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Tuesday, October 20, 2015

Two Separate Views About Greece's Future

The Greek university professor Eleni Louri-Dendrinou visited the US and collected views from Americans. She seems to have been taken a bit by surprise by the "Views from the other side of the Atlantic" because she felt it necessary to contrast those views with her own at the end of her report.

Views from the other side of the Atlantic
"Look at the cumulative loss of GDP in Greece since 2008, they said. You’ve lost a quarter of your GDP and your debt is still increasing. It is now close to 200% while it was 120% in 2008, they pointed at my diagrams! So your adjustment seems to create more problems than it solves and where does it lead? And the banking sector has such a limited time and resources to get recapitalized until the end of 2015! Such questions full of doubt about Greece’s progress were equally expressed by academics, students, bankers and ‘think-tankers’."

Reaction of Prof. Eleni Louri-Dendrinou
"With political stability in place, this adjustment framework looks quite capable of pushing Greece back into positive growth, especially if a first positive assessment of the program implementation leads to opening up negotiations on debt sustainability and restructuring. A virtuous circle can then start provided there is no hesitation, delay or endless and aimless discussions. If focus, clarity and decisiveness prevail, Greece has the potential to recover within the Eurozone faster than many people in the other side of the Atlantic think possible."

I would truly love to share Louri-Dendrinou's view but I also have to remember Goethe's verse "I hear the message well but lack Faith's constant trust". Not that I consider her assessment wrong. On the contrary, it all sounds very logical. It's the soft facts which have made me doubt of late. Not only a society's willingness to change but also, and foremost, its ability to change. Five years of adjustment don't really spread much confidence that willingness and ability are very high. One would literally have to feel the winds of change by now and I, for one, don't feel much in this area.

I remember reading some time ago the catching phrase "For Tsipras to succeed he needs no less than turn into a capitalist". Well, I don't think he needs to become a capitalist Wall-Street-style but certainly a believer in the workings of a market economy with private economic agents. Put the word 'social' in front of it and you have the 'social market economy' of Ludwig Erhard. Perhaps it's due to my insufficient Greek language capability but I never hear anything about markets, competition, private investors, profitability, etc. from members of the current government. Instead, I hear much about the distribution of the fruits of a market economy.

Regarding the views of the Americans, I had to chuckle a bit. They seem to have read very well everything Anglo-Saxon economists have published in recent years. Nevertheless, I will let it stand there because, otherwise, this article would get to long...

31 comments:

  1. Mr. Kastner,

    I really don't know if things are really changing significantly or not. Maybe i am just dizzy from all the taxes and how i have reached the point of just eeking by every month. A saver and investor by nature just eeking by.

    You are an "inside outsider" who has a better POV. I was a basher of Papandreou who i still believe did too much damage. I supported Samaras but quickly began to bash him, although i did support that he did make some changes. I believed alot in Syriza and Varoufakis/Tsipras, but i see that they have also done very little and so much damage. Aside from the measure of 100 installments for cash strapped individuals they have done more damage than anything. In retrospect, Samaras made hard measures which did cut to the bone but his measures did end up putting Greece on the right track. Wolfgang was right ultimately. Syriza lied and brought another 80 bil euro of debt. And tons of taxes.

    I don't know if i am fickle or a moron or i can get swayed so easy by rhetoric. Your points are so correct on the real market but no politician says it outloud. At least a party which has a large percentage. In retrospect if i could rewind the clock back to last Januray i would have voted Samaras. Even if it meant more measures but we would be on a growth path at least.

    It is really sad, every day is like in 2011/12, i am hearing about layoffs and more people unemployed close to my surroundings. I am not sure what Tsipras is thinking of a new left success story but when more people go on unemplyment how is he to convince that he is a success or an improvement.

    We will muddle through and i am just hopeful that at least some of those privatizations fall through and the new salary cap for the public sector is introduce by January. Then hopefully people will be fed up with Tsipras and call for an election where a ND with a new leader can continue the Samaras type reform.

    We greeks are paying such a hard price for our choices.

    Sincerely,
    V

    ReplyDelete
    Replies
    1. "SYRIZA brought another 83 BEUR of debt" - not really. Greece's debt only increases to the tune that it has a budget deficit (i. e. new debt to finance interest and a primary deficit, if there is one) and that it borrows new money for one-time investments like the banks recap. Everything else is just moving money from Peter to Paul.

      Put differently, if Greece had a balanced primary budget, debt would only increase in the amount of interest paid and through one-time investments which do not flow through the budget. If Greece borrows to repay the IMF, for example, Greece's debt remains unchanged.

      But yes, the banks recap will really put a rather large load of
      new debt upon the country.

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  2. Do you think Hugo Chavez can become Margaret Thatcher? If so, then the future for Greece is bright under Syriza.
    Anyway, if you want to read some serious analysis of the Greek economy, you should read Kostas Stoupas - simply superb.
    http://www.capital.gr/o-kostas-stoupas-grafei

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    1. Hugo Chavez was easy to figure out; Tsipras is not (at least in my opinion). When you listen to him at events like the recent Clinton Global Initiative, he obviously doesn't come across like Thatcher but he certainly talked a lot about 'investments' and 'attractive conditions for investments' and 'foreign investments', etc. In short, he left some rather good soundbites and Clinton put some more good soundbites into his mouth (and Tsipras did not object!). But when in Greece, Tsipras sounds more like Hugo Chavez. So you tell me which of the two Tsipras' is the 'real Tsipras'.

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    2. This is the real Tspiras.
      https://www.youtube.com/watch?v=aUh96oXYt18

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    3. I'll watch this, once I have more time.

      But may I try to recount you one of my favorite jokes, I am not usually very good at jokes, but this one sticked. Maybe it is not even a standard joke? I picked it up from a local from a region close by, up here in North Western Germany:

      The patient come to the doctor, telling the doctor, he feels ill since he is tired all the time, once he lies down its fine.

      that's all there is to the joke.

      Disappointed?

      This is the original, while I doubt I can transcribe it in the necessary local dialect:

      "Herr Doktor, isch bin so möd, wenn ich liegsch, denn jedt et."

      that said, I was an early fan of Slavoj--the pop academic--Zlavoj Zizek, as I started to call him at one point, but I have to also admit that once he became famous, and confronted with the steadily increase of his publications, at least the ones I read left me disappointed:

      https://en.wikipedia.org/wiki/Slavoj_%C5%BDi%C5%BEek_bibliography

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  3. And since the fruits of market economy don't grow in Greece they propose to "distribute" them from other countries.

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    1. But please bear in mind that the fruits of a market economy in other countries which Greece wants to share are, with the possible exception of Germany, not fruits of a market economy but proceeds of debt which these countries have assumed and continue to assume. So in the final analysis, most European countries could exclaim "We are Greece!" with the only exception that they are not yet as deep in the debt problem as Greece was and still is, and they have better sovereign governance than Greece.

      As an Austrian, I would say that we are well on the way towards become a Greece. Not today; not tomorrow; but certainly at some point in the future if we keep doing what we are doing now.

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  4. Greek people have no desire to change, and even if they would have had, they got no leaders who got the expertise or the incentives to effect change. So the Troika and market will impose fiscal measures leading to slow GDP / capita decrease over the next couple of years and ejection from the Eurozone after that.

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    Replies
    1. Succinct comment on what may lie ahead.

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    2. @ KK,

      This is a stereotypical generalization. An assumption within the mainstream media that greeks do not want to change. Your only accurate comment is that we have no strong leaders.

      Wherever you are from you can not fathom the difficulties that have been applied to the greek people. Even though much of this difficulty has been brought on by ourselves.

      Greeks want change but is Europe ready to see a humanitrian crisis within its own borders? Forget syrians. Greeks will be the new reffugees coming to a country near you.

      Sincerely,
      V

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    3. Good to see some reaction from you, V. I've also been struggling to understand what these respected Western commentators mean by "Greek people don't want to change". Even if "change" is just an euphemism they use for the implementation of extreme austerity policies, why don't they acknowledge the fact that such policies have indeed been imposed on the Greeks, who have paid a much bigger price than any other EU nation under memorandum? I guess they'll never be satisfied with our "efforts" unless we accept Third World living standards as our "new normal".

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    4. Nikos,

      Lets be honest. We need to make the changes that are being requested and regardless how painful. You and i know at "ground zero" families are struggling day to day with pennies to get by. But is these change that need to be made. If you read the right information the debt is nothing. It is nothing by comparison to our GDP. What we must do is maintain our own income expenses balnces as a country.

      The memorandum should not be called austerity. It should be called "Program of what was not implemented in Greece in the last 30 years." Our system and way of how things work is so backwards. If you have ever lived or gone to other countries to see how much more functional they are you would understand this. The problem is, is our creditors say they want "x" changes to make greece functional at all levels. How that "x" comes about which is taylor made for the greek people is up to the political structure. Here is where the failure comes. Our politicians and our elite powers are so incompitent or seek their own agenda rather than the good of greece, which is prolonging our slow death. when we continue to vote for these useless people we are at fault ourselves. And i will not hide behind my finger and not say i did not vote syriza last January. Thats the damn fool i am.

      I went and checked some of my comments on this blog from 1,5 2 years ago when i bashed samaras on some occassions. I kick my self in the ass. Samaras may have been weak but he got some things done and for the better of Greece. Regardless of if he made a "kolotoumba" of his own.

      Aside from all of the above we need to do and how we do it and how many decades it will take us to be "normal," i can't stand to hear stereotypes of, "greeks don't work" "greeks live beyond their means" "greeks are lazy". Even public workers are working although there are some sectors who are "protected."

      Sincerely,
      V

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    5. @V

      "Lazy Greeks" etc. are not just stereotypes. They've been part of an aggressive anti-Greek propaganda by the German, mostly, media. And it's one of the main reasons for the so called "anti-memorandum" in Greece. If you want to motivate someone you don't start with "You are lazy, incompetent, corrupted, this and that." Especially if you have a certain past with that someone. (I remember reading somewhere that in post-war Germany, even if a Jew dared to insult another Jew he would be in trouble. But it's OK for the Germans to insult us, day in-day out, with their Bilds and their Schaeubles.)

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    6. Let me offer my own two-cents' worth as to the 'laziness of Greeks'. I think the mentality in Central/Northern Europe is very much that 'work' is associated with physical work, work which leads to the production of things, etc. An average Austrian might have some trouble understanding that the staff of an advertisement agency is 'working'. 'Working hard' is often seen as someone coming home in the evening and being very tired of physical work. Greece has historically been much less into physical production work and much more into services and trade.

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    7. I agree, with the "V" that any talk about "the Greek" is pretty dangerous stuff. Would never ever come to my mind. On the other hand, at least to the extend I looked closer, I am not sure if I like the manipulative use of "the Troika" either. And there is a counternarrative that triggers it on people's minds. ... How did this happen?

      In pretty much the same way I am slightly hesitant about the narratives of some VIP's or front-men in the use of Eu Europe's democracy deficit. ... Considered historically, never mind Eastern expansionism, how could it be different?

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  5. @ V
    As long as Greeks wish to satisfy appetites that are bigger than their wallets the price will always be "hard", and you can hardly expect others to go on paying it.

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    Replies
    1. @ AnonymousOctober 21, 2015 at 11:28 AM

      Living beyond their mean? Ok i can say yes pre 2009 or to be even more fair pre 2011 when the crisis hit hard.

      Under what information do you believe that the everyday greek is living being his means to draw yourself to this conclusion?

      Seperate things please. It is one thing the bad managment by our politicians, the lack of a formal plan to get out of the crisis. It is another thing that we have deep embedded problems from the past in many sectors of our society which need to be adjusted. And finally it is completely seperate thing the how much this austerity has affected all people of Greece including the rich. I can fairly say that 90% of greeks living in Greece have been hit severely hard by this economical crisis. 30% is in poverty and another 30% is nearing poverty another 30% is trying to make steps not to be in poverty in the coming years.

      Meanwhile that 90% of people, even though they are severely hurt are still saying we need change and are willing. Instead of bashing us maybe you should commend for trying under such difficult circumstances. Furthermore, all this while having 200,000 refugees coming fromt he middle east, while the rest of europe complain that they do not want more than 2-3-5,000 refugees in their countries.

      Sincerely,
      V

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    2. "Under what information do you believe that the everyday greek is living being [beyond] his means to draw yourself to this conclusion?"

      That's a core point. From my own, admittedly, limited perspective or mental grasp.

      High times for demagogues. But who actually can dig through the larger riddle for us "objectively"?

      Notice, I am not easily satisfied with "oligarchs", but basically guess, nowadays the "oligarchs" anywhere have given up the idea of trickling down of money, or the idea that ordinary people are left with the means for survival. Sometimes the idea to keep them from starting a revolution???

      Nowadays the more you have, seems to mean the more of it you can use to play high poker games with some of it, plus later it may be helpful to invite the ones with not quite the means to join the larger poker to dilute losses. Hypothesis, admittedly.

      Based on this larger, pretty obvious context, it feels to me, I am slightly hesitant of fast offered culprits, like the Troika.

      And yes, strictly, I may have been a fan of it as core culprit, earlier, before taking a closer look at the present VIP's in place, and their economical theories going back to 2010. (e.g. YV grand hoover thesis, combined with Germany's neo-colonial economical exploitation theory of the rest of Europe)

      I think in this context, it may be interesting to take a closer look at the interests that don't like any type of tax put on speculative gains, versus offers of other distributive "surplus" distribution measures like other countries taxes, that may or may not be completely congruent with "surpluses".

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  6. @kleingut.
    With all respect for your solidarity with Greece. Equaling Greek economy (surplus -3,4%, debt 175% of GDP) with Austrian (surplus -2,4%, debt 85% of GDP) sucks. It's like saying all people are approaching death, whereas it is true, it is also true that I am quite a bit closer than some.
    PS. That should not stop Austria from trying to keep on the "straight and narrow".

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    1. Of course I am not saying that Austria is only months away from the situation that Greece found itself in in late 2009/early 2010. I said: "Not today, not tomorrow but certainly at some point in the future". The similarity in historical trends after 1945 is baffling: two-party dominance (if not to say democratic dictatorship) for much of the time; cronyism; vested interests; corruption; etc. etc.). Possibly the highest state quote in all of Europe.

      Austria is currently the ONLY country whose budget statistics Eurostat does not trust. There are many erroneous booking entries and the budget for 2014 needs to be restated: http://wirtschaftsblatt.at/home/nachrichten/europa/4849157/EU-misstraut-Osterreichs-Budgetzahlen.

      What makes Austria different from Greece is that our two-party democrats have always understood that if you plan to milk the cow, you need to keep the cow healthy. The private sector is very competitive and private individuals, overall, have accumulated a lot of wealth which will be available for the state in the future. Contrary to Greece, Austrians have most of their wealth within Austria, easily accessible to the taxman.

      Again, don't misunderstand me: Austria was 3-A rated until recently and I think one agency till has the country at triple-A. But if one looks at trend lines over the last 10 years in all economic indicators, it is a scary story.

      Bear in mind that things can change quickly and once a small avalanche is set in motion, it tends to feed on itself rapidly. I remember, back in early 2009, I read a study which most unfortunately I didn't file. I remember that it was made by some top-class institution. It addressed the question how Greece would fare in the post-Lehman word. The conclusion was that Greece would fare well and a lot better than most other countries. I don't remember the details but two important themes were: Greek banks were not involved with toxic capital markets products (sub-prime, etc.) and thus in good shape; and private Greeks were not overly indepted. Thus, solid banks with solid loans to solid borrowers.

      Austria had a regional bank by the name of HypoAlpeAdria located in the state of Carynthia. That state is now de facto bankrupt and generally (and justifyably) referred to as "The Greece of Austria") . Back in 2006, I believe, this bank was voted "Best Austrian bank" by some international institution. 2 years later it had to be rescued and 3 years later nationalized by the state. It no longer exists but when the total cost to tax payers can be added up in a few years, it will be close to 20 BEUR or only a little less than 1/4th of Austria's budget. And that was only one of 4 second-tier Austrian banks which had to be rescued by tax payers in the last few years. None of the big banks had to be rescued yet but should that ever become necessary.

      Austrian banks are extremely exposed to formerly communist countries in the East. Expressed in % of GDP, no other country comes close to that kind of an exposure. Paul Krugman once asked "Is Austria doomed?" because of this exposure. No, not doomed, but extremely vulnerable.

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    2. And here is an article about a study which the University of Vienna just came out with wherein they state that "Austria is treading in Greece's footsteps".

      http://wirtschaftsblatt.at/home/nachrichten/newsletter/4848687/WUStudie-mit-vernichtendem-Urteil_Osterreich-tritt-in-die

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    3. Just found out that Austria is still triple-A rated by Moody's. How did I find out? Because Moody's announced that they would probably reduce that rating.

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  7. The lady is vague as the oracle. "looks quite capable of". And then she goes on with the conditions that must prevail for it to happen (if-if-if), well knowing that none of these conditions have ever been present in Greece, let alone at the same time.
    Lennard

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  8. Klaus
    OK, I will go along with your analogy that the fruits Greece want to share, are the proceeds of debts the other countries have.
    I am sure that you, as a banker, will go along with my proposal that they also share the debt servicing, at the prevailing market conditions for Greece.
    Lennard

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  9. @ kleingut.
    I bow to your superior knowledge of Austria. Most of the good things you mention I knew, only very few of the bad. The biggest surprise was that you cook the books on your stat's, that is a sure way to self-deception, once it is on print you tend to believe it.

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  10. @V
    That Greece previously had a penchant for living beyond their mean is a historical fact. That Greece still, in this moment, live beyond their means is an economical fact. Why do you think the government tries to reduce expenses and increase income?
    If you, as you indicate, has located this overspending to 10% of the population, then it is easy to adjust, just tell your government who they are.
    Anon. Oct. 21.

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    Replies
    1. All developped countries "live beyond their means"; first and foremost, the US of A; but not every country is as important, as powerfull, as "too big to fail"! The rest of your comment is so profound that it has left me speechless!

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  11. The problem is not that Greeks do not want the reforms. Even when investigated rigorously this statement turns out to be true, something rare among political statements.The real problem is that they do not know what is they must do. There is no concept of capital formation outside the state, no concept of competition etc. So the political plan is to stop the money until the pressure chaniges the political system piecemeal. Hence the feeling of pulling teeth and getting no results.

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    1. @theAthensdog - rather than, or at least as well as, the 'political system' needing to change, I suggest the 'national/cultural ethos' also needs to change.

      If change is imposed from the top it will be resisted (plenty of evidence for that in Greece) and if it only comes from the bottom it will be chaotic (a'la Venezuela).

      What the government does must be coherent with what the majority want. My limited view of almost all Greek politicians (and to a greater extent than elsewhere), is that they regard the people as mushrooms - keep them in the dark, and feed them bullshit.

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  12. @ Klaus
    About your notions of work, the Central European impression you mention may be the one my grandfather had, it is not the one that prevails now.
    Imagine the staff of a big BMW factory, how many of them do hard physical work? Nevertheless they produce a very physical product, they just have to look out on the parking lot to see it. They are all aware that the money they are paid is a product of engineers, designers, accountants, workers, managers and even marketing people, and that they all add value to the process. They are considered role models for large parts of the population.
    The Greek role models are mostly people who extract value from a process, the middle men. To create a product (physical or intellectual) by means of work is considered slightly ridiculous. Most Greek boys still want to be "a business man".
    So, why do Central Europeans still respect their skilled craftsmen so much? They have managed to create, program and operate machines that do things for them that they used to do by hand, no mean feat. And maybe one more thing, found on the wall behind many top leaders. Among various academic diplomas you will frequently find a certificate of competence (ein Gesellen oder Meisterbrief) in a trade.
    Lennard

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