During my initial visits to Greece I was always impressed with the level of political activism. Everyone had an opinion and almost everyone supported a political party. Come election time the streets would be filled with people waving flags enthusiastically, topics would be debated and insults would fly. People sitting in the cafés would count the political points that their team made during some panel discussion. And they would debate the pros and cons of the political parties with the same enthusiasm as they would discuss the starting line-up of their favourite football team. As if politics was a sport.
And that is what it is in Greece - a sport.
In Australia the weekend would be devoted to actual sports. The TV stations would vie with each other to show different events. Switch to any channel and you could watch the tennis, Aussie rules football, golf, swimming or even lawn bowls. Now with the run-up to the Olympics I am sure its all Olympic fever, with different channels devoted to broadcasting different events to provide 100% - 24 hour coverage.
Here in Greece, aside from the Olympic torch ceremony, the Olympics is forgotten. At the moment of course yes people here are watching the EURO championship. But its only since Greece won in 2004 that Greeks paid the same interest in their national team that they would to their local soccer teams like Olympiakos or AEK.
The major sport however has always been politics. The weekend has even more talk shows with politicians talking from the morning - straight through to midnight. Want to watch a sporting event? Switch over to France's TV5 and watch their rugby, otherwise forget it.
The only sport to watch is politics. The problem with treating politics like a sport is that political discussion is reduced to political point scoring. Instead of discussing 'what' makes a good political leader it's reduced to numbers from polls, who scored the most in a poll of who is the better leader.
To get the most points is simple - Say whatever you want to get the points. The criminal action is that no one, especially Greek journalists ever challenges them on how they will implement their promises, do any fact checks or follow up on past promises. One TV station SKAI is pretending to evolve, they asked SYRIZA how they would pay to implement their promises such as hiring 150,000 new public servants, the response was - "We're not saying because other parties will steal our ideas." How very mature. I say pretending to evolve because just asking the question is not enough, a real journalist has to follow up. So when they ask the same question to New Democracy and they respond "we will implement wide ranging measures", a journalist has to follow up and ask "What specific measures" and "How much much from each measure - and who has costed it" etc... and then fact-check it from an independent source.
Of course this is all new to Greek journalists. One of the measures implemented as a result of the much hated Memorandum - Which all parties blame as the source of all Greece's ills and present situation - is that Greece actually produce a central budget, with forecasts and reviews. Instead of having each Ministry handle its own money and spend it on where it wanted without any oversight, and just simply spend. So i will forgive them not knowing.
As a result of this realisation the façade of "political awareness" has worn off, and not just for me, but for many people. Even though voting is mandatory, in the last election around 30% of eligible voters did not turn up to vote. But for many who used to believe in the façade it has turned to disgust with the politicians and their parties. Quite a few politicians have switched sides, PASOK politicians are jumping ship like rats of a sinking boat and are trying to get on-board the far left party SYRIZA. They of course claim that they are doing so out of personal conscience. But if that was the case - they would stay in their party and change it from the inside, not leave because they fear losing their seat. And the same could be said of the other politicians leaving parties like LAOS to go to ND.
And just like in sports, these are treated like sports player transfers. The "numbers" that could be gained as a result of this star transfer.
Talk of ideology or even a plan for Greece - forget it.
This is why i see no ray of hope in these up-coming elections. There is no in depth discussion of what really needs to be done. No balancing of the pros and cons. Instead its all talk of appeasement.
SYRIZA talks big and makes promises - but at the moment the leadership is shitting themselves. They might actually win and that's something that they don't want. Because they know that there is no way that they can actually deliver on anything that they promised. Which is why in the dying days they are fuelling fears saying that "We are no euro fetishists" hoping to scare some voters away from them. In opposition and in control of the Unions they know that they can wield much more power without any responsibility.
New Democracy on the other hand. Wants to show itself to be responsible, and that it will take leadership which its base demands it take. But you can see it in their eyes... If we win, lets just delay things and hopefully something will happen, like winning the Spanish lottery and we won't have to make any decisions, after all that is what PASOK did and look at where they are now.... oh shit!
Friday, June 15, 2012
Wednesday, April 4, 2012
Man shoots himself in the head in public square: Athens, Greece
Greece is in a state of shock this morning when it heard the news that an elderly man walked into Athens' Syntagma square - the heart of Athens, sat down on a park bench and calmly drew a gun shooting himself in the head.
Syntagma square situated in front of Parliament House has also been the site of all the protests against the IMF and the Memorandum of Understanding that many see as the source of Greece's current problems. All this a mere hundered meters from the Ministry of Finance, and the Ministry of Development, Competitiveness & Shipping. I can't help but remember that the employees of the Finance Ministry recently rejected the latest PSI agreement which the government insisted would help Greece (only because they couldn't be bothered to do something earlier) so that they can save their extraordinary exhorbitant pension scheme (which is guaranteed by the government anyway) - while low income (read non public sector) pensioners were the first to have their pensions slashed.
Stepping back from the tragedy i cannot say that i am shocked. Living in Athens for as long as i have and having seen what i have seen - this was to be expected. In fact Greece is lucky that it hasn't happened sooner.
At a recent Health Conference organised by Boussias, health care providers from all around Europe gave solutions to Greece's problems in healthcare as well as sounding a warning for potential problems that arise from a crisis. Worldwide, whenever their is a recession suicides have increased. Except in Greece (based on stats up till 2011). Suicides have remained fairly stable and have not shot up as they have done in other countries. Where Greece is similar is less traffic related deaths as the price of petrol increases (close to 2 euros now) and increases to the price of alcohol.
This tragic incident may be the warning bell that the crisis is only really now starting to hit Greeks. Up until now the family safety nets have saved many Greeks hitting rock bottom, but now their savings are nearly empty. Revised tax laws are taxing unemployed families, with no source of income, merely because they are able to pay the rent. Many unemployed are divulging themselves of their cars to save themselves being taxed an assumed income based on the worth of the car. (Your car is a 1.6 litre and valued at 6000 euros therefore to maintain that car you have a valued worth of x amount - pay more tax in addition to road tax, license fees and insurance. But lets face it for every job that requires a car there are 800 people applying for it, better to give up and save the money for food.) So many are also choosing to live on the streets to avoid more tax.
What was also revealed at the conference was a rise in HIV rates amongst drug users. Health care volunteers who go out on the streets told me that many have purposely shared needles with a known carrier so that they could receive disability pension and receive healthcare. However in 2010 there were reports that as a result of lack of beds for HIV carriers, hospitals would re-categorise them to deny them care.
With politicians refusing to act and intent on looking to the past to lay the blame on someone, the situation in Greece will get worse. This suicide, in so public and so meaningful a place can be interpreted as a message to these politicians to wake up.
While politicians bicker - people and the very country is dying.
This article also appears here
Syntagma square situated in front of Parliament House has also been the site of all the protests against the IMF and the Memorandum of Understanding that many see as the source of Greece's current problems. All this a mere hundered meters from the Ministry of Finance, and the Ministry of Development, Competitiveness & Shipping. I can't help but remember that the employees of the Finance Ministry recently rejected the latest PSI agreement which the government insisted would help Greece (only because they couldn't be bothered to do something earlier) so that they can save their extraordinary exhorbitant pension scheme (which is guaranteed by the government anyway) - while low income (read non public sector) pensioners were the first to have their pensions slashed.
Stepping back from the tragedy i cannot say that i am shocked. Living in Athens for as long as i have and having seen what i have seen - this was to be expected. In fact Greece is lucky that it hasn't happened sooner.
At a recent Health Conference organised by Boussias, health care providers from all around Europe gave solutions to Greece's problems in healthcare as well as sounding a warning for potential problems that arise from a crisis. Worldwide, whenever their is a recession suicides have increased. Except in Greece (based on stats up till 2011). Suicides have remained fairly stable and have not shot up as they have done in other countries. Where Greece is similar is less traffic related deaths as the price of petrol increases (close to 2 euros now) and increases to the price of alcohol.
This tragic incident may be the warning bell that the crisis is only really now starting to hit Greeks. Up until now the family safety nets have saved many Greeks hitting rock bottom, but now their savings are nearly empty. Revised tax laws are taxing unemployed families, with no source of income, merely because they are able to pay the rent. Many unemployed are divulging themselves of their cars to save themselves being taxed an assumed income based on the worth of the car. (Your car is a 1.6 litre and valued at 6000 euros therefore to maintain that car you have a valued worth of x amount - pay more tax in addition to road tax, license fees and insurance. But lets face it for every job that requires a car there are 800 people applying for it, better to give up and save the money for food.) So many are also choosing to live on the streets to avoid more tax.
What was also revealed at the conference was a rise in HIV rates amongst drug users. Health care volunteers who go out on the streets told me that many have purposely shared needles with a known carrier so that they could receive disability pension and receive healthcare. However in 2010 there were reports that as a result of lack of beds for HIV carriers, hospitals would re-categorise them to deny them care.
With politicians refusing to act and intent on looking to the past to lay the blame on someone, the situation in Greece will get worse. This suicide, in so public and so meaningful a place can be interpreted as a message to these politicians to wake up.
While politicians bicker - people and the very country is dying.
This article also appears here
Tuesday, February 21, 2012
"Greece Should default on its debt and leave the Euro" - Debate
Nouriel Roubini has arrived in Greece to take part in a debate tonight where the question will be asked "Greece Should default on its debt and leave the Euro".
This statement has been on the lips of many economists and politicians since the beginning of the crisis. It has brought together Euroskeptics and Euro-Unionists. That Greece must leave to save the Euro and that Greece must leave to end the Euro experiment. Its enough to throw ones hands up into the air, sigh and go out for a drink - if only they hadn't raised VAT so high denying us of this small pleasure.
Debating for the affirmative will be well known economic celebrity Nouriel Roubini and Costas Lapavitsas.
Debating for the negative will be Denis Mac Shane and local economics truth teller, Miranda Xafa.
The debate moderator will be Zeinab Badawi of the BBC.
Though a Marxist-Leninist, by all accounts Costas Lapavitsas is someone that you can talk to and is open to dialogue so he should be interesting to listen to. Of course the communist party here in Greece is all for Greece leaving the Euro and that Greece should default, and withdraw from the capitalist system and has praised the North Korean utopia.
Miranda Xafa worked in the IMF during its most turbulent times from 1980 to 1990 and again in 2004 to 2009. She is well known for her blunt talk and saying the truth. In February 2011 she caused an uproar when she stated that "In order to get the country out of the Memorandum, the government and opposition should leave the doubletalk and come to a national agreement to end the crisis." Months later....
So the debate should be interesting to follow. If you won't be able to make it, Business File will be there and hope to report back on the events.
This statement has been on the lips of many economists and politicians since the beginning of the crisis. It has brought together Euroskeptics and Euro-Unionists. That Greece must leave to save the Euro and that Greece must leave to end the Euro experiment. Its enough to throw ones hands up into the air, sigh and go out for a drink - if only they hadn't raised VAT so high denying us of this small pleasure.
Debating for the affirmative will be well known economic celebrity Nouriel Roubini and Costas Lapavitsas.
Debating for the negative will be Denis Mac Shane and local economics truth teller, Miranda Xafa.
The debate moderator will be Zeinab Badawi of the BBC.
Though a Marxist-Leninist, by all accounts Costas Lapavitsas is someone that you can talk to and is open to dialogue so he should be interesting to listen to. Of course the communist party here in Greece is all for Greece leaving the Euro and that Greece should default, and withdraw from the capitalist system and has praised the North Korean utopia.
Miranda Xafa worked in the IMF during its most turbulent times from 1980 to 1990 and again in 2004 to 2009. She is well known for her blunt talk and saying the truth. In February 2011 she caused an uproar when she stated that "In order to get the country out of the Memorandum, the government and opposition should leave the doubletalk and come to a national agreement to end the crisis." Months later....
So the debate should be interesting to follow. If you won't be able to make it, Business File will be there and hope to report back on the events.
Friday, February 17, 2012
Greece horoscope in the Year of the Dragon
2012 heralds the Year of the Dragon in Chinese astrology, the most auspicious of all animals, making this a year of momentous occurrences and good fortune, (except for those born in the year of the Dragon who will see a tough year ahead). This however does not necessarily equal good financial fortune, that is more commonly associated with the year of the Pig which passed us by in 2007, and we all remember what followed in 2008.
So what does 2012 hold for Greece, where the markets are looking positively bearish - if we are to continue with the animal analogies. Well, according to Chinese astrologers, Greece certainly has a lot more hardship and tough decisions ahead of it. According to one Feng Shui practitioner, Greece as well as its southern neighbours such as Italy and Turkey will see an initial slump in its markets in the first half of the year, only to see these slumps become even stronger as the year wears on. Analysts are already projecting that eurozone economies will see negative growth this year with the region contracting by about 0.7 per cent. And while many local pundits are publicising the on-going saga that are the PSI+ negotiations as a cure all to Greece's sovereign debt problem, we know that this is far from the truth. Indeed just recently Angel Gurria, head of the OECD, has stated that, “After we have overcome this debt hurdle there will come the more difficult question of having sustainable, sustained, growth over the medium and the long term and that requires a very serious structural transformation of the Greek economy, of the Greek administration.” She also went on to add that Greece could do a lot more with regard to privatisations and structural changes and that tax collection needed urgent reform.
The same negative outlook in the Year of the Dragon cannot be said for the rest of Europe however. Germany, England, and France are singled out and slated for a better performance, even their banking and insurance sector will amazingly see itself stabilise, while real estate in England will once again boom. If last year's reports are to be believed, that Greek money was fleeing the country and being invested in London's west end, there could be some nugget of truth in this little prediction.
Overall however astrologers remain optimistic on the fate of the Euro with predictions concurring that the Euro will remain intact, weaker against the Pound and the US Dollar, but intact nonetheless.
2012 is also the year for innovation and innovative businesses ideas, according to another astrologer "We will see many new technology trends and more people will become comfortable using technology in their lifestyles." If this is true, this is good news for Greece's innovators and a good time as any to implement the innovative changes that are so desperately needed in Greece's public sector to achieve reform and transparency. Innovation can also serve to help boost Greece's private sector and improve its global competitiveness as it searches for new markets abroad.
This year will also the year for love and passion and will be full of romance and justice. Justice in that lies will be revealed, so unfaithful lovers take note. Is this perhaps a call for Greece to be more faithful to its promises that it made to its European partners? For the most part it has been revealed that many reforms promised have not been carried out. And if Greece is to remain a trusted partner, and to finally take its future in its hands these reforms must be carried out. There is no denying that it will be a tough road ahead to achieving debt sustainability by 2020, but if there is a will there is a way.
And what astrological sign will it be then I hear you ask, why 2019 till January 2020 will be the year of the Pig and good financial fortune.
Happy Lunar New Year!
So what does 2012 hold for Greece, where the markets are looking positively bearish - if we are to continue with the animal analogies. Well, according to Chinese astrologers, Greece certainly has a lot more hardship and tough decisions ahead of it. According to one Feng Shui practitioner, Greece as well as its southern neighbours such as Italy and Turkey will see an initial slump in its markets in the first half of the year, only to see these slumps become even stronger as the year wears on. Analysts are already projecting that eurozone economies will see negative growth this year with the region contracting by about 0.7 per cent. And while many local pundits are publicising the on-going saga that are the PSI+ negotiations as a cure all to Greece's sovereign debt problem, we know that this is far from the truth. Indeed just recently Angel Gurria, head of the OECD, has stated that, “After we have overcome this debt hurdle there will come the more difficult question of having sustainable, sustained, growth over the medium and the long term and that requires a very serious structural transformation of the Greek economy, of the Greek administration.” She also went on to add that Greece could do a lot more with regard to privatisations and structural changes and that tax collection needed urgent reform.
The same negative outlook in the Year of the Dragon cannot be said for the rest of Europe however. Germany, England, and France are singled out and slated for a better performance, even their banking and insurance sector will amazingly see itself stabilise, while real estate in England will once again boom. If last year's reports are to be believed, that Greek money was fleeing the country and being invested in London's west end, there could be some nugget of truth in this little prediction.
Overall however astrologers remain optimistic on the fate of the Euro with predictions concurring that the Euro will remain intact, weaker against the Pound and the US Dollar, but intact nonetheless.
2012 is also the year for innovation and innovative businesses ideas, according to another astrologer "We will see many new technology trends and more people will become comfortable using technology in their lifestyles." If this is true, this is good news for Greece's innovators and a good time as any to implement the innovative changes that are so desperately needed in Greece's public sector to achieve reform and transparency. Innovation can also serve to help boost Greece's private sector and improve its global competitiveness as it searches for new markets abroad.
This year will also the year for love and passion and will be full of romance and justice. Justice in that lies will be revealed, so unfaithful lovers take note. Is this perhaps a call for Greece to be more faithful to its promises that it made to its European partners? For the most part it has been revealed that many reforms promised have not been carried out. And if Greece is to remain a trusted partner, and to finally take its future in its hands these reforms must be carried out. There is no denying that it will be a tough road ahead to achieving debt sustainability by 2020, but if there is a will there is a way.
And what astrological sign will it be then I hear you ask, why 2019 till January 2020 will be the year of the Pig and good financial fortune.
Happy Lunar New Year!
Wednesday, November 9, 2011
Papademos rejected as PM - Greece on track for drachma
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.
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.
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
Subscribe to:
Posts (Atom)