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.

Greek Reforms: 70+30 = 50 on a good day

It’s anyone’s guess what will happen at the February 16 Eurogroup session, the weekend European press is filled with every possible scenario and even contains detailed sequenced listings of all of potential outcomes.  We congratulate the SYRIZA media machine and its European partners for rolling out yet another wave of editorials and demonstrations in support of current Greek positions.

But our interest is in the substance, not show.  Is the Eurogroup going to put an end to the rhetoric (not our words, but US Treasury Secretary Lew’s) and get down to the business of locking down Greece’s reform agenda and its financing, or is it going to let this float for another six months? And will PM Tsipras be allowed to slip out from under the prior commitments he rejects by simply renaming the new agreement as a New Greece-whatever development bridge program? We hope not.

We chose the title 70+30=50 because its evident the Greek side is trying to pull a fast one by claiming it can easily accept 70% of the Troika’s structural reforms and will replace the 30% it rejects with 10 new measures it proposes (including elements of the OECD reform toolkit).  It will be a few days until we get the whole picture via communiques and leaks as to exactly what reform was traded for what concession, at what budgetary impact, and learn which sectors of Greek society have benefited by allying with SYRIZA for protection. But certainly the private sector will not come out near the top of the pile.

From what we have seen so far the 30% of the structural reforms the SYRIZA government rejects looks more like 50% or more of the previous reform program and certainly includes the essential competitiveness-enhancing reforms that Greece vitally needs. We are not so cynical as to suggest that the rejected 30% is the core of the reform program and the
acceptable 70% (remainder) are things most Greeks would agree on, since they are not seen as pain-inflicting “measures” by the Greek public. That means these are reforms that produce no job losses, no benefits cuts and no political costs, but sound important, like fighting corruption. 

 

But what we have seen of the SYRIZA “redlines” in these negotiations is totally unacceptable to free-market advocates and we urge the former Troika institutions to take whatever steps are needed to get the Greek side out of the clouds and back to Europe 2015.  Excluding privatization, public sector reform and downsizing, the health sector as well as labor market reform from the reforms required of Athens is essentially giving PM Tsipras a complete free hand to roll back much if not most of what little the Troika has accomplished.  This is equivalent to locking the Greek population in a room with a pack of hungry carnivores and telling them to divide up the few provisions the Eurozone will hand out.

While we see little harm in relaxing the budget deficit targets from the politically-unsustainable level of 4.5% of GDP next year, if the cash is available, the reform-minded Greeks that we work with sincerely hope the Eurozone does not make the concessions the Tsipras government is asking for.  Greece deserves better than to be hung out to dry in the face of a group of deeply anti-reform and anti-private sector ideologues, even if well dressed.

How to ‘Tsipras-Proof’ Greece’s reform program and its accomplishments

 

With Greece’s elections upon us and the spectre of “the day after” ever closer, the team at Reform Watch Greece (RWG), clearly no supporters of the reform record of the current government, has reconvened to lay out a few of its ideas.  As the title of this note suggests, RWG believes the path of structural reform more or less laid out by the Troika offers one of the few workable paths forward for Greece at this time.  Of course a reform plan developed here in country and agreed by the population would be far more acceptable, but for reasons specific to Greece which could fill several articles, this kind of program or consensus hasn’t emerged.  But the lack of a Greek alternative is no reason to reject other reform programs.

We produced these ideas because we want to make it clear that no matter who wins the January 25 elections, we believe that softening the Troika’s positions on the core elements of the Greek reform program would be a major tragedy for this country.  There is no question that the majority of Greeks want the country to remain in the Eurozone; our view is that the election will show what percentage of the population is willing to support a risky attempt to cut a better deal, which implies increased external financial support for Greece in some mode but doesn’t answer many other questions about how funds would be found.  Domestically, that essentially translates into reducing taxes (see below) and otherwise accelerating the pace of visible improvements in the Greek populace’s daily lives, because in essence many haven’t seen any change flowing from structural reform other than a spate of new taxes in the last 24-36 months, which have allowed for Greece’s dramatic fiscal consolidation.   As this leaves most Greek families in a state of slow decapitalization with no clear upside, it is not surprising that a sense of desperation has fed radical politics/reform fatigue and boosted the acceptance of radical solutions here.

This note is not intended as a full playbook, but here are several of the key policy parameters Greece’s negotiating partners should expect to encounter:

1. Zero Reform Rollback (ZRR): This is the bottom line. What Greece actually needs is reform acceleration to make up for lost time since the great pre-Euro-election slowdown in early 2014. It is clear that a SYRIZA single-party government would attempt to move immediately and unilaterally to consolidate its popularity/political base through enacting legislation to reverse certain reforms already in place, along with the associated chest-thumping about the “powerless” Troika paymasters. A coalition government would need time to agree on a platform; accordingly such action would be much slower in that scenario. If market signals and domestic cash flow constraints aren’t enough to bring moderation to the new leaders, the Eurogroup and Greece’s allies need to make it clear that any attempt to roll back Troika-initiated reforms or refloat Greece’s public sector will trigger immediate sanctions and jeopardize discussions on both Greece’s debt as well as prospects for closing out/extending the current Troika bailout program. Because of the mixed messages coming from Europe up to now, SYRIZA officials continue to talk confidently to domestic audiences as though Greece’s partners are merely bluffing and have acquiesced to the inevitable. While some of this is show it appears to many as if this is the final SYRIZA position.
2. It’s Amateur Hour: Greece’s interlocutors will immediately notice a different calibre of politician in the mix. Although many key SYRIZA officers have credible (although not world-class) academic credentials, by and large the new team does not have corporate board/private sector experience or previous international financial institution assignments. Without this depth of experience, a SYRIZA-led Greek government team will immediately be shown to be at a disadvantage in international negotiations, and out of necessity extremely cautious in moving discussions forward. Although good at spinning the Greek press, the long-winded academic approach of the SYRIZA economic advisers that we that have seen to-date might well put the focused western negotiators or the journalists they encounter to sleep.
3. Undeniable Debt Unsustainability (UDU) is the new dogma: There can be no discussion of Greece’s economic situation with a SYRIZA official without the subject of “Greece’s unsustainable debt” being broached in the first minute. A lecture on Europe’s “immorality” in lending to Greece will follow shortly. The party essentially has no unifying core ideology beyond the demand for an upfront write-down of Greece’s debt, although as of late it seems an election-period decision has been taken not to demand such a write-off for Greek debts owed to the IMF or ECB (which would never even allow the subject to be raised). Accordingly there is still no room in SYRIZA’s thinking for maturity extensions, longer grace periods, long-term interest rate cuts and the like on the debts Greece now owes to its Eurozone partners – mostly channelled to the so-called Greek Loan Facility (GLF) and the EFSF (approximately 197 billion Euros). The Greek side will talk tough in public while quietly approaching its partners and explaining the “humanitarian emergency” facing the country. Accepting that Greece’s debt can be engineered onto a sustainable trajectory when combined with continued growth-catalysing structural reform — without the demanded write-down — may be the ultimate result of a prolonged negotiation with the Troika, but it will cost SYRIZA its ideological core. However, once it is made clear to the SYRIZA policy team that insisting on its preferred alternative (an upfront write-down) to this is financial disaster for Greece, we have no doubt an arrangement can be made. Be prepared for intense maneuvering: the Greek side will work furiously to exploit every signal from Eurozone member states and elsewhere that appears to indicate there might be the slightest flexibility on the matter.
4. Privatization efforts cannot remain frozen in time: We continue to believe the privatization program will be the major channel for foreign investment into Greece for the next years. Although many if not most Greeks would prefer to side-line the issue, we believe targets should remain in place which will keep the Greek government focused tightly on these projects in order to raise budget revenue. However, we have witnessed a tendency for the Greek government to relax ethical standards in order to reach a deal at any price in the small group of sales that have progressed. In a number of these cases, companies run by Greek oligarchs, who are not immediately driven away by the almost-impenetrable Greek bureaucracy (as many foreign investors are), tend to take prominent roles. At a minimum, tighter monitoring of the suitability of potential investors is required.
5. The Bank of Greece is sacrosanct: The Eurogroup and especially the ECB should remind the new Greek government to respect the full independence of the Bank of Greece Governor. Prior to the election campaign Mr Tsipras levelled substantial criticism at the appointment of former Finance Minister Yannis Stournaras as Governor, probably because he would be immune to SYRIZA pressures once installed. The ECB must warn Mr Tsipras off this tactic and make it clear that no SYRIZA attempts to undermine Governor Stournaras or the Bank of Greece’s critical role in financial policy making will be tolerated.
6. It’s all about the Primary Surplus: The Greek population has been demanding tax policy changes and protesting loudly about some form of “austerity” or against important reforms since time immemorial, so there is relatively little new other than the breadth of the protest since the current fiscal consolidation began in 2010. However, it is important to deal with Greece’s current long-term requirement, imposed by the Eurogroup, to generate and maintain a large primary budget surplus; flexibility here is critical. These targets were set in the run-up to the November 2012 Eurogroup marathon discussions on the Greek program, after the completion of Greece’s private sector debt restructuring (PSI). From 2016-2017, Greece is obligated to run a primary surplus of 4.5% of GDP, with some flexibility to drop this number slightly in 2018 and beyond. We believe this primary surplus target is politically unsustainable, and said so at the time the decision was made. In fact the current elections might be seen as proof of this theory, and the primary surplus has not yet reached 3% of GDP (Latest estimate is 2.7% for 2014). We recommend this budgetary target be reviewed with an eye to an immediate reduction to a more sustainable surplus level, provided reforms proceed, which of course is the underlying requirement for all the Eurogroup decisions. In our view the primary surplus reduction should be keyed to Greece’s debt service repayment requirements, which in all likelihood can be sharply reduced if maturities are extended and interest rates further lowered.

In sum, we think a deal with a SYRIZA-led government might be built around these elements: (A) Reducing Greece’s primary surplus obligation, allowing for somewhat more social spending, but not rehiring in the public sector, and an earnest opening to privatization. It is of course understood that programs for job creation in the private sector will be given priority in future development planning. (B) Extension of Greece’s repayment periods to Eurozone countries (GLF/EFSF) and lower interest rates on all official debt where still possible;  (C) Specific reform requirements/benchmarks to be achieved for each year’s interest rate reductions to be certified, providing a clear budgetary incentive to fully implement reforms.

The Greek Middle Class: 1955-2012

Reader please note, this is the unofficial obituary . . .

The Greek Middle Class (hereafter “GMC”) passed away last week, after several years of deteriorating physical and emotional condition. Cause of death is currently being investigated, but decades of spousal abuse from the Greek Public Sector (“GPS“ also known as Big Fat Greek Public Sector “BFGPS“) is believed to be contributory to GMC’s early demise, as are, unfortunately, the conditions in the Greek public hospitals, and lack of heating oil.

GPS is the successor to GMC’s few remaining assets, and has successfully fended off claims from GMC’s relatives in America, Australia, Canada, and elsewhere. GPS wrote a moving death notice but requested “that the family’s privacy be respected . . . [and] particularly that these slanderous and hurtful allegations of spousal abuse cease.”

The funeral was a somber affair, paid for from GMC’s estate. Other middle classes, particularly from Italy, Spain, Portugal, and Ireland, were too ill to attend, and GPS pointedly refused to allow the German Middle Class to attend, calling them, predictably, “Nazis.” The Greek plutocrats were well represented, with lovely bouquets in tow. Father X, formerly of Vatopedi and lately confessor to the grieving GPS, gave a moving graveside eulogy pointedly praising the spousal solidarity exhibited by GPS, and asking for forgiveness for the hapless GMC. In spite of GPS’s advanced state of mourning, GPS still managed to record the eulogy on a recently acquired I-Phone 5.

GMC was born via a difficult birth circa 1955, the birth records were destroyed in the 2007 fire that charred the Peloponnesus so exact date of birth is uncertain. GMC and GPS were third cousins, with business and political interests. GMC was a sensitive and articulate adolescent, but constantly in the shadow of the plutocrats and GPS. Some of GMC’s relatives decamped to America and Australia as a result, but after the marriage of GMC and GPS in 1981, a certain domestic harmony ensued. GPS appreciated GMC’s willingness to work and eventually GMC rose to regional manager of the other Balkan Middle Classes, in the latter 1990s.  GMC also bankrolled their daughter’s education in Britain, at City College in London.

According to a copy of GMC’s diary, smuggled out of the house by a relative from Toronto, the trouble really began in the late 1990s when GPS forced GMC to agree to signing off on a false financial statement to join the Euro Club. Membership had its privileges, though, and for the next few years, the couple partied hard, not just in Mykonos with the VIPs, but all over the world. For a poor kid from the village, it was heady stuff. But keeping up with the VIPs, both local and foreign, was hard going and GPS began to skip paying bills while demanding more and more from GMC’s paycheck. Blackmail and verbal abuse became the order of the day, and GPS actively stirred both the poor and the rich against GMC, further isolating GMC. Also, relatives from America and peers in Europe were pushed away, and eventually GPS’s bad manners and temper resulted in GMC becoming friendless. GMC’s long history of enabling GPS also eroded others’ respect for GMC.

Just as GMC’s health began to deteriorate, GPS forced GMC to work harder, and constantly demanded GMC’s pay. GPS’s health insurance proved to be less than effective, because GPS had stopped paying the premiums, and GMC was not allowed to seek help from relatives or from peers. By this summer, GMC’s pallor had turned a deathly grey, even as GPS was planning yet another ponzi scheme. With the first serious cold snap, and no money for heating oil, GMC gave up the ghost. A few days before, neighbors did hear a muffled argument about yet another financial demand from GPS, but GPS insisted that the neighbors misheard.

A few days after the funeral, GPS was seen in Mykonos arm in arm with VIPs, hardly a grieving spouse.  Among those in GPS’s entourage included officials in charge of the inquiry into GMC’s death.  A finding is expected shortly.

We all eagerly await the findings of the inquiry.

Time to Streamline

Greece is about to learn the composition of its latest government coalition. Unfortunately this has become an all-too-regular event.  We wish the new government the very best as it takes Greece’s long-overdue structural reforms forward.

Here at Reform Watch Greece we sincerely hope the announcement does not include a Ministry of Development, Competitiveness and Shipping, or a hastily renamed new version thereof. We believe retaining this Ministry (or a close relative) denotes a government intention to continue its excessive level of state intervention in the Greek economy, something that has to end if Greece is to become investment-friendly.

The Ministry of Development et al that we currently know it is a result of multiple iterations of re-creation.  It never delivered the desired results, and over the years became a major bureaucratic obstacle to most investors.  Essentially parts of the 1980’s era Ministry of Economy/Economic Coordination were merged with the old Ministry of Commerce along with various scientific/commercial research organizations.  From time to time, control of Greece’s shipping industry has been thrown into the mix as well.  The shipping sector is critical to the Greek economy and should be handled in a separate ministry; the handling of this industry in recent years has been quite amazing, if not scandalous.

See this dizzying summary of the political tinkering over the years: http://en.wikipedia.org/wiki/Ministry_of_Development,_Competitiveness_and_Shipping_(Greece)

Streamlining and removal of  much of the Ministry of Development’s work would allow for a significant and truly meaningful downsizing of the central government, and would send the desired (and missing) signal to all that Greece is serious about creating a business enabling environment.  Zeroing out of the permits managed by the Ministry of Development would be the single most important signal the government could send that it is serious about business.

With very few exceptions, the permits issued by the Ministry of Development should be set by legislation to expire by the end of the year, with no need to renew them again.

We suggest a very small core group from the Ministry of Development be assigned to a new National Commission for Investment and Competitiveness that would report to the Prime Minister or Deputy Prime Minister and should include most of the “Invest in Greece” organization as well. Work on managing the EU funding which Greece receives can also be handled here.

The functions that the Development Ministry now performs regarding market price and quality controls (pulled from the old Commerce Ministry) should be spun off into a National Directorate for Consumer Protection.

As noted earlier, A Ministry of Shipping is needed, and can handle Aegean development issues as well.

The time to “Reinvent” the Greek government has arrived.  Keeping the Ministry of Development as it is now structured also signals “business as usual” on the business conference circuit (they will be overjoyed), where no meeting/conference with high-level business executives or foreign investors can be considered complete without a speech from the all-knowing Minister of Development.  Surely Greece deserves more than an ornamental relic from earlier times.

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.

Greece under Sanctions? A Yugoslav Deja Vu . . .

 

Greece, like Yugoslavia under sanctions, is starting to be cut off from the world economy.  This time, it is not due to war, but rather economics, and, let’s face it, politics.  The debt binge of the first decade of the new millennium was going to require massive belt tightening to pay under any circumstances, just as it has in Ireland, Portugal, now Spain and likely soon others.

The inability of Greece to reform, and even, on May 6, to elect a coherent government has resulted in the market taking the situation into its own hands.  Greeks are taking advantage of the EU’s lack of currency controls to take their money out of the country, by the billions.  Investors are cutting and running.  Those who sell to Greece demand payment up front; commercial insurers, refuse any Greek business.   And just days after the election, Russian Natural Gas behemoth Gazprom warned that the spigot will be turned off if Greece does not pay up.

Effectively Greece is under economic sanctions, dictated not by politics but by the market.  A nation with a huge trade deficit in energy and even food is basically being cut out of world markets.  This harkens back to Yugoslavia in the 1990s, though the Serbs had the advantage—an important one—of being utterly self sufficient in food and had a far, far lower level of economic integration with the rest of the world.  Though they had serious indebtedness (which contributed not a little to Yugoslavia’s demise) their debt and trade deficit was far less than their Greek neighbors have today.  As such, though the politics are different and (thus far) there is no war and violence, the sanctions effect on Greece may be eerily similar.

Of course, Yugoslavia in the 1990s suffered some of the highest inflation in world history, which thus far Greece has not.  True, but whether this element of the Yugoslav equation comes into play is entirely a matter of what happens on the June 17 election.  If Tsipras comes out on top and puts his imbecilic and ill-defined plans into play, Greece will likely be bounced from the Euro and hyperinflation will no doubt begin, complicated by not having a legacy currency already in existence and by the scarcity of vital products (food, medicine, fuel) due to the virtual sanctions on Greece.

Nearly twenty years on, Serbia is still reeling from the twin blows of sanctions and hyperinflation.  The damage to national wealth and, perhaps more importantly, the national psyche, is palpable everywhere.  Greece today is at the threshold of similar pain, and real prudence is necessary to avoid the abyss into which we now stare.  One of the shoes has already dropped, the other is teetering at the edge.

Tsipras must not win.

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.

Reform Watch May 2012 Round Up…Did you REALLY expect changes?

Yes it’s an election period. And yes, you are tuned to Greece. Who in their right mind would expect a “caretaker administration/service government” to change anything?  Especially anything that involved benefits levels or public sector staffing?

Just testing…We certainly didn’t.  Nonetheless the country kept operating at deficit levels, meaning public sector salaries and pensions were supported by Troika bailout funds, as usual.  Did Greece really move any closer to financial independence over this period? Were those bailout funds well spent or just scattered randomly for public consumption and to sustain businesses/public services that seriously need to restructure?

Below is a brief listing of how certain ongoing structural reforms were “processed” in Greece over the last month. It is basically a “low-performance report.” We are certainly glad we don’t have to compile a detailed matrix of accomplishments for Troika officials prior to disbursing the next cash injection (shape not yet decided) which Greece will so desperately need next month. There is precious little to work with, even for the strongest supporters of Greece in this difficult time. And let’s not forget that the former Papademos government basically sprinted to pass key pieces of reform legislation by mid-April (mostly unimplemented) so the first round of elections could be held in May.

None of this absolves Greece in any way of its requirement to produce a large list of budget cuts for 2013-2014 for Troika approval and vote on dozens of other reform measures by the end of June.  No wonder Greeks prefer politics!

Privatization:  While work on preparing assets already held at the Hellenic Republic Assets Development Fund (TAIDEP in Greek) goes on, policy decisions and transfers of new state assets to the Fund are frozen by edict until the June 17 elections. Socialist parties are doing all they can to stop work at the TAIDEP and some even talk of reversing it.  The status of a number of government assets transferred to the TAIDEP in early May before elections is reportedly under review.

Health Sector:  The new system of electronic prescription management, designed to reduce costs by limiting drug purchases, was partially offline in May for technical reasons.

Tax Issues/Revenue Collections:   Revenue collections have fared poorly this year due to the recession and the extended election period.  Some news reports note a 20-30% decline compared to last year and certain news outlets and high-level government sources  characterized the situation as “desperate” during various political meetings and coalition-formation discussions throughout May. Reforms in the barely functioning tax collection mechanism, especially those designed to fight tax evasion, are not underway now, but major changes required by the Troika should begin in July.

Labor Market:  As of May 14, all “old” collective labor contracts automatically expired. Those contracts could be replaced by so-called individual agreements and could include some wage reductions. This important labor market reform stipulates that a collective contract had to have been signed/reauthorized in the previous three months to be considered valid after May 14.

Public Sector Personnel System:  Just days before the May 6 elections, word was released that the ambitious personnel reviews and job audits planned for the public sector would be delayed due to the elections. Nothing since then, but of course, public sector (BFGPS) paychecks keep coming.

European Community Monitoring Office:  Shortly before the May 6 elections, a site for the Mission’s Headquarters in Gazi was announced.  Public Sector employees already in that building protested immediately.  Since then, not a word.

Bank recapitalization: This is not a structural reform, but since it is linked to the overall PSI package which supports reform, it merits mentioning.  The bulk of the EFSF funds sent to Greece for this purpose in April were disbursed to four participating banks via the Hellenic Financial Stabilization Fund (HFSF) in mid-to-late May, with substantial action (Euros 18 billion) disbursed in the last few days of the month.

 

Scale of reform task facing Greece is monumental

See article below for a good summary (The Irish Times) of what Greece committed to do, under former-PM Papademos, by June 2012 as it received the first “new” bailout tranche under the so-called “Second Memorandum.”  This is not fiction, and that money, disbursed in March, has been spent. The date for the Troika’s next return/review is not yet clear.

http://www.irishtimes.com/newspaper/world/2012/0518/1224316280691.html