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Sunday, December 28, 2014

Austrians DO NOT Tell Germans That They Owe Greeks For WW2!

No, Austrians DO NOT tell Germans that they owe Greeks 1,5 trillion Drachma as this article in Protothema suggests. The article in Austria's Der Standard ("Athens' ire about a forced loan") only reports the position of the Greek side in this matter; no more and no less.

Official Austria would never tell official Germany that they owe Greece money for anything related to WW2 for the very simple reason that one doesn't throw stones when one sits in a glass house. After WW2, the perpetrators of Nazi atrocities were split into 3 different entities: West Germany, East Germany and Austria. West Germany has lived up to at least part of its responsibilities. East Germany never paid a dime and Austria pulled the greatest fast one of all: it declared itself as 'the first victim of National Socialism'. This was based on the Moscow Declaration of November 1, 1943, in which the ministers of foreign affairs of the UK, the US and the Soviet Union claimed that 'Austria was the first free country that should fall prey to the typical aggressive policy of Hitler'. Apparently, they had not seen the pictures where the largest crowd ever assembled on Vienna's Heldenplatz enthusiastically cheered Hitler's arrival. Still, the Moscow Declaration also said that 'Austria is being reminded that it cannot escape the responsibility for having participated in the war on the side of Hitler-Germany'.

When Austria succeeded in getting a State Treaty of Independence with the Four Powers in 1955, that treaty, in paragraph 3 of the preamble, referred to Austria's co-responsibility for WW2. Shortly before signing, Austria's foreign minister got the Four Powers to scratch that paragraph. The myth of 'Austria's being the first victim' has lived on ever since and it has become a pillar of Austria's understanding of its modern history.

No Austrian in his right mind would blame Germany for not living up to its WW2 responsibilites when knowing, at least in the secrecy of one's mind, that one escaped that justified responsibility by pulling a gigantic fast one.

Paul B. Kazarian: "Greece Has Practically No Debt!"

Mr. Paul B. Kazarian recently made the news by offering, through his investment firm Japonica Partners, to purchase up to 2,9 BEUR of Greek bonds. Virtually unknown at the time of the offer, the WSJ researched its files and compiled this article about Kazarian.

In a subsequent 41-minute video (see the Logiki Ellada blog for the video), Kazarian explained why he is so bullish on Greece. In Kazarian's analysis, Greece has a huge competitive advantage which no one, other than himself, has recognized to date.

It is well known that the greatest investment opportunities are where the 'perceived risk' is much higher than the 'real risk'. The perceived risk of Greece is obviously very high these days. The real risk, so Kazarian claims, is much, much lower; in fact, significantly lower than that of other countries of the periphery.

Kazarian makes two principal claims: (a) Greece's net debt to GDP ratio is, in actual fact, significantly below 60% and only about 1/3 of the ratio of peer countries. And (b) Greece's cash net interest payments are close to zero; i. e. no cost of debt service.

A layman may be a bit puzzled by this because he remembers that Greece's debt is always being cited at about 175% of GDP and the annual interest payments, according to ELSTAT, are currently close to 8 BEUR. What alchemy is Kazarian working with?

Kazarian's alchemy is called IPSAS, the International Public Sector Accounting Standards. Essentially, these standards aim at presenting the public sector accounts in the same way as the International Financial Reporting Standards (IFRS) require corporations to present their accounts.

IPSAS on debt
Debt is typically recorded at its nominal value, i. e. if the loan is 1 MEUR, the debtor would show a liability of 1 MEUR. IFRS provides for recording debt at its economic value instead of its nominal value. If the 1 MEUR are bonds which trade in the market at 50% of nominal value, the debt could be shown as only 500 TEUR. The Bank of Greece, for example, follows those accounting prodecures. Thus, the foreign debt which the BoG publishes is significantly less than that which the Ministry of Finance publishes.

Alternatively, one can also record debt at its net present value: 1 MEUR debt due today has a net present value of 1 MEUR. 1 MEUR debt due in 10 years from now, if it carries no interest, has a net present value of 1 MEUR discounted by a market interest rate. If the actual interest rate is subsidized, i. e. below market, the 'liability' of that debt declines.

Kazarian makes a claim which sounds outrageous but he says that he can provide detailed calculations to interested parties. That claim is: Greece's creditors have already sustained 340 BEUR in net present value losses from debt relief, 'thus providing Greece with extremely generous breathing space'. Kazarian calls this a 340 BEUR wealth transfer to Greece (149 BEUR from private creditors and 191 BEUR from official creditors).

I have not requested detailed calculations because I could make them myself on the back of a match box. About 80% of Greece's debt (roughly 275 BEUR) is due to official creditors at subsidized interest rates of 2% or less with very long maturities and substantial interest deferrals. Thus, the net present value of that debt is much lower than the one calculated on the basis of market interest rates and shorter maturities. Suppose that difference were 100 BEUR. Kazarian would then say that creditors have sustained losses of 100 BEUR or: there has been a 100 BEUR wealth transfer to Greece.

"We can understand how this number is not popular to discuss in Greece", says Kazarian. That is a major insight, indeed, because the Greek side would wonder where that 340 BEUR 'wealth' is today and, particularly, where that 'extremely generous breathing space' is.

Kazarian's overall case would have been more credible if he hadn't presented such outrageous mathematical calculations. Yes, Greece has received very substantial debt relief so far but the point is: if half of my debt is forgiven but I am still unable to pay the other half, I wouldn't want to be told by my creditor that he has just given me a wealth transfer of half of my debt.

IPSAS on in interest expense
Governments typically present their accounts on a cash basis. If the interest expense was 8 BEUR for 2014 but did not have to be paid until, say, 2016 (interest deferral), the budget for 2014 would show a zero interest expense. A corporation, on the other hand, has to accrue interest expense regardless of when it is actually paid in cash. Thus, the corporation would show an 8 BEUR interest expense for 2014 even though that interest would not be paid until 2016.

Kazarian starts with Greece's interest expense of 7,3 BEUR according to ESA 2010. That represents about 9,4% of revenues which is in line with peer countries (or roughly the same percentage as Germany's). Kazarian then deducts 2,4 BEUR which he claims is interest due to the EFSF but whose payment is deferred, i. e. no cash payment in the current year. He then deducts another 2,7 BEUR which he claims are ANFA/SMP rebates received from the ECB (my understanding is that such rebates would be due to Greece but they have not been paid yet). Thus, Kazarian concludes that Greece's gross cash interest payments were only 2,2 BEUR (3,4% of revenues) and not 7,3 BEUR.

To top it off, Kazarian calculates that Greece has an additional 2,1 BEUR benefit from investing liquidity stemming from official credits (like the unused bank recap funds), which liquidity costs below market, at rates up to 8%. Thus, Greece's real interest expense, according to Kazarian, was only 100 MEUR in that year or practically 0% of revenues.

SUMMARY
Kazarian calculates that Greek debt which is nominally about 350 BEUR (or roughly 175% of GDP) is actually, in terms of net present value, significantly less than 60% of GDP. And, more importantly, the cost of that debt is practically zero because the interest expense of 7,3 BEUR (9,4% of revenues) which the books report are actually only 100 MEUR (0% of revenues when rounded). This is what Kazarian calls the 'huge competitive advantage of Greece'.

Kazarian concludes that, if and when the world becomes aware of that 'huge competitive advantage', foreign capital will again chase investment opportunities in Greece and the cost of financing for both, the public and private sector, will literally collapse. Small businesses will resurge, construction markets will reawaken, exports will increase given the new competitiveness and the value of income-producing real estate will also increase given the lower capital costs. Within the next 24 months, 200-400.000 sustainable new jobs will be created, according to Kazarian.


My analysis of Karzanian's analysis
Some points are well taken. Clearly, Greece has received very substantial debt relief so far, be it the PSI and/or the highly subsidized terms of the official loans representing about 80% of Greece's debt. And, yes, Greece's interest expense (in terms of a percentage of government revenues) is really not very high at all and certainly a lot lower than one would expect of an 'overindebted country': Gross interest expense of less than 10% of government revenues is more reminiscent of countries like Germany or Austria and far from the percentage of countries with debt problems and austerity challenges due to the debt. Greece itself had debt problems during the 19th century and, during those days, interest expense amounted to 30% (or even more) of government revenues.

But that's about the extent of what is credible in Kazarian's analysis. To assume that foreign capital will start chasing investment opportunities in Greece the moment it discovers Kazarian's logic is a bit of an illusion. Kazarian should ponder a hypothetical situation where all of Greece's debt would be forgiven. Would Greece's problems be solved? Short-term, yes, because Greece would have a renewed borrowing capacity. Long-term, Greece's problems would only be solved if that new borrowing capacity could/would be used for revenue-generating investments instead of domestic redistribution and/or imports.

Friday, December 26, 2014

EU Task Force for Greece - Death in Slow Motion

It happens all the time: first, there is a new idea, a new project. Enthusiasm spreads. After a while, everyday-life sets in and the enthusiasm dies down. And, finally, the new idea, the new project fades away without leaving too many tracks in the sand. Perhaps one remembers sentimentally 'how great it would have been, if...' but then the whole thing quickly becomes part of the past.

I went through this process with the EU Task Force for Greece. When it was announced in October 2011, I was all excited and my excitement held for over one year. My excitement was so high that, exactly two years ago, on the last day of the year 2012, I wrote a passionate plea to "Make 2013 the Year of the EU Task Force for Greece!"

I note that I haven't looked into the progress of the ETFG for quite some time. It was supposed to finish by this year's end but its 'death' was recently postponed until mid-2015. And then one can start thinking 'how great it would have been, if...'

Greek Banks Lack Liquidity?

One of the major factors which is always cited when one asks why the Greek private sector (and particularly the export-oriented companies) does not grow more rapidly is the alleged lack of bank credit. At the same time, one cannot help but marvel when one sees how some banks use their liquidity. Let me just cite the 250 MEUR which Piraeus Bank invested in the Marfin Group.

Back in October, a number of negative news had started a bit of a run on Greek bonds: the yield increased from about 6% to about 9% in a very short time which means that there were more sellers than buyers. One would think that the buying/selling of Greek bonds is an offshore activity, i. e. some hedge funds want to sell while other hedge funds are still interested in buying. Not so last October.

The Bank of Greece reported that 1,7 BEUR left the country during October to buy Greek bonds from motivated sellers. The sellers presumably were mostly hedge funds. The buyers were mostly Greek banks. Had the Greek banks not bought the paper, the yield might even have increased further. But who would have cared? The market yields are relevant only if and when the country needs to make new borrowings at those rates. That not being the case for Greece, Greek bond yields are exclusively a matter for foreign buyers/sellers.

So why would Greek banks, who claim to be starved of the necessary liquidity to finance the real Greek economy, why would those banks spend so much liquidity on buying Greek bonds from foreign hedge funds? It's a bit of a naive question because any school kid knows that when you are borrowing from the ECB at about 1% and buying Greek bonds yielding about 9%, your interest margin is about 8%. And that is a margin a bank will never get from a private sector borrower.

The Finance Minister has now warned that, in case of a government crisis, Greece could not borrow from the Troika but, instead, would have to tap the domestic money market via T-bills in the first quarter of 2015. Amounts up to 4 BEUR have been mentioned. The Greek banking sector may not be adequately financing the real Greek economy but it certainly seems to be using a lot of liquidity for purposes which have little or no relation to growth of the real Greek economy.

Sunday, December 21, 2014

Alexis Tsipras - A Very Lucky Man!

I have read many comments that the best way to discredit Alexis Tsipras and the Greek left is to hieve them into power. They would fail within months and Greeks would finally be cured of their habit to fall for left-wing fantasies.

I would not share that view.

I think the surest way to give Tsipras fame for eternity would be to make him fail on a grand scale. The blame would not be put on Tsipras. Instead, the blame would be put on all those evil powers, mostly foreign, who conspired to deprive Tsipras of the success which he otherwise would have had.

And, of course, if Tsipras succeeds, then he will definitely deserve fame for eternity.

So it wouldn't be such a bad Christmas wish to be once in one's lifetime as lucky as Alexis Tsipras is.

Merry Christmas!

Wednesday, December 17, 2014

Jean-Claude Juncker - The Perennial Public Chatter Box!

I once called Jean-Claude Juncker a 'public chatter box' in this blog. Over 3 years ago, I published a letter which I had written to him, asking him to 'refrain from public statements and, instead, act more competently behind the scenes!'

This man just doesn't seem to have any ability to learn from mistakes. He recently made some silly comments which could only be interpreted as his wishing that Greeks should not vote for SYRIZA. As could have been expected, he received a lot of flak for that. And his response?

"I do not know how to speak Greek and I do not know what Greek newspapers wrote. I cannot understand why the Greek Left defends the extreme Right. I hate the extreme Right.”

I can only repeat in exasperation: "Please, Mr. Juncker, keep your mouth shut!"

A Brit's Prediction for Greece

Below is another message from my friend, the 70+ year old Brit who has been living in Greece for ages. He is the one who had predicted a Grexit for January 11, 2013 at 22 hrs. He was wrong then. And now?

"I still maintain that we will eventually get to the Drachma. The Eurozone bosses just have to figure a way to isolate Greece and let it go its own way without bringing down the rest of the edifice at the same time. Of course, how the Euro is expected to work when it only relies on monetary policy - when the missing fiscal ingredient isn't also there - beats me! Only a Federal Europe can make it work and it isn't going to happen. As Tony Barber recently said in the FT, modernisation, not debt, remains the big challenge for Greece [very interesting article - FT, December 13th]. And we know that Greece is incapable of real reform! So, whether Samaras wins or loses the Presidential vote, whether Tsipras wins or loses a General Election --- it'll end in the same result, i.e. default and the Drachma. It's just a matter of time. As I have been saying for a long time, the sooner some form of planning takes place domestically to prepare for the Drachma - two years of professionalizing Agriculture & Tourism - the less the chaos will be. There is no mistaking that, even with professional planning in each of these two areas, there will be some form of chaos but hopefully somewhat mitigated. However, I just don't see any planning remotely possible. Politics here is going to be a version of the rugby hospital pass: Karamanlis did it to Papendreou in 2009, Samaras may do it to Tsipras, and Tsipras would soon be looking for another victim to pass the ball too! How can any true reform take place under these conditions?!"

Tuesday, December 9, 2014

Central Bank Money Printing = Rise in Stock Markets? A Phenomenal Graph!

Rarely have I seen as graph as phenomenal as the one below. It obviously is self-explanatory!




Impressions of Greece After 3-1/2 Months in Ellada

This little essay is not about hard facts. The hard facts about today's Greece can easily be summarized: over 25% unemployment, 2-3 million Greeks around or below poverty level, more than 2 million without access to health service other than emergencies in the hospitals, etc. No, this little essay is about soft facts. About the impressions and perceptions I have absorbed during the last 3-1/2 months in Greece.

It is now about 5 years that my Greek wife and I spend 2-3 months in the spring and in the fall, respectively, in Greece. 2009 I still have in memory as an extremely bullish period. Even 2010, when Greece had already concluded the first memorandum, brings back bright memories. From then onwards it went downhill from visit to visit. About a year ago, my wife began wondering whether or not we should ever come back. The overall depressed atmosphere, the depressing stories from friends and relatives, the closed-down shops and restaurants, etc. --- all of that had begun to really get under her skin.

This time, however, it felt different!

My first economic indicator is always the traffic density on Vassillisis Olgas, the major access road to Thessaloniki coming from the South. From visit to visit, traffic on that road had visibly declined. Upon arrival in late August, though, I found traffic reminiscent of the go-go days. At first, I attributed it to vacationers returning to Thessaloniki from their summer homes in Chalkidiki. But traffic did not get any better in September and thereafter. And long gone are the crisis days where I could, every once in a while, find a parking lot in down-town Thessaloniki. We were now back to second row parking, sometimes even a third row.

My second economic indicator is always the number of cargo ships in the Thessaloniki bay which I can view very well from our balcony. There had been times where I was surprised when I saw as many as 3 or 4 ships, sometimes none at all. This time I had to rub my eyes: there were always SEVERAL cargo ships in the harbor and quite a few times I counted 10 or even more.

My favorite gas station had closed down a couple of years ago, so I had to find another one, a bit farther away, which then became my new favorite. I was most surprised to see that favorite #1 had re-opened. The new leaseholder, Petros, is a really nice person and so are the 3 or 4 Albanians who work for him. All of them offer outstanding service with a very positive attitude. Petros had only opened shortly before I returned to Greece, so during the first weeks I never saw too much business and started feeling sorry for him. Of late, he has become real busy and seems to be satisfied with the results. Needless to say, this time I did all my business with favorite #1 again. One time, we drove past favorite #2 on a Sunday and I was surprised to see that he was not open for business. Before, he was always open for business on Sundays.

I told Petros that all gas stations in Austria were self-service. One person would normally do what Petros and his 3-4 Albanians do and that person would also run a small self-service retail shop on the side. Petros said that this would never work in Greece.

New retail shops, cafés and tavernas have opened up in Thessaloniki. I have written before about the enormous success of the Mikel coffee shop franchises and I noticed that a couple of new franchises had opened up in our area. I have written before about our friend Elias who had developed a new taverna concept. His place was closed for refurbishing when we arrived. We had to rub our eyes when we saw the refurbished place: a really first-class taverna, very low prices and very high volume. I would guess that he serves at least 500 meals every day.

And now to the greatest surprise: GREECE HAS GOTTEN LESS EXPENSIVE, IF NOT TO SAY CHEAP! I had been wondering from visit to visit why, with all the recession and depression, prices all over had remained very sticky and very high. That is definitely no longer the case. I am not saying that everything has become cheap. There are still many places where one wonders how they can sell anything at their high prices. However, there are now alternatives in many places; a lot of alternatives! There are still the expensive shops in downtown Thessaloniki but there are also a lot of shops advertising extremely low prices. Some of them so low that one wonders how shopkeepers can survive with them. There are still rather expensive restaurants, tavernas and cafés but there is also a very nice downtown restaurant where one can eat for 7 Euros all one can eat (including one soft drink) and the buffett on offer is very good. We have been to several tavernas where the bill for two for a nice meal plus drinks came to 15 Euros, sometimes even a bit less, other times a bit more. The times where a small Espresso would cost at least 3 Euros seem part of the past in many places.

One Saturday, the door of my car was badly damaged by a bus and it needed to be replaced. Monday morning I drove to the workshop thinking that I would leave the car then and there and get it back by Wednesday. Much to my surprise, there was a waiting time of 2 weeks before they could fit me into their schedule. The repair was supposed to take 2-3 days but eventually it took 4 days because they had so much work. The price, on the other hand, was very reasonable.

We took the obligatory trip out West and spent a few days in the area Ioannina-Parga-Preveza. If the Egnatia motorway, perhaps the best but certainly the most impressive motorway I have seen, is an economic indicator, Greece is in deep depression. Hardly any traffic even though I had the impression that the tolls had come down a bit. This should be a busy motorway carrying products from Northern Greece to the harbor in Igoumenitsa and it is near-dead.

On the stretch from Ioannina to Konitsa I had nearly run out of gas a couple of years ago because I couldn't find a gas station. Maybe I was gas-station-blind at the time but nowadays there are at least half a dozen gas stations along the way. On a different road, we stopped at a brandnew gas station. The young leaseholder said he had opened a month ago. A couple of Km down the road there was another brandnew gas station.

Last summer, my wife's sister had visited us in Austria. She was eager to see the beaches of Northern Italy so we went to the tourist spots between Grado and Venice (Lignano, Jesolo, etc.) where I had not been since childhood days. Once, after lunch, we wanted to spend a couple of hours on the beach thinking that we would park the car along the beach and look for beach chairs. Instead, we had to leave the car in a parking lot and walk quite a distance to the entrance of the beach. The beach was completely walled-in, i. e. totally inaccessable. The ticket counter was reminiscent of the ticket counter of a soccer stadium for a Champions League game: all rows of beach chairs (up to 20 or even more) had a letter and each seat was numbered. We had to state how much time we would stay and then we were shown available places. The price for the 3 of us would have been 33 Euros. My two Greek ladies were up in arms and became quite aggressive. They blamed the people at the counter for brutal exploitation when you could get much more beautiful beaches in Chalkidiki free of charge. 

I thought my two Greek ladies would come away from the experience feeling proud of their home country and the much nicer beaches there. Instead, they felt deeply hurt and wanted to know from me why these mean German tourists would come to these horrible and expensive beaches in Northern Italy instead of coming to beautiful Greece. Regrettably, I could not give them an answer but I was certainly looking forward to seeing the Chalkidiki beaches again soon thereafter.

Well, very few German tourists in Chalkidiki (except, perhaps, at the fancy resorts). The entire area seems to be under control of tourists from East European countries. I did not get the impression that they were wealthy tourists. Instead, there seemed to be a good portion of campers. Pefkochori left the impression of a little-Belgrade. Signs, menues, etc. are in Eastern languages. When I expressed disappointment about that, my sister-in-law shouted at me: "You were the one who was saying that Greece ought to become cheap. Now we have become cheap and you don't like it!" Hard to deal with that blame.

We had this favorite place in Nea Skioni where we had occasionally taken a day-trip just to have lunch there (about 1-1/2 hours' drive from Thessaloniki!). This time we didn't see the owner. Instead, foreign nationals were doing the service and seemed to be working in the kitchen. Motivated by his success, the owner had apparently decided to retreat into management and let others do the work. Needless to say, service and food were poor. We asked to see the owner and gave him open feedback. His response: "It's so hard to find good help these days!" We never went back there.

My wife's niece has her own hairstyle shop. She does all the hairstyling, she has one full-time assistant and an Albanian cleaning lady in a shop of about 20 qm size. Her husband, who is not employed otherwise and who has never had any employment in his life, comes by in the morning when their daughter is at school "to supervise everything". The rest of the day he spends at home with the little daughter. The niece told me that business was slow, dangerously slow. When I asked her why she thought it was slow, her answer was: "People no longer have money!" I told her about my surprise that new businesses had opened. She said they were all financed with EU subsidies and once the subsidies had run out, the businesses would close again.

Her father has his own earthmoving and building materials business in the village. The niece told me that he has no work at all. I asked why? Big surprise: "People no longer have money!"

A good friend lives in a village West of Thessaloniki. I told him what I had heard from several people, namely that life in the villages is more or less ok because the villagers have few expenses and need so little to live. My friend told me that this was wrong. In his village, for sure, there is complete misery. The only thing is, he says, that Greeks in the villages are too proud to show their misery, so one cannot see it at first glance.

We needed to replace 2 central heaters in our apartment. The technician, for once, was Greek (I had gotten used to only seeing Albanians doing this kind of work). He definitively was a professional, and a most pleasant person, too. For his labor he charged a flat 90 Euros. Difficult to translate that into an hourly rate because he came and left a couple of times. Still, he was absolutely worth it. He told us that his son was also working for him. They were very busy because they received so many references (that's how he had come to us). It is not unusual for them to bring 500 Euros home in one day (without receipts, of course).

The yacht club in Nea Krini shows off a handful of fancy luxury yachts. Huge luxury yachts! One belongs to a Spanish builder/constructor who only uses it for vacation trips. Another one belongs to a relatively young Bulgarian who claims to be Greek but doesn't speak a word of Greek. He is some kind of a financial advisor who apparently trades non-performing loans. Sometimes he gets his hands on valuable assets collateralizing a loan without paying much for them. The yacht, possibly one of those collateralizing assets, is sportive and so is his Mercedes 500 coupé (in black) which he had parked along the side of the yacht. Another yacht belongs to a "very rich Bulgarian" who only uses Nea Krini for docking during winter. In the summer, he takes the yacht up to the Black Sea. There seemed to be only foreigners in the area where the large yachts were. Incidentally, most of the workers on the large fishing ships were foreigners, too (many from Egypt).

Dimitra runs this wonderful fish taverna in Nea Triglia and we went there at least once a week. We remember seeing the place quite full much of the time. Now it is near empty much of the time. They could not live on the taverna (Dimitra is a teacher in her main job). So Dimitra spends the mornings working at school. Then she works several hours at the taverna. And then she does the job of a housewife at home. Her husband runs the kitchen and is an excellent cook. A son helps out in the taverna, a daughter is studying philosophy in Thessaloniki where she lives in an apartment which her parents own. She comes home for the weekends. Dimitra has become rather depressed. Why? Because there is no perspective for her and, above all, for her children. Why does she think it won't get better? "Because there is no money!" She doesn't care about a possible new election because it cannot get worse. Her children will probably have to emigrate, she fears.

Eva, my former Greek teacher, is 32 years old. She has a university degree in languages and she now works for the Thessaloniki office of a Belgian internet publishing company. Her salary is low but she can support herself, she says. Her sister has a university degree in chemistry and just got a job at Pharmathen, a supremely strong company. She, too, can support herself well. Both got their jobs without any 'third-party help'.

My wife had the chance to test a whole selection of doctors. She also had to go to a couple of medical places like laboratories for blood tests, ultrasonic examinations, etc. Bottom line: we were overwhelmed by the quality of the doctors and their equipment! The laboratories and other medical places were modern and very professionally styled. I do not think that my wife could have had a comparable medical support in Austria. Obviously, my wife is a 'paying patient' and that makes a huge difference but still: the fees were quite reasonable (at maximum 50 Euros per visit). The computer print-out's of the examinations were of a quality and comprehensiveness which one would not see in Austria except in top private clinics.

The orthopaedist was the clear superstar. I would guess in his mid-thirties or a little more. Son of guestworkers in Germany. Perfectly fluent in German. Medical degree from a German university. He works for a private hospital (where we met him) and also has his own, very large private practice (where we went for follow-up visits). I was nearly floored when I heard him ask my wife whether she had a European Health Insurance Card. Doctors in Germany and Austria always pretend not to know that card because it means work but no income for them. Basically, the card stipulates that its owners have access to publish health services in every EU country. From then on, my wife no longer had to pay for prescriptions. And then this: the orthopaedist proposed a treatment for which he charged almost 300 Euros but my wife only had to pay about 50 Euros of that, the remainder being taken over by 'the card'. I severely doubt that a Greek would get similar health support in Germany or Austria. And to really top it off: in the end, the orthopaedist and my wife discovered that their villages were quite close to one another and, bingo, that they were distant relatives!

I asked the orthopaedist how the system worked for someone without health insurance. He said everyone gets emergency treatment but it is not free of charge.

More than once was I in a restaurant with no-smoking signs all over the place but with ash trays on the tables. A friend told me that when a restaurant owner asked a group of city employees who were regular guests to respect the non-smoking signs, they laughed and asked the owner whether he was prepared to lose all the business from city employees. No surprise, my friend told me. Their boss is their role model. When the mayor hits the top restaurants with his cronies, the rooms are quickly filled with smoke. My friend had witnessed a scene where the owner respectfully told the mayor that he might get into trouble if he allowed them to smoke. The mayor's reaction was a waving with his hand. Kind of 'get stuffed!'

I may add a few more paragraphs to this little essay as time goes on. There would be much more to report on. But what is the gist of my impressons and perceptions?

To me, the gist was that a certain part of the population is beginning to see improvement. Their spirits have turned and they are spending more money. In fact, I would say that they live a rather good life (like we do when we are in Greece). At the same time, there is what I would call a 'silent majority'. It probably is not an absolute majority but it is a large group. These people are suffering and gradually falling more and more into personal depression. When together with a group of others, I would often suggest that Alexis Tsipras would run the country into the ground, just to get the discussion going. The reply was invariably: "You don't understand! The voters of SYRIZA don't worry about a bank run because they have no money at the bank. They don't worry about a possible economic collapse because they have nothing to lose. As far as they are concerned, it cannot get worse, only better".

There was one strange phenomenon, at least strange to me. Not once was I in a discussion with someone from the well-to-do where the economic problems of the suffering was discussed. It seemed like they wanted to put those miseries out of their minds by not talking about them. And when I put my finger on the subject, there wasn't much of a reaction.

Quo vadis, Ellada? Dimitra from Nea Triglia whispered that she feared another civil war. As far as I am concerned, the increased traffic on Vasillissis Olgas, the growing number of cargo ships in the Thessaloniki bay, the openings of new businesses, the lowering of prices, etc. could indicate that a part of Greece's economy has indeed begun to turn around. Yes, one could reasonably argue if one waits long enough, that improvement will eventually affect all Greeks but that waiting time, in my opinion, cannot be measured in years, only in decades. I am not sure that the growing suffering part of the population will be prepared to wait that long. Perhaps not even peacefully.

Alexis Tsipras on the Humanity of Communist Regimes

Alexis Tsipras is quoted as follows in this Bloomberg article:

“There was a huge lack of freedom in communist regimes, but at least they had humanity at the center of their thinking".

One must hope that this was a slip of the tongue. If it was intentional, one has to wonder about Tsipras' view of the world and of history!

Thursday, December 4, 2014

180 MPs Will Vote for the President!

As we leave Greece after 3-1/2 months, I would like to make a prediction based on all the opinions I have heard and read: the Presidential candidate whom the government will propose will get at least 180 votes (or whatever lesser number is required in the final round)!

Why?

I have been doing some thinking. I have tried to put myself into the shoes of an MP who looks at his monthly paycheck and thinks of his family of five. My understanding is that an MP earns about 100.000 Euro per year. So, if the current legislative period runs out its full term, I would be looking at about 150.000 Euro for me and my family. But if it comes to new elections, I might be looking at --- nothing.

Well, MPs with backbone and principles would certainly not think that way but there should be enough MPs of the other kind to make up the necessary number of votes.

Monday, December 1, 2014

Europe's Olive Oil Disaster - Greece's Opportunity?

Before reading this article, I was not aware that Europe is currently living through an olive oil disaster caused primarily by "Italy's black year of olive oil". Allegedly, the other European olive oil producers have also been hit. I have no information about Greece's olive oil production this year but the thought comes to mind that production problems happening in one country can open opportunities for production in other countries. I would be curious to learn more about this situation.

Sunday, November 30, 2014

Martin Schulz Discovers Private Enterprise!

"What Greece needs is growth, and employment. It is suffering from lack of investment, like other crisis countries. We have to attract private investments, this is a question of trust. If investors don't trust in the reliability of a country and in the sustainability of the economic development, they don't invest."

Hear, hear, this is Martin Schulz speaking to the HuffingtonPost! Incidentally, the HuffingtonPost titles Schulz as "President of the European Union". The last time I checked he was President of the European Parliament and, according to Wikipedia, there is no such position as "President of the European Union".

This is a wonderfully political interview! Of course Schulz was never in favor of the Troika. But: "The Troika was decided; now we have to live with it".

Schulz admits that he makes a daily appeal not only to his colleagues but also to himself, as Pope Francis recently suggested, that citizens should not be treated like 'economic instruments' and 'cogs in a machine'.  In an obious attack of self-doubt, Schulz asks “We are asking sacrifices from parents, for billions and billions and for what?" And without so much as blinking an eye he has the answer ready for his own question: "For saving banks. And their children are unemployed".

Schulz outs himself as an admirer of SYIRZA. They have transformed themselves from a protest group to a party that has "really tried to develop a program, which is not my program, but they tried to become more serious", says Schulz. His admiration for SYRIZA has limits, though. He considers them 'fundamentally negative' and he knows for sure that SYRIZA will not win an absolute majority at the next election, whenever it will be. Schulz knows exactly what SYRIZA needs for success, namely: a seminar in "How to make compromises".

I return to the introductory quote and emphasize the one sentence which really caught my eye: "We have to attract private investments". It is the word 'private' which surprised me. With billions, and even trillions, of public money being set in motion these days, one tends to forget that it is private enterprise and private initiative which are the cradle of economic value creation. Or to quote Winston Churchill: "Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon".

Thursday, November 27, 2014

Nicholas Gage Warns of "Troubles Ahead"

"So a lot more is riding on the selection of a president next February than who will be the new head of state. If the members of Parliament make a choice and avoid premature elections, a new sense of responsibility in the country may have a chance to take root and lead the Greek people to a promising future. If they don’t, the recent hardships Greeks have faced will pale in comparison with the troubles ahead".

This is the conclusion which Nicholas Gage draws in his article "A Sea of Change in Greece?" published today in the New York Times. I owe Gage some of the best reading hours of my life. His most famous book even prompted me to trace the footsteps of Eleni Gatzoyiannis in Epirus' 'most famous hamlet'.

Given his childhood experiences, Gage is obviously no friend of the left. If "Eleni" were the only book one read about Greece's Civil War, one would be convinced that there were only 'good guys' and 'bad guys' from 1946-49. When Gage visited Greece in the late 1970s, he was stunned to see that the 'bad guys' had successfully come back.

Still, the above is an assessment which I would be inclined to share. The Greek economy is far from being in a position of being able to make it on its own. Greece will require the financial support of foreigners for years to come, be that in the form of loans and/or foreign investment. And based on everything which SYRIZA has declared so far, that financial support is likely to evaporate once SYRIZA comes to power.

However, the current Greek government must understand one key point: the fact that 'the recent hardships Greeks have faced will pale in comparison with the troubles ahead' if SYRIZA comes to power IS NOT a sufficient argument to stay in power. That does not give the current government the right to act as though they are not even interested in the moods and spirits of the Greek people.

If I were a supporter of the current Greek government, I would be desperate for them to finally act in a way that I could wholeheartedly support instead of only supporting them by default. If the 'troubles ahead' will indeed occur, then it will be less the fault of those who caused them then the fault of those who were incapable of preventing them from happening.

Supreme Nonsense From SYRIZA's Economic Leadership!

Yiorgos Stathakis (SYRIZA's top economist) and Yiannis Milios briefed investors in the City of London about the plans they would implement when SYRIZA comes to power. Protothema published an email which Joerg Sponer of the Capital Group sent out after having attended the meeting. I take the liberty of publishing it below.


"Yes, I was at Stathakis (ca. 15 investors) and a separate one mit Mr. Yiannis Milios, Chief Economic Advisor (ca. 20 investors).

Overall summary
* Everyone coming out of the meeting wants to sell everything in Greece.
* The program is worse than communism (at least they had a well thought-through plan). This will be total chaos.
* I expect if SYRIZA get to 36,5% and thus absolute majority given the +50 seats, you will see a Cypriot scenario --- massive run on deposits, corporate clients moving everything they can abroad and a complete stop of foreign direct investments.
* They believe that Samaras will not get more than 174 MPs in March; they have written statements from several MPs not to follow Samaras.

If they weren't that serious when talking, I thought this was a theater play / joke.
* "We feel most connected to 'Podemos' in Spain and 'Die Linke' in Germany. However, they are too liberal".
* "We will stop austerity. We told people on the street to stop protesting as we will come in an take care of them".
* 5 cornerstones of their program:
-- (1) stop humanitarian crisis by providing free electricity, food, shelter and healthcare to all in need.
-- (2)  increase wages for everybody to a minimum of EUR 750/month x 14, and for pensioners EUR 750/month x 13. Start to hire several thousand employees into government positions.
-- (3)  primary surplus of 1% through a sudden stop of the black economy. There is no more incentive for black economy as people now have a minimum of EUR 750/month (what a joke!). No more property taxes (costs 2 BEUR). Cut all taxes to 20% except high incomes (costs 2 BEUR). All being paid for by collecting 70 BEUR in unpaid taxes. They expect GDP growth post-SYRIZA taking over of 3-5% as SMEs can now invest with confidence (LOL). They expect huge FDI.
-- (4) renegotiate sovereign debt.
---- (a) ECB to buy entire Greek sovereign debt for 60 years and forfeit any interest (Germany got in 1952 a 62% debt haircut so Greece should get one, too).
---- (b) I mentioned that Germany also embraced huge structural reforms at the same time. Both sides said that the structural reforms had gone too far already.
---- (c) Greek debt/GDP to go to 20% by 2080 (hahahaha - what a joke!).
---- (d) further increase of deserved subsidies from Bussels by 5 BEUR.
---- (f) nobody in Brussels gains if Greece leaves Euro so Greece has a lot of leverage. Tsipras made the mistake of agreeing with Merkel that Greece is to stay in the Euro.
-- (5) debt moratorium of private debt with a maximum debt service of 20% of disposable income above EUR 750/month.
---- (a) create 2.000 FTI credit bureaus to intermediate between banks and borrowers. They decide who pays what and how much debt is forgiven.
---- (b) HSFS will recap banks with 3 BEUR (cost of year 1 losses of above). In year 2 write-back's (both of them said that seriously!) as the Greek GDP will grow strongly and investmens will flow.
---- (c) banks are too strong, creditors are too weak. They will reverse that.
---- (d) they will exchange 100% of senior management at 3 large Greek banks (ex Eurobank as no more majority)
---- (e) they will order judges to be more productive

Couldn't have made it up, even if I wanted".

So much about Joerg Sponer's email. So far, I have always been very constructive about every plan which has been announced by Tsipras/SYRIZA. In case of doubt, I have read constructive intentions into their announcements. If the above is a correct report of what Stathakis/Milis said at those meetings, then one cannot but consider SYRIZA's economic plans as supreme nonsense!

Thursday, November 20, 2014

Greece's Current Account: January-September, 2014

Below are the numbers for Greece's current account for the period January-September 2014, compared with the same period of the previous year. Also compared are the numbers for the 3rd quarter alone.

(in EUR billions)


January-September
3rd Quarter









2013 2012
2013 2012
Revenue from abroad





Exports 17,6 16,8
6,1 5,8

Services (e. g. tourism) 25,2 22,6
12,9 11,5

Other income 2,6 2,6
0,9 0,9

Current transfers 5,1 6,3
0,9 2,5


---- ----
---- ----

Total revenue from abroad 50,5 48,3
20,8 20,7







Expenses abroad





Imports 31,1 29,7
10,6 10,4

Services (e. g. tourism) 8,4 8,3
2,8 2,8

Other expense (e. g. interest) 4,9 5,2
1,6 1,7

Current transfers 2,3 2,7
0,6 0,8


---- ----
---- ----

Total expenses abroad 46,7 45,9
15,6 15,7














Net foreign deficit (current account) 3,8 2,4
5,2 5,0







Account balances




Trade balance -13,5 -12,9
-4,5 -4,6
Services balance 16,8 14,3
10,1 8,7
Other balance -2,3 -2,6
-0,7 -0,8
Current transfer balance 2,8 3,6
0,3 1,7


---- ----
---- ----
Net foreign deficit (current account)3,82,4
5,25,0


1. The YTD current account improvement was actually greater than the 56% shown above because the previous year included one-time revenues of about 2,5 billion. Either way, a very substantial improvement!
2. Revenues increased both in the YTD period as well as in the 3rd quarter even though both periods included the extraodinary item for 2013.
3. Particularly noticable is the increase in 'services', much of which presumably goes on the account of record inbound tourism.
4. Imports increased at about the same rate as exports. The ratio of imports to exports is now 1,77. That is for every EUR 1.000 worth of exports, EUR 1.777 are imported. A staggering improvement over only several years ago, but still.
5. Overall, the trade balance is deteriorating, possibly reflecting the bottoming-out of the recession.

Press release of the Bank of Greece.

Crush the Greeks! Versailles All Over Again?

It all began with a short comment I made to an article by Prof. Yanis Varoufakis titled "Crush the Greeks! The Greek bailout revisited in the light of the Geithner revelations". Instead of leaving my comment buried among all other comments, Prof. Varoufakis made a separate post of it: "Klaus Kastner responds to the Geithner revelations, and my Versailles Treaty allegory". This was then followed with an article by Prof. Varoufakis "Was Maastricht another Versailles for the German nation? A reply to Klaus Kastner". And it was then finished off by my clarification "Klaus Kastner replies - On the Versailles Treaty parallels".

Happy reading! Particularly happy reading of the numerous comments!

Monday, November 17, 2014

Alexis Tsipras - Convert 7 Key Aims Into Just One!

The French blog LaTribune published an article about Tsipras/SYRIZA in which it hyperlinked a post which I had written just about one year ago: "Alexis Tsipras - Convert 7 Key Aims Into Just One!" After re-reading it, I decided to reproduce it below.


November 23, 2013
This article reports the answers which Alexis Tsipras gave when asked by the newspaper Avgi what his key aims would be during his first 100 days of governing (the bold emphasis is mine): 

* Cancelling the EU-IMF memorandum and replacing it with a national reconstruction plan.
* The plan will include bringing back collective bargaining laws and restoring the minimum wage to the pre-crisis level of 751 euros, from which it was reduced by 22 percent in 2012.
* The creation of an assets register to help with taxation, and the drafting of a new tax system.
* The renegotiation of Greece’s loan agreement.
* Increasing social welfare.
* Reopening public broadcaster ERT and legislating for the awarding of digital licenses.
* The overhaul of Greece's banking system, providing greater state control of lenders and the creation of small, regional development and cooperative banks.

I would suggest that the way Tsipras formulates his first key aim (in bold) may have as a consequence that his government won't last for 100 days. I would recommend to rephrase that key aim as follows: 

"Negotiate with our EU-partners to consensually transform the current EU-IMF memorandum into a long-term economic reconstruction and development plan for the Greek economy. The plan’s objective will be to transform, within one generation, Greece into a self-sustaining, value-generating economy on the basis of a sound, market-based private sector supported by an efficient and modern public administration, adequate in size and competency. A major pillar of the plan will be a focus on direct foreign investments in Greece’s productive sector, thus bringing not only financial resources but also know-how in all areas to Greece; thus enabling Greece to increase its productive capacity, to increase employment and to import less; thus enabling Greece to make products which other countries will want to buy. The primary responsibility for developing such a plan will be with Greece but we seek active participation of and know-how contribution by our EU-partners. We are confident that, once that comprehensive plan is on the table, our EU-partners - seeing that the plan has our unequivocal support - will willingly assist with financing it because such financing will be a good investment”. 

I would further suggest that if Tsipras were to focus on the above key aim, all his other key aims would fall into place naturally (because they would be part of a long-term economic reconstruction and development plan for the Greek economy).

Sunday, November 16, 2014

Who Says Things Have Not Improved in Greece???

One of my recent pieces on reforms in Greece triggered a lively debate about the question whether, despite all the talk, there have been reforms in the first place. Whether anything at all has improved since 2010. I quote below a commentary which an anonymous reader of my blog had posted. I think it is a very remarkable listing of hard facts (and some great soft facts, too!). Something which I have not seen elsewhere. 

"Public sector lay offs (or, as requested, public sector cost reduction): How they did it was their (the government's) choice. Layoffs may not have been many, but there were layoffs, be they directly or indirectly. What did you expect to hear? Government laying off 50,000 workers in one day? Not going to happen. In any country. Public sector was reduced by wage cutting and drastically reducing benefits. Not health but the unbelievable benifits we both know about. Such a 75% off for this and that public service. Also retirement. Yes many had to be retired, outdated dinosaurs who do not know what a computer looks like. I like seeing so many young and eager faces in the public sector don't you? See anyone smoking in public buildings? No!

I am aware of many services which have improved in performance and their budgets have been cut, quality of their services improved and the time to action. Police, Fire department, KEP, Ministry of Taxes (of course they are taxing the hell out of us but at least they have been modernized). I can do everything online without having to be on line for 5 hours and interigated at the end. Department of transpotation has improved its services. IKA or health system is still behind but they always were. At least they reduced the cost of drugs plus allowed quality generics drugs into the system. This has in parallel contributed to the increased production of Greek pharmaceutical businesses. A business sector in Greece that is booming and has both local and exports. Generics is the future and Greece already has a strong pie in the local balkan region.

Road system. Our major highways, although private and expensive, are the best in Europe. I have been all over Europe and we have nothing to be jealous of versus Germany, Italy or France. In contrary they should be jealous of us. It is expensive, yes, but Turkey, a major exporter to the EU, uses our roads now as a necessity to get goods safely to their destination. Konstandinoupouli to Igoumenista to Italy and so on.

Free market? Pharmacies? No this is not a monopoly. Have you not seen how many pharmacies have popped up everywhere? Are you aware that super markets can now have pharmacies? This will change the landscape alone in this sector. The difference is that we choose to go to our local pharmacy because we want an expert opinion from "our own" phamacists. It is a personal issue. Law is there. But companies have not come yet. They will. The invester who brings CVS to Greece will make a pile of money. Drive in pharmacy like the USA. It is all coming. The only reason it has not happened yet is that commercial companies do not choose to sell to non pharmacies because it is a strong sector. It will change though.

Sunday opening? That is an American idea which simply cannot be implemented in Greece. Firstly, it is an idea which costs more for a business in Greece to open on Sunday because nobody goes. In America it works because America has a larger population and people go to shop on Sunday. It is a cultural thing. Greeks will not go on Sunday. The idea is a disaster and there are already discussions in stopping this. Nice idea, didn’t work.

Transportation? OSE I assume? I pray for the day that either Cosco or the French bidder buys OSE. In my Masters of Logistics Managment in 1997 I studied the logistics changes of the 80's in the USA. Imports from ASIA would go through the Panama canal to service EAST coast USA. That ended with the idea of train piggy back. Containers would be dropped off at west coast and onto rails and be shipped by trains to the east coast. The costs of shipping were halved in one night.
 
.....

Now imagine Greece. We are the first major port or can be the largest port into EU coming out of the Suaze or outgoing to Asia and Mid Asia. Piggy back to Europe and compete directly with all the northern european ports EASY. Increased turnover, increased infrastructure, more jobs, reduced costs for local goods, increase in exports for local companies. The handling of containers by Cosco has greatly increased since it was a public port. Thank God! Why on earth do you think Cosco bought our port? For Greece and the local market? No because they see the oppotunity to own and serve Europe through Greece. Very wise our Chinese friends. As a public port we would never be able to aspire to this. This will be a great thing if this happens. I believe it will.

ERT: Although this smells from the top to bottom, I am sorry to say I am glad they closed ERT. Yes nice programs and good reporting but I am not going to pay 30-40 euro monthly for this. NO WAY. I can get Nova with 30 channels with the same money. As a news source the private channels were propaganda machines anyway. They simply removed the balanced opinion. It was not worth the money. Especially for once a week shows who the presenter was making XXX,000 euro? per show to get piss drunk and have fun with his friends.

Don't look at things as we normally see things. With our negative attitude or our disbeliefs. Things are happening and things will change. I also get discouraged with many things in our country, but we must have faith and strength within ourselves to all help move foward. Together. Nobody can ever stop us if we were togther and you know this.

Although I am not a Keynesian, I do admire one of his most well noted quotes: "The difficulty lies not in the new ideas but in escaping from the old ones."

Change is happening and we need to embrace it. Even if an idea is wrong, we need to find the positive in it.

Like Socrates said, "know thyself." Do you know what our biggest problem is? We are 9 million greeks in greece and for every issue or aspect of our society, we have 9 million opinions.

We have incredible diversity. This is a good and intrinsic value of character. nobody has it like us. But it must not be in our way to grow. So when we see something new, we should not bash it but embrace it and try to improve it if it has flaws. 

And rethinking the above I would say we are on a better track than what most people think".

Saturday, November 15, 2014

Greece's Return to Growth

In October 2011, that is over 3 years ago, I wrote an article titled "Good news! Greece will grow again!" I was being sarcastic because Horst Reichenbach of the EU Task Force had predicted that Greece would return to growth in... 2014. My question was: "Another at least 2 years of economic decline? Put differently: another at least 24 months of a development which has already tested social peace quite noticeably every month?" My implication was that this couldn't possibly end well.

Well, Reichenbach was right and I was wrong; fortunately!

It now definitely looks like the Greek economy will close 2014 with a positive sign in front of GDP development. And Greek society, despite all the hardships, has not revolted. Not yet, that is.

Since Reichenbach seems to be a rather good forecaster, I quote one of the forecasts which he made at a recent LSE discussion group when he referred to the current social hardships in Greece: "This is really a dramatic situation in which the activities of extreme parties can prosper by offering part of the solutions to these problems and if Greece is not, as a state, and in solidarity with Europe, is not able to address these problems head-on, there will be a very difficult situation".

We now know that the next 3 months will determine the future of Greece. Or so everyone seems to be saying. Which reminds me that I have heard several times in the past that Greece's national fate would be determined 'in the next few months'. So far, the national fate has miraculously survived all those fears. So if I had to bet money, I would extrapolate from the past and predict that the national fate will not be decided in the next 3 months. Hopefully not!

Thursday, November 13, 2014

Has Greece Reformed Since 2010?

"So we ended with half-hearted reforms, which in some cases were not implemented or were eradicated after being approved. The biggest crime of all was that the political system relinquished reform ownership and blamed everything on the memorandum and the troika. Greeks despised the troika and the memorandum as they saw their salaries and pensions being slashed while taxes skyrocketed. There was little, however, in terms of reforms. Schools, universities, hospitals, red tape and justice, among others, remained more or less the same. Fiscal reform was carried out in the same way in which a dentist pulls out a tooth without using anesthesia. In the absence of other policies, lowering labor costs became the easy way to increase competitiveness. This failed to translate into exports and real production, however, as the entire system is anti-entrepreneurship".

This would be the major critique of Greece which foreigners make off-the-record when they are being blamed for 'having destroyed the Greek economy'. I was surprised to read it in an editor's commentary in the Ekathimerini. And I was even more surprised that quite a few of the readers of the article expressed agreement with it.

Personally, I am at a loss to judge this. On one hand, when I read reports by the EU Task Force, the Troika or the IMF, I always read that "Greece has made substantial progress...". Sometimes they include listings of all the items where Greece has made progress with reforms. On the other hand, the people who I meet in day-to-day life tell me the opposite. They tell me that they have to wait as long as before to get things done with public offices; that things are as complicated as they were before; and - sadly - that public officials are as corrupt as they were before.

One thing is certain: only if and when everyday people notice in their day-to-day lives that things are getting better will they start believing that things will get better.

Piraeus Bank: David Einhorn vs. ViennaCapitalist (cont'd)

"This is a very weak investment thesis. The quality of the analysis is disappointingly low. Both his (David Einhorn's) macro and his micro arguments are overly superficial, as he takes all figures at face value without trying to understand the drivers behind them. This makes him blindly trust the coverage ratios presented by management (or Piraeus Bank), or ignore the effect of known regulatory changes. He doesn’t touch the management topic at all, although there clearly are some issues such as a cosy relationship with regulators/politicians – in my experience not necessarily evidence of shareholder value driven ethics. Worst, however, is the fact that he does not demand a “margin-of-safety” from this investment, but prefers to speculate on how much people might be willing to pay in the future".

I have previously published Part I of ViennaCapitalist's analysis of Piraeus Bank and above is the conclusion of Part II.

I have written quite a bit about Piraeus Bank, particularly its relationship with the Marfin Investment Group. To me, Piraeus Bank is a classic example of the weaknesses in the Greek banking system. Under the pretext of wonderful headlines and with the help of creative accounting, crony business deals are pursued and falsely described as efforts to turn-around the Greek economy. 

"You can fool some of the people all of the time and you can fool all of the people some of the time, but you can't fool all of the people all of the time" (Abraham Lincoln). Whether this statement will also apply to some of the Greek business elite, such as Piraeus Bank, remains to be tested.

David Einhorn on Piraeus Bank: Now I know what he thinks (Part I)
David Einhorn on Piraeus Bank: Now I know what he thinks (Part II)