 600mn. Release of the latter two was contingent on implementation of the consolidation programme. At the end of the first year, the government was quietly advised by Brussels that its performance had been so abysmal that, if it applied for the second tranche, its application would be rejected. The government did not apply and instead tried to muddle through with domestic programmes until it fell in an early election in 1993.
In 1992, the ND government had signed up to the Treaty of Maastricht which transformed the European Economic Community into the European Union and set the framework for a common currency with a unitary monetary policy to be administered by a European Central Bank (ECB). Those countries who wished – and were able – to subscribe to conditions laid down in the Economic and Monetary Union (EMU) were eventually to be allowed to deploy the Euro.
The criteria for the EMU included basic rules that deficits should be no more than 3% of GDP and debt should be equivalent to, or headed towards, 60% of GDP. In addition, there were other criteria related to exchange rate stability, inflation, and long term interest rates. In 1998, when the European Council decided which countries were entitled to become members, Greece was the only one of the twelve that wished to join, that did not qualify. The Greek deficit stood at 4.6% of GDP and its debt at 108.5% of GDP while its inflation rate was more than double the reference rate and its long-term interest rates were nearly 2 percentage points higher than the reference rate as well as being unstable.
The Pasok government of the day – by this time headed by Costas Simitis – devoted all its political energies for the years 1999 and 2000 to meeting the criteria to join the Economic and Monetary Union. To do this it used accounting practices which it claimed were sanctioned by Eurostat. These reduced the estimated general government budget deficit for 2000 to less than 1% of GDP (0.8%) and brought down the general government debt to 104% of GDP. Inflation was squeezed through a series of administrative measures and interest rates fell below the reference level. In March 2000 Greece was declared to have met the membership targets and on January 1, 2001 it became the 12th member of the EMU.
Member states of the Economic and Monetary Union are required each year to present a so-called Stability and Growth Programme to the European Commission detailing the policies that they will follow in the medium term in order to continue to adhere to EMU membership criteria.
For three years, the country produced programmes which appeared to show that it was abiding by the rules. I say appeared, however, because when the New Democracy party was restored to government in March 2004 it undertook what it styled a “fiscal audit” which claimed that Pasok had only achieved the target numbers through creative accounting. Among other things, ND contended that the socialists had kept down deficits by keeping off-balance-sheet many items of expenditure. By ND’s calculations, the 2004 deficit, which had been officially forecast to be 1.2% of GDP, was actually 3.2% of GDP and debt levels, which were supposedly contracting, were actually on the rise.
The full text including annotations can be read here
Tuesday, August 2, 2011
Invest in Greece - Entering a new era
There are two ways for Greece to get out of the crisis. One is to reduce the debt burden, the other is to increase growth, however this is not an either / or choice and the country must chase both. As i have mentioned before, the private sector cannot continuously look to the government for cash, therefore the importance of Foreign Direct Investment becomes even more important in encouraging growth.
As Mr Syngros, Executive Chairman at Invest in Greece points out, recent changes in the Greek legislation pave the way for economic growth in Greece.
Following is an excerpt...
June has been a trying and tumultuous month for Greece and the Greek government which, faced with a difficult agenda, succeeded in parliament by winning a crucial vote of confidence, passing a needed austerity package coupled with an aggressive privatisation plan, and a voting for its implementation. This far-reaching vote paves the way for Greece to continue with a necessary and vast structural reform programme that will redefine economic development in a country that has experienced bureaucratic inefficiencies, opacity, a lax taxation regime, excessive public spending and a bloated public sector.
Today, Greece has the unique opportunity to truly enter a new era that must replace misguided policies of the past and establish a friendly business and social climate that eliminates waste, fosters sustainable growth and, most important, promotes investment opportunities that the global business community should welcome.
One of the key components of the new growth model is the rational and productive use of state assets that will become available to the private sector. State-run companies, utilities, national infrastructure facilities such as ports and airports, vast tracts of real estate, and other assets will all be privatised to create win-win results: revenue enhancement for the Greek state and highly attractive investment opportunities for the private sector, all serving the public good.
In addition, sectors of investment such as tourism infrastructure, RES, environmental sciences and waste management, biotechnology, food and beverage and ICT continue to offer superb investment opportunities. Our Fast Track programme is attracting widespread investor interest.
Read the whole article here
As Mr Syngros, Executive Chairman at Invest in Greece points out, recent changes in the Greek legislation pave the way for economic growth in Greece.
Following is an excerpt...
June has been a trying and tumultuous month for Greece and the Greek government which, faced with a difficult agenda, succeeded in parliament by winning a crucial vote of confidence, passing a needed austerity package coupled with an aggressive privatisation plan, and a voting for its implementation. This far-reaching vote paves the way for Greece to continue with a necessary and vast structural reform programme that will redefine economic development in a country that has experienced bureaucratic inefficiencies, opacity, a lax taxation regime, excessive public spending and a bloated public sector.
Today, Greece has the unique opportunity to truly enter a new era that must replace misguided policies of the past and establish a friendly business and social climate that eliminates waste, fosters sustainable growth and, most important, promotes investment opportunities that the global business community should welcome.
One of the key components of the new growth model is the rational and productive use of state assets that will become available to the private sector. State-run companies, utilities, national infrastructure facilities such as ports and airports, vast tracts of real estate, and other assets will all be privatised to create win-win results: revenue enhancement for the Greek state and highly attractive investment opportunities for the private sector, all serving the public good.
In addition, sectors of investment such as tourism infrastructure, RES, environmental sciences and waste management, biotechnology, food and beverage and ICT continue to offer superb investment opportunities. Our Fast Track programme is attracting widespread investor interest.
Read the whole article here
Wednesday, July 27, 2011
Rescue package for Greece - How about a Greek one?
By now of course you know of the rescue package that has been created for Greece. Though large, there is still a lot of work that needs to be done and Greece cannot breathe easy. Many changes - structural ones still need to be done.
While Europe dithered and bickered, economists, policy-makers and dinner ladies all came up with their own solutions. Mr Economides from the Stern Business School New York, highlighted 7 key aspects that a rescue package should cover. He writes...
"A national strategy for Greek sovereign debt needs to achieve the following:
1. Convert present debt to long term debt to avoid a default in the next two years. No matter how successful the reforms are, Greece will default if it does not convert its short term debt to long term debt.
2. Reduce the size of the total Greek debt. To pay the total amount of debt, Greece needs very fast sustained growth year after year over a fifteen years – not impossible but very unlikely. Otherwise, Greece requires a significant reduction of the total debt burden and has to focus on the way that this can be done best in the national interest.
3. Keep Greek banks afloat, liquid, and with sufficient trust to them. Greek banks have been subject to a prolonged bank run for over a year, as depositors have withdrawn large amounts. Every day that the debt problem is not solved, there is a chance that the bank run will become acute with truly disastrous consequences for the banks and the Greek economy. Such events may be triggered by the idiotic remarks of prominent Greek politicians that Greece is leaving the Euro, a Spiegel story, or practically any rumor in the Greek or foreign media or the Internet. The danger to Greek banks alone is sufficient to require the immediate solution of the Greek debt problem.
4. Improve the quality of Greek debt to be able to achieve lower interest rates. The present market rates for Greek sovereign debt, from 11% to 26%, are prohibitive for Greece. Greece cannot afford to borrow at interest rates above 4-5%. It will achieve these interest rates only if it increases the quality of the bonds. That can be done by either by buying high quality liquid collateral such as Eurobonds or by a guarantee from the European Stability Mechanism (ESM).
5. Be based on the true reality of the situation and should not expect Greece or its partners to do the impossible. In their attempt to please voters, politicians in Greece and the EU with very short horizons have often agreed on terms that are unfeasible. For example, the first aid agreement said that Greece would come back to the financial markets in 2012, even though no one believed this to be feasible.
6. Should be a comprehensive solution and not an attempt to kick the can further down the road.
7. It would be useful but not absolutely necessary for any refinancing not to create a 'credit event' that would lead the rating agencies to declare Greece in default."
His full article can be read here
While Europe dithered and bickered, economists, policy-makers and dinner ladies all came up with their own solutions. Mr Economides from the Stern Business School New York, highlighted 7 key aspects that a rescue package should cover. He writes...
"A national strategy for Greek sovereign debt needs to achieve the following:
1. Convert present debt to long term debt to avoid a default in the next two years. No matter how successful the reforms are, Greece will default if it does not convert its short term debt to long term debt.
2. Reduce the size of the total Greek debt. To pay the total amount of debt, Greece needs very fast sustained growth year after year over a fifteen years – not impossible but very unlikely. Otherwise, Greece requires a significant reduction of the total debt burden and has to focus on the way that this can be done best in the national interest.
3. Keep Greek banks afloat, liquid, and with sufficient trust to them. Greek banks have been subject to a prolonged bank run for over a year, as depositors have withdrawn large amounts. Every day that the debt problem is not solved, there is a chance that the bank run will become acute with truly disastrous consequences for the banks and the Greek economy. Such events may be triggered by the idiotic remarks of prominent Greek politicians that Greece is leaving the Euro, a Spiegel story, or practically any rumor in the Greek or foreign media or the Internet. The danger to Greek banks alone is sufficient to require the immediate solution of the Greek debt problem.
4. Improve the quality of Greek debt to be able to achieve lower interest rates. The present market rates for Greek sovereign debt, from 11% to 26%, are prohibitive for Greece. Greece cannot afford to borrow at interest rates above 4-5%. It will achieve these interest rates only if it increases the quality of the bonds. That can be done by either by buying high quality liquid collateral such as Eurobonds or by a guarantee from the European Stability Mechanism (ESM).
5. Be based on the true reality of the situation and should not expect Greece or its partners to do the impossible. In their attempt to please voters, politicians in Greece and the EU with very short horizons have often agreed on terms that are unfeasible. For example, the first aid agreement said that Greece would come back to the financial markets in 2012, even though no one believed this to be feasible.
6. Should be a comprehensive solution and not an attempt to kick the can further down the road.
7. It would be useful but not absolutely necessary for any refinancing not to create a 'credit event' that would lead the rating agencies to declare Greece in default."
His full article can be read here
Tuesday, July 26, 2011
Stiglitz - Still not good enough to work in Greece
Right now, Greece is going through some tumultuous events and the decisions being made now will have important ramifications for generations to come.
For now however I would like to talk about Stiglitz and his presentation. Actually I want to write on the irony of his talk. Over 200 people attended his poorly publicised talk. Only a couple of politicians turned up, one of whom Stefanos Manos is a former politician. So the front rows of around 50 seats were empty as the invited politicians didn’t show up, obviously scared to show their face in public or be seen listening to - what the communists and far left call - “That Jewish Economist”, in a tone that makes one fear for public safety. In the audience there were those who challenged him on a couple of his economic points – and rightly so, but on the whole everyone enjoyed his talk and it was not raided by a Student Union demonstration happening down the road.
The irony lay in the fact that it occurred in a country where he is technically not allowed to work as an economist or university lecturer or is even recognised as an English speaker.
Stiglitz cannot work as an economist because he never completed his 'guild' like training at a Greek University. Only those who graduated economics from a Greek University are recognised. To have his degree recognised as good enough, he has to prove his university exists which may include translating a university handbook into Greek at a price of 1.5 euros a page. Once proven - he can then proceed to get his Degree recognised. If he is lucky he can have it recognised in 2-5 years, and involve ancillary costs of up to 18 000 euros. Then he has to wait from the Economists guild to invite him as a member, once a member he can set up his shingle and head off to work.
However it is now slightly easier. One of the new ‘Austerity Measures’ passed by parliament recently – which was one of the reasons we saw the terrific riots happening down in the centre - was the 'Opening up of professions.' The Greek work landscape is littered with closed professions. Reading the list of 136 professions that were opened it - it is no surprise that unemployment is where it is - or the number of luxury cars that still roam the streets. A list can be found here in Greek. These professions include dentistry technicians, tour guides, hairdresser and of course - economists. Not included in the list are truck drivers, lawyers and pharmacies - three of the most powerful lobby groups that still remain closed to competition.
Closed professions in Greece are a result of a 'guild' like recognition system and a restriction of licenses to operate. Licenses to operate trucks were given out during the Military Dictatorship in the early 70s and when PASOK came to power in early 80s - and never again. These can be sold or inherited - hence the signs outside pharmacies saying Inherited Pharmacy (Pharmacies are also guaranteed 33% profit margins by the government and lack of competition means they can charge higher prices on certain goods compared to the rest of Europe).
Ostensibly the new legislation will make it easier to become a taxi driver, run a currency exchange business, or a beauty shop. However as a student of Economic Development and History i am not praising the legislation just yet. Some of you may have heard of a Japanese expression "Turning it in the belly". During Allied Occupation the Allies - read USA - encouraged opening up of trade and changes to the legal system. The Japanese bureaucrats followed these changes to the letter of the law, but implemented other changes to make the law meaningless. One famous example was allowing American baseball bats to be sold. This they allowed no problem - they just implemented an administrative decision to check that all bats imported were made of wood, and so all bats imported had a hole drilled right through to ensure that they were wooden. Similar stories occurred with tyres (Japanese snow was different to American snow) and other goods.
Which is why I - and most of my friends are cheering the 'opening up of professions' just yet. We wait to see what administrative barriers exist to see if Greek bureaucracy will 'turn it in the belly'.
So until then, Mr Stiglitz - come and talk to Greece and (if rumours are true) advise Greece, but know that you're not good enough to work here.
For now however I would like to talk about Stiglitz and his presentation. Actually I want to write on the irony of his talk. Over 200 people attended his poorly publicised talk. Only a couple of politicians turned up, one of whom Stefanos Manos is a former politician. So the front rows of around 50 seats were empty as the invited politicians didn’t show up, obviously scared to show their face in public or be seen listening to - what the communists and far left call - “That Jewish Economist”, in a tone that makes one fear for public safety. In the audience there were those who challenged him on a couple of his economic points – and rightly so, but on the whole everyone enjoyed his talk and it was not raided by a Student Union demonstration happening down the road.
The irony lay in the fact that it occurred in a country where he is technically not allowed to work as an economist or university lecturer or is even recognised as an English speaker.
Stiglitz cannot work as an economist because he never completed his 'guild' like training at a Greek University. Only those who graduated economics from a Greek University are recognised. To have his degree recognised as good enough, he has to prove his university exists which may include translating a university handbook into Greek at a price of 1.5 euros a page. Once proven - he can then proceed to get his Degree recognised. If he is lucky he can have it recognised in 2-5 years, and involve ancillary costs of up to 18 000 euros. Then he has to wait from the Economists guild to invite him as a member, once a member he can set up his shingle and head off to work.
However it is now slightly easier. One of the new ‘Austerity Measures’ passed by parliament recently – which was one of the reasons we saw the terrific riots happening down in the centre - was the 'Opening up of professions.' The Greek work landscape is littered with closed professions. Reading the list of 136 professions that were opened it - it is no surprise that unemployment is where it is - or the number of luxury cars that still roam the streets. A list can be found here in Greek. These professions include dentistry technicians, tour guides, hairdresser and of course - economists. Not included in the list are truck drivers, lawyers and pharmacies - three of the most powerful lobby groups that still remain closed to competition.
Closed professions in Greece are a result of a 'guild' like recognition system and a restriction of licenses to operate. Licenses to operate trucks were given out during the Military Dictatorship in the early 70s and when PASOK came to power in early 80s - and never again. These can be sold or inherited - hence the signs outside pharmacies saying Inherited Pharmacy (Pharmacies are also guaranteed 33% profit margins by the government and lack of competition means they can charge higher prices on certain goods compared to the rest of Europe).
Ostensibly the new legislation will make it easier to become a taxi driver, run a currency exchange business, or a beauty shop. However as a student of Economic Development and History i am not praising the legislation just yet. Some of you may have heard of a Japanese expression "Turning it in the belly". During Allied Occupation the Allies - read USA - encouraged opening up of trade and changes to the legal system. The Japanese bureaucrats followed these changes to the letter of the law, but implemented other changes to make the law meaningless. One famous example was allowing American baseball bats to be sold. This they allowed no problem - they just implemented an administrative decision to check that all bats imported were made of wood, and so all bats imported had a hole drilled right through to ensure that they were wooden. Similar stories occurred with tyres (Japanese snow was different to American snow) and other goods.
Which is why I - and most of my friends are cheering the 'opening up of professions' just yet. We wait to see what administrative barriers exist to see if Greek bureaucracy will 'turn it in the belly'.
So until then, Mr Stiglitz - come and talk to Greece and (if rumours are true) advise Greece, but know that you're not good enough to work here.
Wednesday, July 20, 2011
Initiatives for development from Mr Azariadis and Mr Ioannides
Lets turn our attention to yesterdays enthralling discussion organised by AXIOTIS - which is a scientific, non-profit organisation dedicated to dialogue and promoting the principles of meritocracy, transparency and the modernisation of public administration, the business sector and civil society.
Speaking at the event was Costas Azariadis, from Washington University, St Louis, and John Ioannides, Tufts University, Boston, both of whom spoke on the much talked about subject of development. Mr Azariades’ talk was titled “A country seeking work.” He reminded those gathered that Greece has 3.2 million souls working in the private sector, 1.1 million in the public sector and 1.8 million pensioners. In other words One in two is waiting on the state. However, Greece has 1/3 of the Mediterranean coastline which is underdeveloped when it comes to private capital. What this means post Memorandum is that we may see a boom and a shift towards extensive infrastructure development with private financing. Along with opening up of the education system to private initiative, this could jump-start the economy.
For the rest of the article click here
Speaking at the event was Costas Azariadis, from Washington University, St Louis, and John Ioannides, Tufts University, Boston, both of whom spoke on the much talked about subject of development. Mr Azariades’ talk was titled “A country seeking work.” He reminded those gathered that Greece has 3.2 million souls working in the private sector, 1.1 million in the public sector and 1.8 million pensioners. In other words One in two is waiting on the state. However, Greece has 1/3 of the Mediterranean coastline which is underdeveloped when it comes to private capital. What this means post Memorandum is that we may see a boom and a shift towards extensive infrastructure development with private financing. Along with opening up of the education system to private initiative, this could jump-start the economy.
For the rest of the article click here
Monday, July 18, 2011
Joseph Stiglitz in Athens
For those of you residing in Athens, you may like to know that Joseph Stiglitz will be in town speaking on the subject 'Eurozone's debt crisis and possible solutions'.
This event will be held at the National Bank Auditorium, Aiolou 82-84 this Wednesday July 20 at 19:00.
This event will be held at the National Bank Auditorium, Aiolou 82-84 this Wednesday July 20 at 19:00.
Wednesday, July 13, 2011
Up and running again...
Yes this blog is getting back on its feet.
Its been a hectic period - full of ups and downs, both for the nation and personally.
So in order to sate your thirst for information, here is an insight from one of Greece's preeminant thinkers, Mr Papagiannidis.
Greek politicians, may they live long, are an especially short-sighted race. As remarkable as they are short-sighted. (Correction: maybe not 'Greeks' in general, but perhaps better defined as Greek residents.)
And as a result of their shortsightedness - deeply self-destructive! Look at how they cried out in response to the capital flight in personal deposits. Let's look at examples of the impact of wild enthusiasm on the one hand, and of pragmatism on the other. The wild enthusiasm: In comes Theodoros Pangalos sounding alarm bells that the medium term financial plan would not pass into legislature, he describes a situation wherein Greece returns to the drachma, sending people running to the banks to withdraw their money, and the only thing that can stand in their way are the tanks and the armed forces.
Leaving aside the fact that Theo has most probably not seen a soldier, or any kind of military figure up close (hence his notion that they would be protecting beleaguered banks), lets also ignore the fact that the interview was given to Spanish newspaper (hence limited risk that it would be read by the natives), but given his statements, what is one to think, and what did he think would be the outcome of his statements. The exuberant and quick tempered Theo invited the people to withdraw their deposits and send them abroad, hide them under the bed, buy gold sovereigns, throw them down a well, put them in a bag and head of to Albania or Turkey, do anything to save them.
The rest of the article can be read here.
Its been a hectic period - full of ups and downs, both for the nation and personally.
So in order to sate your thirst for information, here is an insight from one of Greece's preeminant thinkers, Mr Papagiannidis.
Greek politicians, may they live long, are an especially short-sighted race. As remarkable as they are short-sighted. (Correction: maybe not 'Greeks' in general, but perhaps better defined as Greek residents.)
And as a result of their shortsightedness - deeply self-destructive! Look at how they cried out in response to the capital flight in personal deposits. Let's look at examples of the impact of wild enthusiasm on the one hand, and of pragmatism on the other. The wild enthusiasm: In comes Theodoros Pangalos sounding alarm bells that the medium term financial plan would not pass into legislature, he describes a situation wherein Greece returns to the drachma, sending people running to the banks to withdraw their money, and the only thing that can stand in their way are the tanks and the armed forces.
Leaving aside the fact that Theo has most probably not seen a soldier, or any kind of military figure up close (hence his notion that they would be protecting beleaguered banks), lets also ignore the fact that the interview was given to Spanish newspaper (hence limited risk that it would be read by the natives), but given his statements, what is one to think, and what did he think would be the outcome of his statements. The exuberant and quick tempered Theo invited the people to withdraw their deposits and send them abroad, hide them under the bed, buy gold sovereigns, throw them down a well, put them in a bag and head of to Albania or Turkey, do anything to save them.
The rest of the article can be read here.
Wednesday, July 6, 2011
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