Comrade Tsipras savior of Greece’s Publik Sektor

During a televised interview on 12th June, Alexis Tsipras, the 37 year old leader of the radical left SYRIZA party referred to Greece’s partners in Europe on as “our opponents.” This thug who has proved to be an illiterate uneducated opportunist, the type that spent all his school and university days leading sit-ins and occupations, infringing on other people’s rights, derives from a well-to-do family and never actually having worked anywhere in his life, went straight into “the party” and has spent his entire parliamentary tenure creating problems for the country, thwarting any reform efforts,  encouraging violent riots and throwing smart-arse juvenile comments into the political arena meant to enthrall the impressionable and less intelligent.

Like millions of other Greeks within the country and in the Diaspora, I am thoroughly ashamed that someone of this man’s caliber has been “elevated” as a representative, or “leader” of Greece and the Greek people. His policies are ridiculous, those that are actually articulated that is, depending on which version is released by which hermaphrodite SYRIZA constituent clan, surreal in fact. One of his parliamentary candidates in Corinth just resigned in protest, stating that Greece will not last more than a few hours under such reckless leadership. Tsipras has now even gone to the Financial Times with an op-ed to try to improve his image as a reasonable negotiating partner.  Hogwash.

Anyone who has any real knowledge of what is going on in Greece at present would be aware that the only reason this party (SYRIZA) has gone from 4% to up to 30% or more in less than 12 months is because a large part of the spoiled and corrupt public sector, criminal unionists, cronies of the former PASOK (which has been basically cleansed through this) as well as even many right wingers from Nea Dimokratia have thrown their support solidly behind SYRIZA because they believe Tsipras will save them from going where they deserve to go…the rubbish bin.

Sadly, it seems that history will probably remember Greece as a deeply Balkan country that never really evolved from its Ottoman past and was destroyed by its useless public “servants”, corrupt trade unionists and state-dependent cronies, thanks to the opportunistic political operative called Tsipras. There may well be the need to reclassify Greece in global brokerage house lingo from a “developed economy” (if its institutions ever truly graduated to the EU level from the “emerging market” category) to a “submerging market.”  Tsipras should get two gold stars for his good work there.

CORRUPTION BLUES UNDERSCORE THE NEED FOR DEEP SYSTEMIC REFORM IN HELLAS

Whilst this blog is not called “Corruption Watch Greece”, unfortunately a large percentage of the news these days requires us to focus on the subject.   Systemic corruption in Greece is widely regarded as one of the triggers of the Greek debt crisis also threatening the very fabric of the Greek nation today. According to Transparency International, “efforts to reform and rebuild Greece’s economy in the future will be undermined because the country’s government, businesses and civil servants not only fail to stop corruption but actively participate in it”. More specifically, this warning was issued on 29 February 2012 through Transparency International Greece’s first ever assessment of the ability of important national institutions to fight corruption and underscores the fact that Greece’s ranking on Transparency International’s closely watched Corruption Perception Index (CPI) worsened in 2011, with the country taking joint 80th position out of 183 countries on the list. Its ranking puts it on a par with El Salvador, Morocco, Peru and Thailand, a ranking worse than any other country in the European Union of 27 nations, below that of Turkey in fact.

What is truly amazing, therefore, is that even after the latest revelations about bogus pensions, the orgy of fraud by corrupt IKA employees, the illegal social security benefits, and bribery demands by senior public servants at the Ministry of Development, some people continue to be offended by Pangalos’ statement that “Olloi mazi ta fagame” (“We ate everything together”), to run after Dalaras (a famous popular singer and a national icon who has always been a staunch defender of Greece’s interests) throwing chairs or “moutzes [offensive gestures]” at him and partake in throwing yoghurt at politicians. The logic that it is impossible for the 300 members of parliament, along with 100 or a few more corrupt henchmen to build up a national public debt of 360 Billion Euro seems to  be dawning, finally, in the most dramatic way possible.

In fact, according to the recent audit carried out by the Ministry of Labour, a total of 63,500 main and supplementary pensions were found to be fraudulent and their cancellation has resulted in a net benefit to the long-suffering state-owned pension funds of 450 Million Euro per annum, even though no real mention has been made about recuperating illegal payments already made or firing the individuals that approved those pensions. It is notable that in the OGA (Agricultural Pension Fund) audit alone, 8,500 outright fraudulent pensions were found as well as 21,000 persons who were receiving allowances and benefits without being entitled to them. According to the Minister of Labour, the audit found that many people were illegally receiving pensions for over two decades, whilst interestingly, after their cancellation only 7-8 people turned up to claim them.  How fast the news travels, it seems.

The fact that many people were invited to and took part in the “party” that Pangalos refers to is confirmed by the data made public by the Ministry of Health whilst the full report that reveals other specific cases of wholesale fraud is expected to be released in the next few days. The scam involving welfare benefits, set up on a national basis, is estimated to have cost the state more than 4 Billion Euro over the last decade! The audit conducted by the Ministry of Health revealed that on the island of Zakynthos, of the 700 people who were receiving the “blindness benefit“  (2% of the island’s population compared to 0.6% on a global basis (including third world countries) according to the World Health Organisation), only 100 turned up to claim the benefit as part of the audit of which 60 were found not to be blind! In the municipality of Eleusina, Attika, 107 files concerning apparently fraudulent cases of welfare benefits have been sent to the public prosecutor’s office. On the island of Kalymnos, during the two months July-August 2011, 595 cases of people with severe disabilities were registered. On this basis, with a population of 8% of that of the entire Dodecanese, Kalymnos officially now boasts 31% of the cases of severe disability of the entire prefecture! Moreover in the Dodecanese, a total of 68 people receive the “Heating Fuel Benefit” of which 59 live on Kalymnos, that is 87% of the total! One could also be forgiven for believing that the rest of the population of Kalymnos  is comprised of blind people and of people with mental disabilities with 18% of all the blind people in the Dodecanese (59 out of a total of 335) and 17% of those with severe mental disabilities (53 out of a total of 311). In other words, statistically, just about every Kalymnian suffers from something and receives a social security benefit for it. This of course, reveals there is simply no oversight by these organizations’ Athens headquarters or the Ministry of Health, as one would expect when cases of certain aliments statistically exceed national or international averages. …

Recently, 7 employees of the Kallithea branch of IKA (the largest social security organisation in Greece) were arrested and charged over a massive scam involving millions of euro that were stolen from that organisation’s coffers via a primitive but effective scheme made possible through the active participation and collaboration of the public. Whilst the exact amount stolen is still unknown, as investigations are currently in progress, it is estimated that the financial loss to the state-owned fund will exceed 300 Million Euro. This scam involved fraudulent claims being approved to members of the public as beneficiaries by corrupt officials who orchestrated it over a number of years.  Both benefited. Indicatively, one of the main players, a middle-aged IKA employee, was found with nearly one Million Euro in notes in her mansion, complete with a swimming pool and private chapel for forgiveness of sins. It is beyond any doubt that the participants in this scam were not only public sector mandarins and medical personnel, but many ordinary folk who received welfare payments for bogus pregnancies, births of twins, virtual medical operations and hospitalization for non-existent illnesses.

Hot on the heels of the IKA scam comes the arrest of two senior Ministry of Development employees caught red handed accepting a bribe of 120,000 Euro which they had demanded from two businessmen to release the approval of government  grants for a hotel complex development (already agreed in principle), the paperwork of which was submitted in 2005. The ministry officials had been holding back the disbursement of 13 Million Euro’s worth of state grants for the construction of a new hotel complex in the Peloponnese. Ministry employees had apparently been making demands for a kickback since one year after the application for the grant was submitted. Initially there were demands for 700,000 Euro. The businessmen, who already own a hotel complex outside Nafplion, refused to pay the bribe and the approval to provide the grant remained locked up in a drawer at the Development Ministry. It is a well-known secret in Greece that ministry officials nearly always ask for a bribe equal to between 2 and 4 percent of the value of the grant.  The fact that this is a known “going rate” shows just how prevalent and audaciously open the practice has become.

According to Kathimerini Newspaper (article dated 14 March 2012) this case has highlighted the difficulties that the Greek justice system has in dealing with cases of alleged corruption. About 90 percent of investigations carried out by public prosecutors relate to claims of graft in the civil service and a law passed last October designed to speed up the process has yet to be implemented. Since the law was passed last year, no ruling has been issued for a case of alleged public sector corruption.

It is notable that as soon as she was appointed Development Minister, and when this scandal hit the media, Anna Diamantopoulou reacted quickly by ordering the immediate dismissal of the approximately 100 personnel comprising the Department of Investment of the Development Ministry that these two culprits derived from and their replacement.  The Inspector of Public Administration, Dimitrios Rakintzis, has been assigned to investigate the financial affairs of all these personnel from 2005 until today and their bank accounts ordered opened.

It is encouraging that the Minister has exercised such apparent determination in rooting out the rot in her new ministry, but one cannot help but wonder to what extent have the seeds of the rot spread?  Are these the final spasms of a dying decadent society on its way out, or is this merely the tip of the iceberg?

How Not to Reinvent the Wheel

The article below, on the deep structural reforms successfully instituted by successive Australian governments over the last 25 years, and translated into English from the original Greek was published today, Sunday, 19 February 2012 in the Kathimerini newspaper. We believe Australia’s experience is a useful case study of how reforms can be implemented successfully both in the economy and across a country’s public sector. The lessons are many, but the key concept is simple. The reform process must be continuous and sufficiently broad in scope to allow a positive synergy, meaning that key structural reforms in the functioning of the economy and labor market have to work together with improvements in public administration. Australia was of course not a member of a currency union, meaning it had a broader range of macroeconomic and financial policy options than Greece does today. But it struggled with a large, expensive and inefficient state bureaucracy for many decades before finally reinventing it to serve the public’s interest and to support investment and development.

Lessons learnt in Australia for Greece

By Jenny Bloomfield*

Many ask what the steadily rising achievements of the Australian economy and the unprecedented prosperity that the country is experiencing today is due to. The answer is that because of the implementation of painful and radical reforms, we were able to reconstitute our economy and to be now in a position to take advantage of our natural resources in the best way possible and thus to benefit from the economic boom in our region.

In the 80’s and 90’s, Australia underwent an exceptionally painful period of economic restructuring in order to adjust to a new world economic reality, dramatically reducing protectionism and opening up key sectors of the economy to competition. The high cost of protectionism and the support provided to non-productive and non-competitive industries weighed heavily on the consumer who paid dearly for goods and services, as well as on our most productive and export-oriented industries. After 25 years of implementing structural reforms which led the way to two decades of continuous economic growth, Australia has changed significantly.

We strengthened competitiveness by investing in innovation and by increasing productivity. We reduced bureaucracy and the cost of business activity simplifying state procedures whilst in parallel strengthening incentives for people to work. We institutionalised a flexible framework of industrial relations and closely linked salary variations with productivity increases, which was instrumental in increasing employment levels and decreasing inflation.

We opened up the local marketplace, including the state monopolies and state-controlled businesses, to competitive forces, a factor that was a catalyst in increasing productivity. We helped surplus personnel in the workforce to integrate into more productive sectors of the economy through re-training and the acquisition of new skills.

These changes had the immediate effect of increasing the GDP, as well as the establishment of a more flexible, active, dynamic and efficient economic system. The increase in state revenue made it possible for the Australian government to continue improving its social security program. A re-structured, rationalised and effective public sector and open, transparent, accountable institutions made it possible for structural reforms to take place resulting in an improvement of public governance in Australia.

With focused reform measures for the improvement of the administrative framework of state institutions, we strengthened accountability, transparency, the state’s ability to respond to the needs of the citizens and the seamless operation of public services, harmonising the outcomes and productivity of the public sector with the private sector. We gave greater autonomy to public organisations, whilst legislating in parallel a framework for strict criteria of performance evaluation and accountability based on the achievement of predetermined targets and outcomes.

The diligent monitoring of the economic activity and the performance of public organisations contributed substantially to their improved status and better outcomes. Successive governments continued to implement a series of reforms which aimed to maintain and to improve the performance of the Australian economy in the fields of competition policy and productivity, industrial relations and flexibility in the marketplace, public administration, education and investment in innovation and the so-called “knowledge or information economy”.

The Australian people understand the difficult adjustment which the Greek people are currently undergoing to bring the country back to a healthy and robust economic status which will ensure the long-term prosperity of all citizens. The most significant lesson resulting from our experience is that the difficult adjustment program can be implemented successfully as long as there is collective support for the necessary changes and determination to achieve the results.

* Mrs. Jenny Bloomfield is Australia’s Ambassador to Athens.

Original article here, in Greek:

http://news.kathimerini.gr/4dcgi/_w_articles_economy_2_19/02/2012_473064

Reform Reversal Greek Style (or Revenge Of The Public Sector)

Back in January 2012, some of us argued that bowing to the public sector unions and failure by the then Papademos government to implement the decision made by former Minister of State, Ilias Mosialos, in August 2011, that is to close down ERT television stations ET1, digital “Cine Sport”, the TV gossip magazine “Radiotileorasi” and 10 of the 19 regional radio stations would deal a serious blow to its credibility and compound problems for the future. It seems that this article was prophetic to the point that someone, a very unlikely “reformer,” had to come and cut the Gordian Knot…It remains to be seen whether this is now too little too late or the beginning of a process to to take unpopular but necessary cost-cutting measures that actually throw public sector employees out of their heavily subsidized jobs. .We are re-running the January 2012 piece below so that readers pulled into the ERT closure story can get a balanced historical perspective and not just the hyperbole of the dozens of emotional articles written in the last 48 hours, many by involved parties or their allies.  In our view, this is not a battle about “media freedom” in any sense, rather it is about the toughest battle Greece has yet to face, reform of its bloated and deeply-entrenched public sector.

Begin January 2012 article:

Five months after the announcement by the then-State Minister and Government Spokesman (oversees the government’s press/communications policy) Ilias Mosialos that the state-run television station ET1, the digital television station “Cine/Sport” and “Radiotileorasi” Magazine would close down (or be partially subsumed in other activities) as part of the government’s public sector consolidation drive, the Board of Directors of ERT, buckled to the pressure of the public sector unions and announced on 30th January 2012 that in accordance with the “special study” just undertaken the decision to close down these organisations has now been in large part reversed.

Without divulging any information concerning who performed this “special study”, and in contravention of the ministerial decision 5 months ago, ERT S.A. has announced that:

• ET1 will remain in operation as a station placing emphasis on culture, the arts, entertainment, cinema, childrens’ programs, documentaries and programs of special interest as well as programs currently aired by digital Prisma+ channel for people with disabilities
• Digital station “Cine/Sport” remains in operation, but as a satellite station. (Note these stations were once separate but had been merged earlier in 2011)
• “Radiotileorasi” Magazine will not only remain in circulation but will be upgraded and its contents enhanced.

In addition, the Board of Directors of the state-run ERT has announced that it approved the plan to change and “improve the performance” of its 19 regional radio stations instead of closing ten of them as had been announced in the summer.

These scandalous decisions by the ERT Board, made under the pressure of the public sector unions, and the obvious acquiescence of the government, ensure that no cost reductions will be effected in that organisation and the Greek tax payer will continue to be burdened for services that could have been absorbed quite readily by the other two existing state-run television stations (NET and ET3) and for products, such as the   “Radiotileorasi” Magazine which is not within the realm of something that any reasonable person would expect the state to provide, least of all at times of economic crisis.

ERT receives 300 million EUR per annum from the compulsory levy (antapodotiko telos) paid by all households and businesses through the electricity (DEH) bill, an amount that is equal to the total amount spent for advertising on the private radio and television stations. One would expect, therefore, that ERT would enjoy a significant share of the listening and viewing public. But on the contrary, the viewing and listening ratings of ERT are very low compared to the total marketplace, whilst public radio and television stations in other European countries enjoy at least 50% of their total potential listening and viewing public.

ERT needs to radically change its modus operandi implementing the decision made by the government in August 2011 and immediately close down ET1 whilst incorporating any programs worth while saving into the other two state-run television stations (NET and ET3).  It is not the government’s role to produce radio and television gossip magazines at taxpayer expense, such as “Radiotileorasi”, that no one reads and the digital station “Cine/Sport” must be closed down completely without any further procrastination.

Even though elections are coming up, failure to implement these simple cost reduction measures and bowing to public sector union pressure puts the Papademos government’s credibility in serious doubt.  If the Troika provides any service to the Greek people, it is to strengthen the ability of the government in place to take unpopular cost-cutting measures that actually throw public sector employees out of their heavily subsidized jobs.

One wonders if the ERT Directors seriously believe their decision can stand, in view of the  need to cut government spending drastically and refocus it on essential public services like health and education, not make-work employment programs for some of Greece’s self-labeled “journalists” who happen to have the connections to get them public sector jobs.  Is this simply a pre-election ploy to kick the game into overdrive and work out a deal with the next elected government?  What will it take to close ET1, an edict from Brussels or the appointment of a Commissioner for Greece?

Letter from a Greek Private Sector Employee to a Public Sector Employee

In the wake of long overdue public sector reforms, brought on by external pressures (Troika), the Greek government apparently submitted legislation to deal more effectively with illegal and unethical behaviour in the public sector. The first article referred to below and published in Bloomberg and on our Twitter feed January 18 refers to this.

The second article, from a fellow blogger, entitled “Letter from a Greek Private Sector Employee to a Public Sector Employee” was posted in Greek originally. We have translated it below for the benefit of our readers because we thought that it goes to the heart of the matter succinctly.

Letter from a Greek Private Sector Employee to a Public Sector Employee

“Dear public servant, DEKO (Public Sector Corporation) employee etc, earning 1300 Euros (monthly), personally I don’t know you so I have no reason to either believe you or not believe your claims that you are not paid well enough by the state for the work that you do. Statistics though, and my empirical experience tell me that you do not even work enough to earn 500 Euros. Despite this, I don’t know whether as a ministry employee you receive two or two and a half thousand Euros just to keep the armchairs in your office warm.

I have no reason to believe that you weren’t receiving the “prompt arrival benefit/bonus,” nor the lump sum pension bonus from your “contributions” (how much more should you be paid?). I don’t know whether you are a tax collection service official receiving kickbacks and extracted bribes from companies so that you don’t impose a “fine,” at the expense of the country of course. I don’t know whether you work in town planning receiving “fakelakia” (little envelopes with cash) from builders to turn a blind eye on their illegalities, at the expense of the state again. I don’t know if you are a teacher who is on holiday for four months of the year and who works 25 hours a week, obliging through your laziness your students to undertake private paid lessons. I don’t know whether you are a customs service official making a little fortune on the side from illegal imports, nor whether you work for DEH (Public Power Corporation) extracting “mizes” (bribes) to award contracts to companies without going to public tender.

If you worked for Olympic Airlines, then you surely stole spare parts and batteries for your car, making sure that the company went under. If you work for OSE, then it’s certain that you had sent goods on consignment on the train system without documentation securing a fee for yourself at the company’s expense of course. If you work for OTE (formerly state owned telephone company), then you surely secured that placement through contacts, a “visma (a power connection)”, joining an already overstaffed company and receiving a fat salary. As an employee of a government television station, you probably never even set foot on the premises. If you are with the police, you would have cancelled traffic violations, you would have engaged in all sorts of illegalities without ever being punished and would have simply enjoyed your coffee and bougatsa whilst on duty being paid a double salary for special assignments. If you declared your occupation as forestry employee, then you would have simply organised a bonus for yourself to turn a blind eye to all the illegal buildings in the forests.  So you’re a member of the military then, eh? Then, at the best of times you would have merely stolen from the army’s food supplies in your capacity as responsible officer for the rations. Perhaps though you work in a hospital and made a cosy arrangement with some suppliers where you issued fake invoices, inflated tenfold, to profit handsomely at the expense of the state. If you are a Public Sector unionist, I don’t even want to think about how fate has treated you cruelly.

I personally, public servant, do not feel sorry for you at all. Thanks to your tolerance and votes and for your convenience and comfort, the Greek public sector grew into the monster that it is. Your contribution was decisive in creating the ogres we call politicians; those incompetents who cannot even follow simple instructions. Swim now, therefore, in the cesspool that was created by your own sewage.”

http://www.businessweek.com/news/2012-01-17/greece-submits-legislation-on-public-sector-disciplinary-action.html

http://wiredandready.net/2012/01/18/dimosio3/

Proud Yes, Powerless No!

Collective responsibility in any democratic society is borne by all citizens. Citizens are obliged to be informed about the issues affecting their society, their country. Political leaders are voted into office by the citizenry, they are therefore “popular representatives”, and in any democracy, through the power of the vote, the people, and civil society, have the ability to send them home if they disagree with the way that they govern the country. It is difficult, therefore, for the people to evade the collective responsibility that they allowed the country to be governed by two political parties, which had the support of the vast majority of the electoral body, resulting in the economic and moral meltdown of today.  In fact, one can argue quite credibly that the moral bankruptcy preceded the economic bankruptcy in Greece.

We noted in our previous post (In search of a leader with reformist vision) that Greece today urgently needs the healthy reformist sectors of society to come to the forefront. Our concern is essentially that there still has not emerged the critical mass of citizens pushing for structural reform. Too many have been bought off/co-opted by having family members in/or dependent on the less productive segments of the public sector, so the whole issue of reform is forced ahead only by the Troika at each bail-out tranche review. The few Greeks and focused elements of civil society which support structural reform are such a minority that they cannot, it seems, even form a political party. So we will not let Greek society off the “collective” hook until the consciousness shifts, and those who defend “poor little Greece” in the Western media are actually doing more harm than good unless they forcefully support Greece’s small number of true reformers (not Papandreou style speech-writers). The wave of creative destruction we are seeing now across the country is inevitable — Greece’s considerable human and capital resources have to be reallocated to functions which allow them to generate something of value. Like it or not, the free market is doing it, since government here is unable/ unwilling to. This hurts some (weaker) elements of Greek society excessively and it may take a generation. Civil society/NGO’s could be helping more…

To this extent, we are, therefore, astonished by the way some authors who clearly should know better gloss over the true problems in Greece.  The article below is an example of a superficial feel-good effort to explain the problems without any real data. Whilst the author does state that the two main problems are corruption and incompetence, he then glosses over this telling us that most Greeks are upset with the Troika and their own politicians…forgetting to mention that corruption and incompetence are to be found at every social level and in almost every sector of society. Moreover he fails to even touch on what this all says about an entire society that was actively milking the system for decades, but had no idea that this would lead to economic and social collapse.

Totally unconvincing!  We live in Greece and know what is happening. The sad fact is that a critical mass of Greek people does not appear to want structural reform or modernization of the economy and especially Greek society; many still want a return to the good old days when handouts were readily available, especially to those connected to the power structure.  Reorganization of Greece from the ground up has been recommended by just about everybody, check our previous posts.  Those elements of civil society which have focused on the problems, like the newly independent media (bloggers) and groups like Transparency International, are still relatively ineffective, although gaining some ground.  Why don’t the authors of the article below even attempt to explain how or why Greece has delayed on Troika-mandated reforms for over 18 months now?  They can’t, so the whole point of this plea for mercy is wasted.  And Greece continues spiraling down……

http://www.telegraph.co.uk/news/worldnews/europe/greece/8998359/Proud-but-powerless-the-Greece-that-I-love.html

GREECE’S PRIVATE SECTOR DEATH SPIRAL OR CHILDREN OF A LESSER GOD

The country’s private sector is caught in a death spiral. ESPA infrastructure investments are not materializing and liquidity taps are drying up whilst foreign investment is not materializing, at least not until the country’s solvency situation is clarified. Typically, the “flagship” Fast Track Hellenikon former airport privatization plan is being moved to 2013-2015. In the meantime household consumption does not appear to be recovering, household bank reserves are being shifted abroad, and the state continues to withhold payments — as such there is no prospective source for new spending. On the external front, the emerging depressed growth throughout Europe is diminishing hope for a recovery led by tourism, shipping and exports.

7 out of 10 businesses in Greece are planning to reduce employee salaries and 1 in every 3 are planning to reduce staff levels whilst sales are dropping dramatically, even for export businesses, and the lack of cash flow creates an asphyxiating climate, with 70% of all business predicting that 2012 will be worse. These are the summary findings of a study carried out by IOBE, the Foundation for Economic and Industrial Research, and presented by IOBE at a press conference on 13th December 2011, covering the 2.000 largest businesses in the country employing approximately 3.000 people.

More specifically, 70% of the 2.000 largest businesses in the country are planning to reduce employee salaries (this is not the first reduction), 28% to reduce employee numbers, whilst more than 52% of businesses expect a reduction in sales in the next 12 months, hot on the heels of the cumulative sales reduction 20% between 2009 and 2010. The number of domestic investments is also predicted to drop by 50% across the board.

“The lack of cash flow has now been compounded by the lack business confidence for the country and its businesses, which makes the situation far worse” as stated by the vice president of the Greek Industrialists Association (ΣΕΒ) Haris Kyriazis, whilst the General Director of IOBE, Giannis Stournaras underlined that if the endeavor to restructure the economy does not succeed, the economic crisis may transform itself into a social crisis.

The study, carried out from April to July 2011, with the collaboration of the National Polytechnic University and opinion pollsters Public Issue, verified that the economic crisis has affected the entire private sector. All businesses appear to be experiencing a cash flow problem basically because their customers are also experiencing that very problem themselves (48%) but also because of the lack of access to credit from the banking system (36.5%).

The lack of access to credit from banks is decisive for the construction industry where more than 60% of construction companies surveyed declared that they are experiencing serious problems. This sector is also experiencing a greater exposure to the crisis because of, amongst other things, the refusal to pay for services rendered and goods supplied by a prime customer, the Greek Public Sector, as well as the vastly reduced request for services and goods from that customer. This is sometimes referred to as an “internal payments freeze”, which knowledgeable observers consider a standard Finance Ministry method to engineer budget targets for Troika auditors.

Manufacturers are experiencing serious cash flow problems due to demands for more immediate payments to their overseas suppliers ( a consequence of declining foreign confidence in Greece’s solvency) and due to pressure from low cost competitors, whilst the shift by consumers to cheaper categories is one of the main problems faced by hotels and restaurants.

The main line of defense for businesses for the next twelve months is the containment and reduction of salaries, according to 69% of respondents, cutbacks in bonuses and indirect benefits (34%), reduction in prices (34%), adjustments to working time (34%) and a reduction in employee numbers (28%). Export businesses seem to be weathering the crisis better as they appear to be making up for losses in the domestic market.

According to the study, 54% of export businesses predict an increase in sales in 2011, 87% of these however state that the increase will not exceed 10%. Only 45% of the 2.000 largest businesses in the nation have an export positioning. For manufacturing businesses however, the corresponding proportion is 70%. Businesses that do export attribute 30% of their turnover to export income. It remains an open question, however, as to how profitable these exports have become.

In total, businesses sampled indicated decreases in sales of 11% for 2009/10 and predict a further decrease in sales of 7% in 2011. 52.3% of businesses declared that the current year will close with a decrease in sales and only 10% anticipate an increase.

In the area of domestic investments, the number of investment plans has dropped by 50%, whilst their value by has dropped by 40% for the current year compared to last year. In manufacturing, the reduction in investments is of the order of 29%. For the period 2009-2010, the investment value of companies sampled was of the order of 5.16 billion euro. Nevertheless it is notable that 73% of businesses that plan to carry out investments in 2011-2012 closed the year with a profit in 2010, that two out of every three businesses which plan to carry out investments of over 1 million euro in 2011-2012 had also carried out sizeable investments in 2009-2010 and that 63% of those planning to carry out investments of over 1 million euro in the period 2011-2012 predict that their sales this year will increase or remain constant. These are the survivors, clearly with deeper pockets than most Greek companies.

The survey also found that building activity plunged in August this year. The number of new building permits decreased by 14.2% compared to the corresponding month last year, and that based on total building quantity, private building activity receded by 11.4%. Over the 8 month period January – August, the number of building permits dropped by 30.5% in comparison with the corresponding period in 2010, whilst the total building quantity decreased by 37.3%.

In light of these findings, the Troika and Horst Reichenbach’s EU Task Force have already expressed their concerns for the consequences of this continuing private sector death spiral on the economy and society as a whole since it not only feeds unemployment, but places a time bomb at the foundations of the tax revenue structure.  In parallel, it increases the need for social security/unemployment expenditures and makes an exit from the tunnel increasingly remote.

Bureaucratic red tape remains untouched…as do the “closed shop professions” which have not been deregulated, the country remains a European leader in public sector corruption according to the recent report released by Transparency International with low productivity and an ever changing and complex tax structure.

As for inflation, despite the fact that Greece has been experiencing negative growth for the last 4 years, it is currently running at 5.5% with significant price increases on basic commodities which in turn undermine productivity and competitiveness.  The lack of a fully competitive market in Greece is one cause of this not-unexpected phenomenon, the other being the barrage of new taxes which have over recent months raised prices despite many business owners’ declared efforts to hold the line. For early 2012 we can expect new energy taxes will generate another spike in inflation, further undermining Greece’s export competiveness, whilst the private sector, the only hope for real economic recovery, continues in the path of an asphyxiating death spiral.