Letter to Mr Verhofstadt — A Modest Proposal

Dear Mr. Verhofstadt: By now you must have received several thousand messages of praise for your brilliant speech in the European Parliament. Your speech was full of eloquence, real world specifics, a keen sense of history, and an obvious love for Europe and for Greece.  You even offered to come to Athens to help. My question is, when can you start? Would you consider being Prime Minister of a Greek government of national unity?  It is not as crazy as it sounds.  You hit the nail on the head when you said that the Greek political class is the problem; they are all tainted and corrupt, Syriza is part and parcel of that system, and cannot or will not be any different.  As a people we are deeply divided, part of that is history, part of that must just be genetic, and at this time, to fulfill the program you so clearly and concisely elucidated, someone from the “outside” has to do it. Who better than you? First of all, you have done this job before, as Prime Minister of Belgium, a country with the same population size as Greece and one which is, let’s face it, also divided and with its share of dysfunctions.  You already have a plan, outlined with more depth and specificity than anything the Tsipras government provided.  You have a sense of history, not the cliché allusions to Classical Greece but to the real modern state.  You have an energy and optimism singularly lacking, frankly alien, to the Greek political class. Your being a foreigner need not be a problem.  As a Belgian, you are no doubt fluent in several languages, and the only Greek under 60 who could not communicate with true precision with you is Mr. Tsipras himself.  Anyway, given the way you pronounce Trikoupis and Venizelos (the Real One), you will no doubt make headway with Greek as well.  Being a foreigner is your greatest advantage; you have no local base or bias, and Greeks know instinctively that no Greek today can take command of the ship of state.  That is why the “electoral accident” of Tsipras occurred, because there was no real choice. Until now. Greek history is full of precedents of foreigners helping out or taking the helm at key times in our history, enabling us to rise over our divisions.  I prefer a more recent example.  In 2004 a German coach named Otto Rehhagel led a Greek team against 150 to 1 odds to the European Football Championship.  Our people have the will and the guts; we lack the leadership and the reforms. Come to Greece.  (Don’t worry about the citizenship, this is Greece, we can arrange something!)

Yours sincerely, Alexander Billinis, Co-founder,  Reform Watch Greece

The Elena Panaritis Show has been cancelled…is future syndication possible?

Greece is now casting around for a new Representative to the IMF (Executive Director) following the announcement June 1 that former nominee Elena Panaritis is withdrawing her candidacy for the position after a weekend of intensely negative reaction in SYRIZA’s ranks. From a statement she issued Monday: “I did not ask for this position and given that I accepted it only because I felt that I could help the government with my experience of how the IMF works, it is impossible for me to accept the appointment when there is a negative reaction from SYRIZA MPs and members.”

Just a few points need to be made.  Ms. Panaritis was clearly one of Greece’s most qualified potential candidates for this slot. Her knowledge of that rare dialect spoken at International Financial Institutions such as the World Bank and IMF was unmatched.  If another dozen Greek citizens could be found with expertise at roughly equivalent levels, they would likely have served in those institutions previously. It is doubtful other candidates would have had anything close to her wide background in structural reform issues.

So why was such a knowledgeable and media-savvy candidate a problem for so many in SYRIZA?  First, as a World Bank economist notably having led property rights reform in Peru, she could speak the language of reform, not the language of “reform rollback” that most SYRIZA officials sincerely believe they are elected to oversee.   So she was instantly in conflict with the core values of the government she would have been sent to represent. Second, as a nominee of Finance Minister Varoufakis, she was automatically suspect by all those who mistrust him.  Finally, as an economist who had served both the current SYRIZA government (most recently in the Brussels Group) and in George Papandreou’s government (MP at-large), she was clearly seen as an outsider (similar to Varoufakis) and probably fatally, as a “Memorandum supporter.”  Clearly, “structural reform” remains a dirty word in Greece, unless spoken in that special Syrizan-dialect that does not include the words “cutback,” “performance” or “fiscal restraint.”

This turn of events also further indicates the dysfunction of SYRIZA as a cohesive political party.  Cobbled together from a myriad set of alliances, smaller political Marxist-oriented parties, and disaffected Socialists, SYRIZA was only recently judicially recognized to have standing in national elections as a political party.  In coming to terms with SYRIZA, one must understand that this is a political party that is unable to speak with one voice.

The Eurozone presses Greek reforms: Rewind, Reset, Reform, Finally? Part 2

 

Reform Watch Greece has been here a long time (2011), and we have seen our fair share of Greek reform proposals.  Since the Eurogroup quickly blessed the Greek submission February 25^th as enough to work with for the next four months, there is not much point in overanalyzing these starting positions.  Greece will be fortunate if even one quarter of these reforms can be implemented by mid-2015.  Below we provide the text of Greece’s reform proposals as publicized early on February 25, WITH SHORT ANNOTATED COMMENTARY ON EACH SECTION (Bold  headers).

 

 

Dear President of the Eurogroup, In the Eurogroup of 20 February 2015 the Greek government was invited to present to the institutions, by Monday 23rd February 2015, a first comprehensive list of reform measures it is envisaging, to be further specified and agreed by the end of April 2015.

In addition to codifying its reform agenda, in accordance with PM Tsipras’ programmatic statement to Greece’s Parliament, the Greek government also committed to working in close agreement with European partners and institutions, as well as with the International Monetary Fund, and take actions that strengthen fiscal sustainability, guarantee financial stability and promote economic recovery.

The first comprehensive list of reform measures follows below, as envisaged by the Greek government. It is our intention to implement them while drawing upon available technical assistance and financing from the European Structural and Investment Funds.

Truly

Yanis Varoufakis

Minister of Finance

Hellenic Republic

 

RWG Comments:  While this is a good introduction, it needed to mention at least once in this section the Greek side’s commitment to take no measures with a budgetary impact. Its omission tells us something but it was clearly not a deal-breaker.  It also drops an oft-mocked phrase used by Minister Varoufakis in earlier documents about the new government’s “commitment to broader and deeper reforms.”

 

 

1. Fiscal structural policies

Tax policies – Greece commits to:

 Reform VAT policy, administration and enforcement. Robust

efforts will be made to improve collection and fight evasion

making full use of electronic means and other technological

innovations. VAT policy will be rationalised in relation to

rates that will be streamlined in a manner that maximises actual

revenues without a negative impact on social justice, and with a

view to limiting exemptions while eliminating unreasonable

discounts.

 Modify the taxation of collective investment and income tax

expenditures which will be integrated in the income tax code.

 Broaden definition of tax fraud and evasion while disbanding

tax immunity.

 Modernising the income tax code and eliminating from it tax

code exemptions and replacing them, when necessary, with social

justice enhancing measures.

 Resolutely enforce and improve legislation on transfer

pricing.

 Work toward creating a new culture of tax compliance to ensure

that all sections of society, and especially the well-off,

contribute fairly to the financing of public policies. In this

context, establish with the assistance of European and

international partners, a wealth database that assists the tax

authorities in gauging the veracity of previous income tax

returns.

RWG Comments:   With few details it is rather difficult to get a true sense of the priorities, for instance will there be a focused “chase the rich” campaign or simply a raft of new legislation?  Everything here sounds well-intentioned and designed to increase tax collections but we must see which tax code changes are coming in which order and which privileges will remain in place for those groups that helped to elect the current government.  We did not expect Greece’s Eurozone partners to find much fault other than to ask for a timeline and details.

 

 

Public Finance Management – Greece will:

 Adopt amendments to the Organic Budget Law and take steps to

improve public finance management. Budget implementation will be

improved and clarified as will control and reporting

responsibilities. Payment procedures will be modernised and

accelerated while providing a higher degree of financial and

budgetary flexibility and accountability for independent and/or

regulatory entities.

 Devise and implement a strategy on the clearance of arrears,

tax refunds and pension claims.

 Turn the already established (though hitherto dormant) Fiscal

Council into a fully operational entity.

RWG Comments:   Generally positive but without details on the arrears clearance mechanisms to be used, any evaluation is difficult.

 

 

Revenue administration – Greece will modernise the tax and

custom administrations benefiting from available technical

assistance. To this end Greece will:

 Enhance the openness, transparency and international reach of

the process by which the General Secretary of the General

Secretariat of Public Revenues is appointed, monitored in terms

of performance, and replaced.

 Strengthen the independence of the General Secretariat of

Public Revenues (GSPR), if necessary through further

legislation, from all sorts of interference (political or

otherwise) while guaranteeing full accountability and

transparency of its operations. To this end, the government and

the GSPR will make full use of available technical assistance.

 Staff adequately, both quantitatively and qualitatively, the

GSPR and in particular the high wealth and large debtors units

of the revenue administration and ensure that it has strong

investigative/prosecution powers, and resources building on

SDOE’s capacities, so as to target effectively tax fraud by, and

tax arrears of, high income social groups. Consider the merits

of integrating SDOE into GSPR.

 Augment inspections, risk-based audits, and collection

capacities while seeking to integrate the functions of revenue

and social security collection across the general government.

RWG Comments:   This was probably well received, although the systemic changes mentioned are unlikely to have visible short term impact in the Greek context.  We believe use of foreign tax and customs advisors and collectors in the short and medium term would be far more efficient in terms of boosting revenue collection and for training, but this remains an almost taboo subject in Greece. At least the Greek side seems open to use of foreign technical assistance, but Greece has almost always utilized small amounts of help on tax system reform, including the EU Task Force which has been present since the first year of the Greek crisis.

 

 

Public spending – The Greek authorities will:

 Review and control spending in every area of government

spending (e.g. education, defense, transport, local government,

social benefits)

 Work toward drastically improving the efficiency of central

and local government administered departments and units by

targeting budgetary processes, management restructuring, and

reallocation of poorly deployed resources.

 Identify cost saving measures through a thorough spending

review of every Ministry and rationalisation of non-salary and

non-pension expenditures which, at present, account for an

astounding 56% of total public expenditure.

 Implement legislation (currently in draft form at the General

Accounts Office – GAO) to review non-wage benefits expenditure

across the public sector.

 Validate benefits through cross checks within the relevant

authorities and registries (e.g. Tax Number Registry, AMKA

registry) that will help identify non-eligible beneficiaries.

 Control health expenditure and improve the provision and

quality of medical services, while granting universal access. In

this context, the government intends to table specific proposals

in collaboration with European and international institutions,

including the OECD.

RWG Comments:   The proposed cost savings steps noted here are not all new ideas, and in any event will take a long period for implementation.  Cutting high public sector non-wage costs should find favor with creditors, but is not a new concept.  The final bullet in this set is interesting as it is generally moving Greece in the direction of the EU; in earlier periods health sector reforms that lowered direct health care costs (esp access to prescription drugs) ran into intense opposition. Accordingly we need to see these proposals in final form for details.

 

Social security reform – Greece is committed to continue

modernising the pension system. The authorities will:

 Continue to work on administrative measures to unify and

streamline pension policies and eliminate loopholes and

incentives that give rise to an excessive rate of early

retirements throughout the economy and, more specifically, in

the banking and public sectors.

 Consolidate pension funds to achieve savings.

 Phase out charges on behalf of ‘third parties’ (nuisance

charges) in a fiscally neutral manner.

 Establish a closer link between pension contributions and

income, streamline benefits, strengthen incentives to declare

paid work, and provide targeted assistance to employees between

50 and 65, including through a Guaranteed Basic Income scheme,

so as to eliminate the social and political pressure for early

retirement which over-burdens the pension funds.

RWG Comments: We do not see much that is new here, although the focus on eliminating early public and banking sector retirement incentives gets needed attention; some work has been done in this area already.   This segment of proposals should be non-controversial with creditors but will take years for implementation and each cost-cutting step faces strong resistance here in Greece.

 

 

Public administration & corruption – Greece wants a modern

public administration. It will:

 Turn the fight against corruption into a national priority and

operationalize fully the National Plan Against Corruption.

 Target fuel and tobacco products’ smuggling, monitor prices of

imported goods (to prevent revenue losses during the importation

process), and tackle money laundering. The government intends

immediately to set itself ambitious revenue targets, in these

areas, to be pursued under the coordination of the newly

established position of Minister of State.

 Reduce (a) the number of Ministries (from 16 to 10), (b) the

number of ‘special advisors’ in general government; and (c)

fringe benefits of ministers, Members of Parliament and top

officials (e.g. cars, travel expenses, allowances)

 Tighten the legislation concerning the funding of political

parties and include maximum levels of borrowing from financial

and other institutions.

 Activate immediately the current (though dormant) legislation

that regulates the revenues of media (press and electronic),

ensuring (through appropriately designed auctions) that they pay

the state market prices for frequencies used, and prohibits the

continued operation of permanently loss-making media outlets

(without a transparent process of recapitalisation)

 Establish a transparent, electronic, real time institutional

framework for public tenders/procurement – re-establishing

DIAVGEIA (a side-lined online public registry of activities

relating to public procurement)

 Reform the public sector wage grid with a view to

decompressing the wage distribution through productivity gains

and appropriate recruitment policies without reducing the

current wage floors but safeguarding that the public sector’s

wage bill will not increase

 Rationalise non-wage benefits, to reduce overall expenditure,

without imperiling the functioning of the public sector and in

accordance with EU good practices

 Promote measures to: improve recruitment mechanisms, encourage

merit-based managerial appointments, base staff appraisals on

genuine evaluation, and establish fair processes for maximising

mobility of human and other resources within the public sector.

RWG Comments: Many of the topics in this cluster strike us as basic good governance/public administration issues and may be incorrectly classified as structural reform. This is a matter of labeling and semantics.  That said, they can certainly be added to government priorities but not in exchange for other hard reform measures.  Charging powerful Greek media companies for public goods used free (frequencies) will be a major challenge, and is a reform that is over 25 years late.

 

 

1. Financial stability

Instalment schemes – Greece commits to

 Improve swiftly, in agreement with the institutions, the

legislation for repayments of tax and social security arrears

 Calibrate instalment schemes in a manner that helps

discriminate efficiently between: (a) strategic

default/non-payment and (b) inability to pay; targeting case (a)

individuals/firms by means of civil and criminal procedures

(especially amongst high income groups) while offering case (b)

individuals/firms repayment terms in a manner that enables

potentially solvent enterprises to survive, averts free-riding,

annuls moral hazard, and reinforces social responsibility as

well as a proper re-payment culture.

 De-criminalise lower income debtors with small liabilities

 Step up enforcement methods and procedures, including the

legal framework for collecting unpaid taxes and effectively

implement collection tools

RWG Comments: The SYRIZA government has legislation ready on tax collection, this segment is simply an explanation of the approach. Creditors will likely want adjustments in some areas, and tougher controls on the moral hazard area. RWG warns against any discounting of the initial tax bill amount for late payers, as this simply encourages the next cycle to wait and game the system before payment.  Bottom line:  Acceptable to adjust penalties for late payers but It must always remain more cost effective to pay a bill when due.

 

 

Banking and Non-Performing loans. Greece is committed to:

 Banks that are run on sound commercial/banking principles

 Utilise fully the Hellenic Financial Stability Fund and

ensure, in collaboration with the SSM, the ECB and the European

Commission, that it plays well its key role of securing the

banking sector’s stability and its lending on commercial basis

while complying with EU competition rules.

 Dealing with non-performing loans in a manner that considers

fully the banks’ capitalisation (taking into account the adopted

Code of Conduct for Banks), the functioning of the judiciary

system, the state of the real estate market, social justice

issues, and any adverse impact on the government’s fiscal

position.

 Collaborating with the banks’ management and the institutions

to avoid, in the forthcoming period, auctions of the main

residence of households below a certain income threshold, while

punishing strategic defaulters, with a view to: (a) maintaining

society’s support for the government’s broad reform program, (b)

preventing a further fall in real estate asset prices (that

would have an adverse effect on the banks’ own portfolio), (c)

minimising the fiscal impact of greater homelessness, and (d)

promoting a strong payment culture. Measures will be taken to

support the most vulnerable households who are unable to service

their loans

 Align the out-of-court workout law with the instalment schemes

after their amendment, to limit risks to public finances and the

payment culture, while facilitating private debt restructuring.

 Modernise bankruptcy law and address the backlog of cases

RWG Comments: Much of this cluster depends on improving the efficiency of the judicial system, not addressed previously but covered below.  Creditors will not be impressed with the focus in this section on social justice instead of banking system efficiency; if anything the outlines presented here appear to weaken the prospects for Greece developing a strong payment culture.

 

 

III. Policies to promote growth

Privatisation and public asset management – To attract

investment in key sectors and utilise the state’s assets

efficiently, the Greek authorities will:

 Commit not to roll back privatisations that have been

completed. Where the tender process has been launched the

government will respect the process, according to the law.

 Safeguard the provision of basic public goods and services by

privatised firms/industries in line with national policy goals

and in compliance with EU legislation.

 Review privatisations that have not yet been launched, with a

view to improving the terms so as to maximise the state’s long

term benefits, generate revenues, enhance competition in the

local economies, promote national economic recovery, and

stimulate long term growth prospects.

 Adopt, henceforth, an approach whereby each new case will be

examined separately and on its merits, with an emphasis on long

leases, joint ventures (private-public collaboration) and

contracts that maximise not only government revenues but also

prospective levels of private investment.

 Unify (HRDAF) with various public asset management agencies

(which are currently scattered across the public sector) with a

view to developing state assets and enhancing their value

through microeconomic and property rights’ reforms.

RWG Comments: Clearly this subject is anathema to much of the SYRIZA electorate which considers inclusion of this issue in the reform list a major loss.  Creditors will need to push hard for changes here as privatization should become the major channel for attracting private investment into Greece and this section still contains excessive restrictions.  We are especially concerned the future of the process will be left in limbo without deeper Greek commitments to do more.

 

 

Labor market reforms – Greece commits to:

 Achieve EU best practice across the range of labour market

legislation through a process of consultation with the social

partners while benefitting from the expertise and existing input

of the ILO, the OECD and the available technical assistance.

 Expand and develop the existing scheme that provides temporary

employment for the unemployed, in agreement with partners and

when fiscal space permits and improve the active labour market

policy programmes with the aim to updating the skills of the

long term unemployed.

 Phasing in a new ‘smart’ approach to collective wage

bargaining that balances the needs for flexibility with

fairness. This includes the ambition to streamline and over time

raise minimum wages in a manner that safeguards competiveness

and employment prospects. The scope and timing of changes to the

minimum wage will be made in consultation with social partners

and the European and international institutions, including the

ILO, and take full account of advice from a new independent body

on whether changes in wages are in line with productivity

developments and competitiveness.

RWG Comments: As in the previous section this subject is problematic to much of the SYRIZA electorate who will view its inclusion in the reform list as a major concession and divergence from the party’s announced policies. Moving in the direction of EU best labor practices is not massively problematic nor an unreasonable target, but reverting to older collective bargaining processes, even with new names and tweaks to the system, will be seen for what it is, a reform rollback.

 

 

Product market reforms and a better business environment – As

part of a new reform agenda, Greece remains committed to:

 Removing barriers to competition based on input from the OECD.

 Strengthen the Hellenic Competition Commission.

 Introduce actions to reduce the burdens of administrative

burden of bureaucracy in line with the OECD’s input, including

legislation that bans public sector units from requesting (from

citizens and business) documents certifying information that the

state already possesses (within the same or some other unit).

 Better land use management, including policies related to

spatial planning, land use, and the finalisation of a proper

Land Registry

 Pursue efforts to lift disproportionate and unjustified

restrictions in regulated professions as part of the overall

strategy to tackle vested interests.

 Align gas and electricity market regulation with EU good

practices and legislation

RWG Comments: Not particularly new, and not problematic, but implementation needs to be given top priority, especially competition policy and the high priority development of a business enabling environment.  The energy sector needs a major focused initiative if Greece is to exploit its competitive advantages, not just a brief mention.

 

 

Reform of the judicial system – The Greek government will:

 Improve the organisation of courts through greater

specialisation and, in this context, adopt a new Code of Civil

Procedure.

 Promote the digitisation of legal codes and the electronic

submission system, and governance, of the judicial system.

RWG Comments: Absolutely essential to Greece’s modernization.

 

 

Statistics – The Greek government reaffirms its readiness to:

 Honour fully the Commitment on Confidence in Statistics, and

in particular the institutional independence of ELSTAT, ensuring

that ELSTAT has the necessary resources to implement its work

programme.

 Guarantee the transparency and propriety of the process of

appointment of the ELSTAT President in September 2015, in

cooperation with EUROSTAT.

RWG Comments: Unclear why this needs to be included as a current reform, since the institutional changes at ELSTAT were completed several years ago.

 

 

1. Humanitarian Crisis – The Greek government affirms its plan

to:

 Address needs arising from the recent rise in absolute poverty

(inadequate access to nourishment, shelter, health services and

basic energy provision) by means of highly targeted

non-pecuniary measures (e.g. food stamps).

 Do so in a manner that is helpful to the reforming of public

administration and the fight against bureaucracy/corruption

(e.g. the issuance of a Citizen Smart Card that can be used as

an ID card, in the Health System, as well as for gaining access

to the food stamp program etc.).

 Evaluate the pilot Minimum Guaranteed Income scheme with a

view to extending it nationwide.

 Ensure that its fight against the humanitarian crisis has no

negative fiscal effect.

 

RWG Comments: Mostly derived from SYRIZA campaign promises and the Thessaloniki program.  Creditors will not find major issues as long as these reforms are not fiscally negative.

 

 

Austerity without Justice

Austerity, yes! Justice, maybe

In a few hours we will know whether fear trumped rage in this latest round of Greece’s election drama.

Were the European leaders and bankers right in threatening Greeks with the direst of consequences should they support openly anti-Troika parties?

Was the Global Left, Occupy Wall Street and the “austerity hurts” crowd closer to the point – that Greece could not and should not be subjected to more of the pain of structural adjustment?

Does it matter?

The implementation of Greece’s reform program has three major hallmarks:

–Little or no domestic constituency for reform

–Underperformance on agreed targets at almost every juncture

–Confusion about Greece’s administrative capacity to undertake reforms

At least up to the present, limited penalties were imposed by the Troika for Greece’s sustained underperformance on reform targets.  So in a perverse way, underperformance has paid off and kept the cash flowing in.  Look at the so-called “closed professions” and see how little has changed.  For example, recall how the IMF’s debt sustainability reports for Greece were revised almost monthly last year to make the case for a deeper haircut at each juncture, yielding Greece more debt relief at each new stage of the discussion.

We suggest that the majority of the Greek people are reacting normally to a structural reform program that has few if any visible “up front” benefits.  Building a domestic constituency for reform will be a long process, but up to now the issue has been a clear lack of justice, giving the population no stake.  Tax increases alienated a large segment of the population early on.  Finally, horizontal cuts in wages and pensions, a choice made by the Papandreou-led PASOK government itself, spread the pain across many layers of Greek society instead of the appropriate target, the bloated public sector.  The Troika should not have accepted PASOK’s “job-preservation is paramount” arguments, since this shifted the pain of adjustment heavily onto the already overburdened private sector and hastened the collapse in economic activity, while barely reducing the Greek state’s revenue requirements.

This could be changed, and quickly, if leaders decided that the missing sense of justice would be addressed as a priority.   Any of these ideas could have been attempted in the last two years and would have reduced the rage we are seeing today, in addition to producing some visible evidence that things could change for the better and that crime did not pay.

Ideas include: 

–Effective prosecution of the corrupt political and business elite based on a reformed judicial system. But in the meantime, set up special tribunals focusing on public procurement scandals.

–Repair and extensive modernization of the taxation system, allegedly ALWAYS underway, to include use of foreign advisors in the debt collection process.

–Re-evaluation of politicians’ asset declarations.  Moving the “look-back” period on these assets to 1974, as many are proposing.

–High priority auditing of public sector jobs so the downsizing and mergers of public sector organizations can be accelerated.  Prosecution of those found to have made hiring decisions based on political criteria as well as fast-track removal of the individuals illegally hired from those jobs, with pension benefits cancelled.

–Thorough scrutiny of all offshore business activities linked to Greece, via special tribunals.

The skeptics will say these ideas are politically unacceptable. We suggest they focus pain where it should be focused, so to demonstrate to the Greek people that unavoidable austerity (at least for the short-term) can be implemented with some sense of justice, social responsibility and reform.

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?

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