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Sunday, January 14, 2018

Responsibility For Greece's Collapse In 2009-10

Eight years after the fact, a new debate has erupted regarding the responsibility for Greece's fiscal collapse in 2009-10. Was ND the culprit or was it PASOK in the first place?

That is quite a change over recent months because until not too long ago, it seemed clear that Greece's financial collapse was caused singlehandedly by Andreas Georgiou from ELSTAT. Now the two traditional Greek parties, ND and PASOK, have replaced Georgiou in the defendants' dock. That's progress!

At first glance, the case seems clear: Greece may have been on the wrong track for some time before 2004 but the true derailment came at the end of the ND government from 2004-09. The deterioration throughout this governing period was extreme and during the last year, 2008-09, foolish extremism exploded. Case closed.

Or perhaps not? After all, Greece had been in relatively good shape by the time it joined the EU in 1981. Perhaps relatively poor when compared to Central European countries but in relatively good shape, nevertheless: public debt stood at 28% of GDP; the budget deficit was less than 3% of GDP; and the unemployment rate was 2-3%. Something must have happened after 1981 which set the stage for the final orgy from 2004-09, and that something had a first and last name: Andreas Papandreou (and his PASOK).

The best analysis that I know of comes from Prof. Aristides Hatzis who writes:

"PASOK’s economic policies were catastrophic; they created a deadly mix of a bloated and inefficient welfare state with stifling intervention and overregulation of the private sector. The political legacy of PASOK was even more devastating in the long-term, since its political success transformed Greece’s conservative party, ND, into a poor photocopy of PASOK. From 1981 to 2009 both parties mainly offered welfare populism, cronyism, statism, nepotism, protectionism, and paternalism. And so they remain. Today’s result is the outcome of a disastrous competition between the parties to offer patronage, welfare populism, and predatory statism to their constituencies."

In conclusion, the search for responsibility does not result in an either/or explanation (either ND or PASOK). Instead, it is a clear case for an as-well-as explanation (ND as well as PASOK) and substantial progress will have been made if and when both sides accept this fact.

Friday, January 12, 2018

World Leaders Versus Domestic Leaders - What A Difference In Quality!

According to Ekathimerini, Greek-owned shipping companies invested almost 10 BUSD in 2017. To repeat: that is ten billion US dollars! That amount was split roughly 50:50 between the purchase of used and new vessels. It should be noted that these are official records only. Not included would be any private deals.

By all possible measures, Greek shipowners are the leaders of the pack world-wide. And to put things into perspective: Greek shipowners last year spent an amount on new investments which is almost twice the amount which the state spent on the service of its debt!

It is quite amazing that a nation which can produce world leaders in a highly competitive global industry is unable to produce domestic leaders which can run the country successfully.

Saturday, January 6, 2018

Ivan Savvidis - Parvenu Of Greece's Oligarchic Scene

Ivan Savvidis is unlikely to enjoy reading this article which describes him as the parvenu of Greece's oligarchic scene. The name Savvidis first caught my attention when I was told that, as the owner of the soccer club PAOK, he had taken out full-page newspaper ads to thank Alexis Tsipras and his government for having passed legislation which freed him (Savvidis) of about 20 MEUR of tax liabilities. That seemed like a strange gift to a Russian billionaire. Then Savvidis' name came up again with the privatization of the beautiful Paliouri Beach which struck me as a deal behind closed doors. Then he allegedly purchased the Makedonia Palace Hotel in Thessaloniki, allegedly from IKA. Again, there was a smell to the deal. Then I heard the story that Savvidis had become the hard drinking partner of formerly dry alcoholic Yiannis Boutaris, the mayor of Thessaloniki, who had allegedly returned to alcohol after his girlfriend left him. And then came the sale of the Thessaloniki port which I have written about before. There is so much smell surrounding the name of Ivan Savvidis that one cannot help but think that he is a crook. Perhaps even of the violent sort because one wonders why a businessman like he walks around protected by bodyguards.

One truly has to feel sorry for Greece when one reads the following excerpt from the article:

"These vulture oligarchs, many of whom—Boris Mouzenidis, Victor Restis—were not even born in Greece, have exploited the crisis to pick off swathes of real estate and industrial sectors for pittances. The provenance of most of their capital is at best suspect, at worst blatantly illegal. Evangelos Marinakis, a Piraeus shipping magnate with suspected ties to the Greek underground, has now become a major media player. The family of Dimitris Melissanidis, an oil tycoon with roots in North Ossetia who has been caught up in allegations of smuggling gasoline and has provided the U.S. Mediterranean Naval Fleet with its oil since 2003, now lords over OPAP, the former state-owned gambling conglomerate. A handful of other barons—Dimitrios Copelouzos, Spiros Latsis—have taken over airports and huge chunks of coastline. Each of these figures presents exaggerated versions of what Greeks call diaploki, the nefarious intertwining of government and private interests that austerity has deepened, not dismantled. But only with Savvidis does a confrontation appear to be forthcoming. What will happen when SYRIZA is voted out of power? Some speculate that New Democracy will be forced to move against him. He will present a test—an opportunity, even—for Mitsotakis, the new party leader widely considered, even by those within his own party, to be a feeble technocrat."

Savvidis is a foreign investor of the type which Greece should not touch even with a ten-foot pole!

Wednesday, December 27, 2017

ELSTAT, Andreas Georgiou --- And A Slap In The Face!

What would be a good definition of a 'slap in the face'? Well, if you happen to be a current or former associate of ELSTAT and if you are still convinced that Andreas Georgiou conspired against Greece and reported inflated deficit numbers to Eurostat in order to bring unnecessary pain upon Greece, here is a recipe: Write to the American Statistical Association, provide them with evidence and ask them for a ruling that "the Greek public debt and deficit burdens have been unjustifiably exaggerated, that they have actually been created, instead of describing the 2009 reality."

When the American Statistical Association then answers that "the evidence confirms exactly the opposite (of the above allegation). This and the many other troubling statements in your letter raise significant questions about the ethics and integrity of your allegations", well, then you know what a true slap in the face is.

Below is the text of the response by the American Statistical Association and here is a tweet about it.

From: Wasserstein, Ronald L.
Sent: Sunday, December 3, 2017 5:35 PM
To: 'Zoe Georganta' <> Subject: your letter of October 27, 2017
Dr. Georganta and Dr. Logothetis,
Your letter of October 27, 2017, has been carefully reviewed by many people, including the members of the ASA Board of Directors. No evidence that you have presented or that we can find confirms your basic premise that "the Greek public debt and deficit burdens have been unjustifiably exaggerated, that they have actually been created, instead of describing the 2009 reality." Rather, the evidence confirms exactly the opposite. This and the many other troubling statements in your letter raise significant questions about the ethics and integrity of your allegations.
Ronald L. Wasserstein
Executive Director
American Statistical Association
Promoting the Practice and Profession of Statistics® 

Friday, December 15, 2017

Betting On A Greek Recovery? (cont'd)

An anonymous reader of my blog who makes time and again very thoughtful comments on my articles has made the below comment on my recent article "Betting on A Greek Recovery?"

Observing from outside or even at close range, you really cannot distinguish what is really going on. Overall of course Greece is bouncing back. Both on ground level and country level. This though does not necessary mean we still do not have the crisis still in hand. Nor will the wounds of the severe crisis be closed for many years. We will still have strict measures for many years to come and one from the inside can take that people have simply accepted them. Of course there is a sense of vengeance always boiling underneath.

On ground floor there are positive views in both the economy of black (less now) and white markets. Investment has never stopped and is showing itself and its only speeding up. This is evident with small business, middle sized and large corporations. Of course there are many large projects that will greatly help to the rebound of the country. Ports, airports, roadways, Trainose, energy, ellinikos and many more. All this will help the ground level economy to bounce back.

It will come when Tsipras leaves. He will have done all the dirty work and ND will come. Not that strict policies will not remain but I believe it will signal the rebound. I believe Tsipras is trying to show this rebound as so he can be reelected, but he needs to go.

Every year and as time goes by, the transportation of goods and works is growing on a large scale as you see the ships in the port. I see truck queues lined up everywhere for importing and exporting. Whichever it is, it is not necessarily bad or good, the positive you should take from this is that there is movement. For example, right now there is a great shortage of trucks for transportation of goods. This more so in the spring and summer periods when our agricultural exports also kick in.

We will rebound and I am sure of this now. Will Greek mentality return? To some small extent yes, but not the classic. We have changed like a chameleon changes its color.

In addition to the above you now start to see movement of people. In the deep crisis nobody would dare risk to leave their job. Now people are changing jobs at an increased rate.

For the average Greek though things are still hard. Not much room for black money considering the need to pay with cards as to acquire tax breaks for income taxes.

Overall, we are okay. If investment comes and the large projects move forward, Greece will be a force to be reckoned with.

Wednesday, December 13, 2017

Betting On A Greek Recovery?

Having just finished our regular 3-month autumn stay in Greece, it's a good time to reflect on the impressions I could gather and what may be in store for Greece until we return there next spring. Obviously, the all-important questions are: Has Greece really turned the corner (economically, that is)? Are we perhaps witnessing the beginning of an accelerated turn-around? In short: has the time come to bet on a Greek recovery?

There have been different views in recent months. Some, like the reputable American investor Kyle Bass, predicted that "investors are getting ready to pour billions back into the Greek economy". Others considered talk about Greek economic recovery as "fake news in action". Today, it was Bloomberg who headlined an article "Betting on the Greek Recovery."

What stands out is that all commentators focus on the macro-side of things: Will Greece successfully exit the program? Will Greece be able to return to markets? Will yields on Greek bonds decline further? Are bank shares rising? Do banks report profits? Etc.

To be sure, the hard facts still tell a rather miserable story:

* the government continues to tax the living daylights out of Greeks, the result being that unpaid taxes (about 100 BEUR!) seem to rise faster than taxes collected. To put this into perspective: GDP is currently running at about 170-180 BEUR which means that unpaid taxes amount to substantially more than half of GDP!
* while some progress seems to have been made with non-performing loans, NPL still amount to almost half of all loans in the Greek banking sector. By all normal standards, a banking sector which has almost half its loans in the non-performing category is a defunct banking sector kept alive by artificial means (is there any other banking sector in the world which comes even close to having half of its loans in the non-performing category?).
* Greeks exposed to the risk of poverty are still said to be close to 3 million.
* while unemployment figures have come down of late, monthly incomes at the minimum wage level (or even below) seem to have become standard for those who find a new job.
* the government's conduct with regard to foreign investment (Ellenikon, Eldorado) makes one wonder why any investor would get ready to 'pour billions' back into the Greek economy.
* Etc., etc.

And yet...

A visitor like myself observes significant changes. Already during our spring stay I had written last May that "The gut says: 'Greece is on the rebound!'" Today, the gut says that even more emphatically. I emphasize: it's the gut which is talking, not the brain. If I ran into depressed Greeks a couple of years ago, I now ran into cheerful ones. If every Greek I talked to a couple of years ago talked about the crisis, was frustrated about the Troika, about foreigners in general and about Schäuble in particular, this time it seemed like the crisis didn't matter. Yes, it was still there but so what?, the feeling seemed to be. A bit like a boxer who was badly knocked down but not out and saved by the bell. And after the break he felt the juices returning and went on to fight well again, albeit with a lot of bruises.

As I write this, I look out the window at the Thessaloniki bay where a number of huge freighters are waiting to enter the docks. Not too long ago,  I was happy when I saw 3 or 4 ships and I don't even remember seeing large freighters. Now, there is hardly a day when there are not at least 10 ships, most of them large freighters, and they all seem to be heavy-loaded. Now, I have no idea whether this relates to Greek exports/imports or whether it is just goods in transit towards the Balkans and further up. But my point is: the economic activity in the Thessaloniki harbor has increased substantially!

Thessaloniki has returned to its vibrating temperament where life is pulsating. But in the villages, too, I noticed a return of spirits. And jobs, too. My wife's 2 nephews are both in the construction industry: one in earth moving and building materials and the other one is a project engineer. As late as two years ago, their families had to live off their savings. Now both have rather good order books. Some village tavernas which we frequent seemed to be close to shut-down not too long ago and now I have seen them fully booked. Albeit only on Sundays but there had been Sundays in the past were we were the only customers.

In short, wherever I looked I got the feeling that money was being spent again. Whether official or black money, I don't know.

All of these observations, be they the professional ones or my gut feelings, have one thing in common: they don't address the question whether things have really changed in Greece; whether the economy has really become reformed; has Greece really become a good place to do business? The original intention had been to use the shock of the crisis to 'build a modern and prosperous Greece: a Greece characterised by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos' (EU Task Force). Is Greece now on its way towards becoming such a country?

As I listened to my Greek friends over the last 3 months, I have never heard from anyone a comment to the extent that something had really changed significantly in the last years. It was much more common to be told, with a twinkle in the eye, that "Greece will never change!" Yes, the budget was balanced, no doubt a sensational result but actually a controller's result (raise taxes and cut costs). From true leadership one would have expected new visions, new narratives, new plans, etc. The general business model pursued in Greece does not seem to have changed much. Greece still exports far too little and imports products which it should make at home (including agricultural products and food stuffs). And Greece continues to hold the questionable distinctions of ranking at the bottom in the EU as regards attractiveness as a place to do business and the top as regards perceived corruption.

So my bottom line at this point is this: yes, a turn-around is happening and it may even gather some speed. Nevertheless, however large the turn-around will be, it is unlikely to be the result of a reformed and improved economic framework. Instead, it seems to be driven by catch-up needs and by a generally higher level of optimism. The well-known political slogan is 'never waste a good crisis!' As far as Greece is concerned, I am not sure that the terrible crisis of the last years has been put to good use.

Tuesday, December 5, 2017

US Ambassador Chastizes Privatization Of Thessaloniki Port!

Back in April of this year, right after the so-called privatization of the port of Thessaloniki was announced, I wrote a very critical article about the transaction ("Thessaloniki's private equity port"). My conclusion at the time was that "The Deutsche Invest consortium seems to be the prototype of the foreign investor that Greece should stay away from."

For reasons unknown to me, this subject never really made the headlines. Nevermind that at issue was/is Greece's second largest port and gateway to South-Eastern Europe; nevermind that SYRIZA had for years blocked privatization of this port; nevermind that Greece's conduct versus foreign investors is a much-observed subject --- the deal was declared successful and it was closed. End of story.

So much more was I surprised when no one less than the American ambassador to Greece now raised the subject publicly. In a speech at the American-Hellenic Chamber of Commerce on December 4, Ambassador Geoffrey R. Pyatt made the following statement: "We have seen the difficulties privatization faces in Greece, as in the Thessaloniki port, where it’s unclear who the private investors actually are and where their money comes from."

When an American ambassador says something like the above publicly in his host country about certain policies of his host country, one can undoubtedly consider it a bombshell. It will be interesting to see if this bombshell now makes the headlines or not.

PS: a Greek friend of mine gave me the following, albeit not very sophisticated, analysis of the transaction: "Someone needs to know something about running a port (the French), someone needs to figure out who needs to be bribed (Savvidis) and someone needs to provide the money for the bribes (the Germans)."