The Biggest Liability to the Viability of the Greek Economy

The present PM of Greece, A Tsipras, sent a letter to the Eurogroup today asking for a new loan facility from the ECB.

In this letter, Tsipras assures all recipients that the Republic (presumably, the Hellenic Republic) is "...fully committed to service its debt in a manner that ensures the viability of the Greek economy, growth and social cohesion".

Words, and playing with words, as usual.

What he is saying is "I will pay you -- unless of course I see that my growth suffers, or that maybe the viability of the economy suffers (how did it get into this mess in the first place?) or the social cohesion in the country dictates: no repayment ". But don't worry, you're there somewhere in the lower priorities.



The biggest liability to the Greek economy's viability is Mr Tsipras himself. Were he to remove himself and his cronies from power, things would, magically, improve.

The letter: please give me money. If things go right, I might pay you back -- unless, that is...

The Adolescent In Need of Therapy -- Greece's Government Yet Again Blames the Scapegoat

The problem is not with the scapegoat, it is that people listen.



Greece seems to be suffering in the throes of misinformation -- or at least conflicting information. There seems to be a difference between what is happening, what is reported locally and what is understood as happening: it is "the European partners" who are imposing austerity measures (the Greek government proposed the measures) there was an ultimatum (there was none), etc. There are planty of examples of confusing and conflicting information.
With 50% of Greeks only loosely connected to the Net and only an estimated 17% receiving news on-line, it should come as no surprise that confusion is rampant.

Now Greeks are called to vote in a referendum without clarifying the subject of said referendum.

It is loosely referred to as "a resounding no to oppressors" (i.e. down with school, down with teachers!) by sympathisers and "grexit" by the others. Early on Sunday the idea was put forth that it is a referendum on the proposed plan by the Greek government (?). This is 47 pages long and largely incomprehensible.

It is uncanny to ask individuals to vote on a question-mark or on 47 pages of fiscal text (badly written) and unconstitutional in Greece to do so -- but the latter is the least of the Greek government's bother. Constitutionality does not seem to be high on their agenda.


The referendum is essentially bogus and simply an ultimate means of putting pressure on the Eurogroup members.

Of course, it is presented to the public as "confound the oppressors" -- a bit like this sounds like the cry of an emotionally challenged adolescent, revolting against parental authority. And while this may be adequate explanation, it is no comfort: most Greeks do not understand what is going on and the easiest solution is the one that hits home first:
we are trying but it's the other peoples' fault - the Europeans do not want us.


What Greece seems to lack is awareness of itself and responsibility to tackle the situation, one problem at a time.


Greeks are also notoriously misinformed:



Or, Greece's government is simply enjoying the fun: campaigning for "money for nothing and the chicks for free". If it works, it works. If not, who cares, they'll move to Australia -- or buy out the land with their Euros stored in foreign banks in foreign lands.

The ATM in the Greek House of Parliament on Saturday: MP queueing up to draw cash asap!

Understanding Greeks: What is Going On-2 (The Enemy That Lurks On the Outside.)

To a large extent, the comfort for many Greeks contains a scapegoat; now it is the Eurogroup and the Germans.

In years past it was the Americans. Generally speaking. Any demonstration -- many of which took place as a matter of course or tradition, a commuters-annoying fiesta if you will -- would end up at the American embassy.

Of course Greek politicians, probably Europe's most corrupt and ineffectual, need "bad guys" to explain away the dismal situation of their country and its abysmal financial state.


What is the situation at this moment:

1) Greece's government is misinforming the country as to what is going on in the negotiations, trying to support the "bad guys" concept and putting forth the notion that its the bad guys who are imposing austerity that the Greek government is resisting.

2) Some Greeks, (4.5/10) who voted for this fascist - left wing coalition government insist on burying their heads in the ground and looking elsewhere when reality is staring them in the face; they voted for a magic wand that would make everything OK (syriza) and they could start consuming again.

3) The media are between two stools about stating the obvious and reporting reality: they fear
a) a drop in their viewer ratings(because people do not want to be troubled by the truth -- which they know intuitively anyway. Greeks want to shy from the truth.)
b) be labelled the unpatriotic propagandists of foreign powers

4) So, by and large, a large slice of the Greek voting population remains unaware of what is really going on.


Despite all, a demonstration last week labelled gathered thousands "We are European"


So, what is really going on?


AFAI understand:
The lenders have decided to take a hard stance as regards cost cutting by insisting on a positive current account balance. 

This means that the Greek government must either raise its income with increased new taxation (ref, talks about vat, etc) OR reduce spending. The latter is preferable for the future.

The lenders have accepted that the debt (approaching 450bill euro) is not sustainable. It will probably be restructured in the form of a write-off quietly sometime in the future. 


(Greece produces little value adding and the state bureaucracy and the public service agencies inertia  doe not allow for much initiative and change. Spectacular growth figures for the future, needed to service this debt, are not on the visible agenda.)


For the write-off to take place, Greece has to step into the path of sustainable growth. 
I.e. two things have to happen to the satisfaction of lenders (and, largely, to the good of the country): 1) Greece has to show it will not run a similar debt yet again 2) make reforms that testify to its pursuit of more competitive path as a country and ones that will bring it into the 21st century (free investments, allow excellence in education, allow efficiency in medical care, reform closed professions, reduce the abysmally reactionary and huge public sector, maybe even contain corruption).


The present Greek government does not want to reduce its spending because it is afraid of losing its voters. Also, in order to win the elections it promised to do away with austerity - in other words, to give away money. It is also supportive of the civil service and hostile to investment, so it is unsure of how to promote "growth". 

Greek Government organised rallies in favour of the government's efforts are organised in Athens in an effort to give evidence of support and sway European leaders and public opinion.

 
And this is the gist of it. As it trickles down to the negotiations saga:

whenever lenders say, "reduce spending",

the Greek government quietly says:
"how about we agree on implementing equivalent, income-increasing measures? Like say, increase VAT?"

The lenders / Eurogroup probably answers:
"that's not a good idea, that would hit a critical industry, hospitality. Also, increasing vat on drugs would affect the weakest...".

The Greek government comes back home and declares publicly:
"the lenders wish to impose high VAT on us. They are inhuman!"


And the saga lives on


Close to 70% of Greek state spending goes to civil servants' salaries and pensions (early pensions make up 45% of the budget for pension; about 30% of this in the form of subsidies to state owned corporations' special retirement benefits (chiefly PPC & Hellenic Telecom).


The Greek government does not want to reduce spending

Greece Debt Negotiations: What is Going On (the truth)?

The Greek government has stated that it prefers to pay civil servants' salaries rather than pay creditors and avoid bankruptcy.

So, for the sake of 1.4 million (purported) cronies, the Greek government is ready to sacrifice the livelihood of the country's remaining 9 million!!!

This cannot be the opinion of most inhabitants, for sure.

Misinformed they may be-- either by the state controlled propaganda or the misguidance of people who are there to inform the public at large.

A friend said yesterday that the Greek government has yet to submit a valid proposal -- i.e. one that supports the weakest in the country, faces the crisis, contains cost-cutting measures and puts forth growth prospects. This is what the Europartners expect.

Instead, the Greek government's net contribution to the Eurogroup up to now has been to propose tax raises and to oppose, rather than propose: the counter anything and everything that is put on the table. So, the initiative is generally in non-Greek hands, hence (probably) the mailaise and incomprehension of Greece's Europartners.

I received the letter below and am reproducing it as is.

"""As an EU citizen with a family living in Greece, I am one of many inhabitants of the country dismayed by the nature of the negotiations between the Eurogroup and the Greek government – and fearful of the consequences of a misdeal. 

This is a very concerned citizen’s viewpoint.

The humanitarian crisis in Greece is real and real people are suffering. But these people are largely ignored - despite the best efforts of the Euro-Partners so far.

The Greek government argues that there is humanitarian crisis and claims flexibility in negotiations as long as there is a "fair deal". The government says it draws the line on touching "salaries and pensions" and on maintaining past labour law reform.

Salaries and pensions:

* "Salaries" can only refer to the Public Sector i.e., the Greek state payroll. In other words the Greek government's humanitarian concern for not reducing salaries refers to 800,000 - 1,176,000 persons (it is still unclear how many persons are directly & indirectly on the public payroll in Greece). It would seem that the Greek government is prepared to sacrifice a deal with lenders to protect the income of civil servants in the country.

* Salaries in Greece in the period 1997 - 2014 are still up by 7% comparing the two dates (eurostat). So, at least, civil servants, all of whom are still employed, are better off than their unemployed private sector brethren, even after the reductions imposed on their income in 2012-2013;

*Labour law in Greece is restrictive both in flexibility to employment and to redundancies, as well as to temporary placement.
The Greek government proposes to oppose or cancel reforms that have already been implemented, even though these reforms may help make recruitment & job creation easier and more attractive.

The “humanitarian crisis” in Greece:

* Pensions:
We have 4.5 mill pensioners in Greece, 1% are under the age of 25. The highest cost belongs to the 56-65 age brackets. Presently, 51% of new pensioners are in the age bracket 55-61 (Hellenic Stat Service). The monthly median pension is € ~900 and many pensioners who have contributed for decades are now supported by their families.
If further cost-cutting needs to be implemented it could be done selectively rather than across the board: in Greece the catalogues are up to date, so groups enjoying special benefits at the expense of others, or are employable, can be identified.

* Greece does not have a guaranteed minimum income (i.e., allocation universelle or revenue minimum); so, unless privately supported, if you are poor in Greece you will die.
A guaranteed minimum income is not included in the Greek government's humanitarian pursuits.

* Unemployment is ~26%, or close to 1.4 mill persons (Ministry of Labour 1/2015), mostly long-term unemployed. Benefits are only allowed for 12 months. Hence, only around ~10% of unemployed in Greece receive unemployment benefits (figures for 10/2014). The standard monthly unemployment benefit is € 360 and reaches € 540 for families with 5 children.
The nation's unemployed and their survival are not mentioned by the Greek government and do not seem to concern its members.

* Worse: medical cover is unavailable to the unemployed after 24 months. How people survive and their families cope thereafter is anyone's guess. Suffice it to note that children are insured under the parents’ benefits; without the parents insurance, children are uninsured as well.
Helping the unemployed is not part of the Greek government's humanitarian concerns either.

Overall, there is a crisis and there are people who hope for a solution but do not know where it will come from. Many do not know what is going on and when they search for a reason why there is no progress, they are told "it's the others' fault, the IMF, etc." They are assured that, "the government is doing its best to protect the citizens".  Probably, the people who are charged to inform the public are misinformed as well. 

Overall, in its five months in power the current Greek government has reinstated ~2300 civil servants who had been made redundant by the previous government and lowered the standards in secondary education. Nothing else.

The combination of lack of reliable information, misunderstanding, crisis, and the strange attitude of the country's government, spells catastrophe. """

Thus ends the letter. Hopefully not the country.