Follow by Email

Sunday, January 31, 2016

A Lesson From Cosco

The Chinese company Cosco was successful with its bid for 67% of the harbor in Piraeus. This was only a few weeks ago and yet, Cosco is already announcing major new plans, among others to transform Piraeus into a major holiday cruise port. I would like to draw attention to the following sentences in the respective article in the Ekathimerini:

"To that end, Cosco will embark on infrastructure investments that will gradually reach up to 135 MEUR".

"It (Cosco) is also beginning a consultation process with cruise groups in mid-March in Florida, in the context of the industry's main annual exhibition".

"Cosco officials will be noting all of the cruise groups' remarks and demands that it is prepared to satisfy, with the aim of providing services and facilities that Piraeus has not supported to date".

"A Cosco source said: 'Piraeus will roll out a red carpet to the groups which will support the project of turning the Greek cruise market into a giant'".

If the Greek government is truly interested in attracting foreign investments, it would be well advised to copy a page from Cosco's approach to attracting customers. One doesn't tell potential investors "Prove to us that you will make us happy!" Instead, one politely asks them "Please tell us how we could make you happy while becoming happy ourselves at the same time!"

A few years ago, I attempted to describe a Greek party that I could vote for. Its party program would be based on creating among Greeks 4 obsessions: "Obsession with import substitution"; "Obsession with exports"; "Obsession with tourism" and "Obsession with foreign investments". Many people will quickly remind me that the word 'obsession' sounds like a mental illness. True, if one wants to give it a negative twist. If one prefers to give it a positive twist, it's a means for generating enthusiasm.

Sunday, January 24, 2016

With Friends Like These, No Need For Enemies!

Scene 1: Varoufakis speaks about Plan X and its rejection.

Scene 2: Government reacts to Varoufakis' Plan X comments.

Scene 3: Grexit choice explored last year but Tsipras was not convinced.

Will there be more scenes in this saga? Perhaps some secret tape recordings to reveal the truth? In any event, there seems to be no love lost between these former political friends.

Saturday, January 23, 2016

A Surprise For 2016?

"I believe 2016 will be the year that Greece will surprise the world economic community," Alexis Tsipras declared in Davos. Could he turn out to be right?

Well, I suppose he meant 'surprise' in a positive way. And, yes, he could turn out to be right. Providing, of course, his government remains stable throughout the year.

I have no hard facts to support my position but I cannot ignore what happened in 2015. By all standards, Greece fell into political and economic chaos in 2015, at least during the first half of the year. In those days, it was clear to everyone that the small primary surplus of 2014 would evaporate and turn into a mega primary deficit in 2015, and that a small projected 2015 GDP growth would turn into a GDP decline to the tune of 3-4%. I do not recall any more positive projections.

And yet, 2015 did not turn out negative at all. The current account reached an all-time high and there WAS a primary surplus, not a small one at that and much larger than in 2014. I would go so far as to say that the figures for 2015 defy everything that happened during the year.

Which brings me to 2016. There seems to be some hidden resilience in the Greek economy which the naked eye does not see at first glance. And the statistics don't seem to catch it, either. And perhaps after nearly 6 years of crisis, of continuous decline, Greeks have become accustomed to that new level and begin building on it instead of only complaining about it. Perhaps more energies are really being put to better use now.

Of course everything could change quickly. The government could fall over the pension reform and political chaos could return. Grexit could happen. We've been through all that. BUT: if all of that were not to happen, I think there is a fair fighting chance that Greece will indeed surprise the world economic community in 2016.

State Budget Execution 2013-2015

Below is the development of Greece's State Budget (not to be confused with the General Government Budget!) for the period 2013-15 (in BEUR). The respective analytical comments by the Ministry of Finance can be found here. And this article in the Ekathimerini also makes analytical comments.

What stands out, in my opinion, is the year 2015. Throughout the year, particularly during the first 6 months, one could read that the Greek state was collapsing; that taxes were no longer being paid; that the small primary surplus of 2014 would turn into a huge deficit in 2015. And yet --- 2015 looks rather normal, if not quite good.

Another thing which stands out is that tax revenues before tax refunds are actually declining. This is quite surprising against the background of the seemingly countless tax increases which were made since 2010. One the other hand, one needs to bear in mind that, month after month, over 1 BEUR of taxes due are not paid. If those taxes were paid, the state would have huge surpluses.

State Budget Excecution
2013 2014 2015
I. State budget net revenue (1+2) 53.019 51.366 51.421
1. Ordinary budget net revenue (A+B+C) 48.423 46.650 46.589
A. Revenue before tax refunds 51.442 49.636 49.257
B. Privatization proceeds 86 384 254
C. Tax refunds -3.105 -3.370 -2.922
2. Public investment budget net revenues (A+B) 4.596 4.716 4.832
A. EU funds 4.520 4.649 3.900
B. Own resources 76 67 932
II. State budget expenditure (1+2) 58.459 55.063 54.950
1. Ordinary budget expenditure (A+B+C+D+E) 51.809 48.471 48.544
A. Primary expenditure 44.230 41.928 41.298
B. Military procurements (cash basis) 529 345 565
C. Guarantees called 879 587 703
D. Net interest payments 6.044 5.569 5.800
E. Loan disbursement fees (EFSF) 127 42 178
2. Public investment budget expenditure 6.650 6.592 6.406
A. Own resources 783 710 681
B. Co-financed 5.867 5.882 5.725
III.a. State budget primary balance (excl. interest) 604 1.872 2.271
III.b. State budget balance overall (incl. interest) -5.440 -3.697 -3.529

Friday, January 22, 2016

High Noon In Davos: Tsipras vs. Schäuble

Seldom have I witnessed such a discrepancy between what media reported and what actually happened. I watched the entire panel discussion yesterday in Davos on live stream. Never would I have thought what kind of a High-Noon-Event the media would make out of it.

Die Welt reported that Tsipras had made himself a laughing stock. So much so that, immediately after the discussion, yields on Greek bonds jumped high. On the other hand, the Greek blog KeepTalkingGreece reported that Schäuble had called Tsipras "stupid". What had actually happened?

At one point, Tsipras said that "we not only have to become more competitive, we also have to become more productive. We must not only look at labor costs". According to Die Welt, die audience was in shock and could only shake heads. Did Tsipras not even understand the difference between labor costs and unit labor costs? Did he not even understand that becoming more productive is a precondition for becoming more competitive?

I can literally picture how members in the audience, shocked by Tsipras' statement, immediately texted their brokers to sell Greek government bonds because if the Prime Minister is confused about unit labor costs, the country will have to go down the drain.

And Schäuble? Did he really call Tsipras "stupid"? Well, my impression was that Schäuble had decided to show his charming side on the panel. Early on in the discussion, he made comments like "as the Greek Prime Minister said" or "I agree with the Greek Prime Minister". This, of course, was not in relation to Greek finances but to the refugee problem, instead. As regards Greek finances, one would have had to be very naive to expect that Tsipras & Schäuble would suddenly fully agree. But as things go: Bill Clinton still gets praised for coining the phrase "It's the economy, stupid!" but when Schäuble says "It's the implementation, stupid!", some people see it as an offense instead of a reference to Bill Clinton's slogan.

Overall, I thought Tsipras handled himself well and Schäuble was far from his aggressive potential. In fact, I would give Tsipras credit for the best line in the entire discussion: Schäuble explained that any change to the existing agreement would require him to go back to the Bundestag and seek approval. This, he said, would be like "walking into a room full of dynamite carrying a burning candle". Tsipras's response was: "I do not recommend carrying a burning candle into a room full of dynamite. Instead, we should first remove the dynamite and light the candle thereafter!"

Not bad; not bad at all!

Wednesday, January 20, 2016

All You Ever Wanted To Know About Greek Pensions!

Below are links to 3 publications about the Greek Pension System (past, present, future) by Prof. Platon Tinios, which I have found extremely informative:

"A quick guide to one more Greek Pension Reform"
"Briefing Note on Greek Pension Reform"
"Technical clarification of Greek Pension Reform"

Prof. Tinios' previous claim to fame was that he was a major contributor to the Spraos Report of 1997. That Report urged dramatically the need for a major reform of the Greek Pension System in order to prevent its near-term collapse. That sort of alleged scaremongering prompted the Head of the Greek Trade Union Confederation to prophetically state that "the Spraos Report suggests that the Greek Pension System will collapse by 2010. Well, before the Greek Pension System collapses, the Greek State will collapse". And that was the end of the Spraos Report. There is an entire chapter about this episode of Greek politics in Yannis Palaiologos' book "The 13th labour of Hercules".

I was surprised by Prof. Tinios' presentation. I had not been aware of the mess previous governments had made since 2010 by implementing only partial reforms in piece-meal efforts. This, of course, out of fear of the electorate. But what surprised me even more is that, according to Prof. Tinios, the reform which SYRIZA is now proposing, at least on paper, sounds much more plausible as an overall reform than the piece-meal efforts of previous governments. In fact, what SYRIZA is proposing now makes a lot of sense in the context of where the Greek Pension System has been, where it is now and where it should be in the future.

There are two caveats to be made. First, no financial projections as to the impact of the SYRIZA proposal are available as yet. And, secondly, all financial projections become meaningless if the Greek contributors, in protest against benefit reductions, find ways to avoid making their contributions.

In short, SYRIZA's proposal is definitely not a proposal which should be thrown out of the window simply because it comes from a left-wing government. In fact, I cannot recognize significant left-wing elements in the content of their proposal (even though there are some in the propaganda for it).

Tuesday, January 19, 2016

A New Manifesto For Europe!

A spectre is haunting the Powers of Europe, the spectre of new Manifesto's aiming at the radical reform of the European Union. My Google search "manifesto europe" yielded 1.310 results. Here are just a couple of the more important ones:

"Our Manifesto for Europe" by Thomas Piketty and 14 others.
"A Europe that works" by the ALDE party.
"We are Europe" by Daniel Cohn-Bendit and Ulrich Beck.
"A Plan B in Europe" by Jean-Luc Mélenchon and others.
"European Solidarity Manifesto" by

This is ample evidence that there is something rotten in the state of the European Union. If one really wants to know how rotten that state is, one should read the provocative book "Die letzten Tage Europas - wie wir eine gute Idee versenken" by provocative author Henryk M. Broder (available only in German).

It is quite apparent that a new market is developing here, the market of proposing new Manifesto's for Europe. It seems to be a competitive market with major positions already taken by major players, so it was high time for the most prominent player of all to appear on the scene --- Yanis Varoufakis, proud leader of 689.000 followers on Twitter.

On February 9, Varoufakis will proudly present the Democracy in Europe Movement 2025 (DiEM 2025) in Berlin. And, of course, there will now be a new Manifesto, the "Manifesto for Democratizing Europe". It nicely fits on just over 5 pages and is worth some consideration.

Off the bat, the Manifesto is Varoufakis-style from start to finish: most beautiful, if not poetic language; catching phrases; plausible arguments; arousing exhortations, etc. Lest there be any doubt that this Manifesto will go down into history as the most important document since the Communist Manifesto, Varoufakis takes the liberty to start off with the phrase "A spectre is haunting the Powers of Europe".

If one is looking for things that one could passionately disagree with, one will not find much. Some statements read so beautifully ("No European nation can be free as long as another's democracy is violated" or "No European nation can live in dignity as long as another is denied it") that one overlooks to ask what they mean in practice. But like with most Varoufakis' publications: while his Manifesto reads beautifully, one cannot get rid of the feeling that there is a hidden agenda behind it.

The Manifesto then addresses the questions of what the lofty prose means in practice and it is quite specific with clear milestones: within 6 months, within 12 months, within 2 years and thereafter. Here are the milestones:

Within 6 months: full transparency in EU decision-making (live-streaming of all important meetings, publication of ECB minutes of important sessions, publication of all important documents such as the TTIP negotiations, etc.).

Within 12 months: address the economic crisis. DiEM 2025 will present detailed policy proposals in the four realms where the crisis is housed: public debt, banking, inadequate investment and rising poverty. The policy proposals will "Europeanize all four while returning power to national parliaments, to regional councils, to city halls and to communities."

Within 2 years: formation of a Constitutional Assembly comprised of representatives elected on trans-national tickets. The Constitutional Assembly will be empowered to decide upon a future democratic constitution that will replace all existing European Treaties.

Thereafter: enactment of decisions of the Constitutional Assembly.

Well, here it is. Varoufakis informs us that he plans to be a major voice in Europe at least until 2025. It is easy to understand who will be unhappy about his plans: in short, all of those whom he alienated as Greece's Finance Minister, be they in politics, economics or business, or just regular citizens. But who will be happy?

I think there will be a significant correlation between Varoufakis followers and personal IQ. Young students with socially-romantic dreams will fall for him, no questions asked. I think there will also be a strong correlation between Varoufakis followers and lack of practical experience in the real world. And, of course, all dreamers of a leftist victory over cold-blooded neoliberals will be among Varoufakis' passionate followers regardless of age, IQ or work experience.

I think the big question is whether Varoufakis will succeed in lighting a fire relatively soon. A fire among his followers, within the media, within the public discourse etc. If he does not succeed with that, his movement will wither away relatively quickly. As a new Finance Minister, Varoufakis succeeded in lighting a fire throughout Europe literally from one week to the next (until he blew a fuse). We will soon know if he manages to accomplish the same feat also as a former Finance Minister.

Friday, January 15, 2016

Bee-Keeping The Solution For The Greek Economy?

According to this article in the FT, MPs of the Chalkidiki region in Northern Greece argue that "the region should be developed for 'soft' tourism and rural activities that would protect the environment, such as bee-keeping and controlled woodcutting". And not, of course, for the mining of gold, as the Canadian investor Eldorado has been promised they could.

It is a testimony to the business incompetence of SYRIZA that they would demonstrate their reservations against large foreign investors at the time when Greece needs little else as much as foreign investments. SYRIZA does not seem to understand that this is not only an issue of Eldorado and the gold mine. They do not understand that EVERY potential foreign investor is watching how the SYRIZA government handles itself in this situation. I am not saying that SYRIZA should give Eldorado a blank check but they certainly should not play out disagreements in public. And above all, they should not display an antagonistic attitude towards foreign investors.

On the other hand, the above may speak for the political competence of SYRIZA. If it were their intention to demonstrate their reservations against foreign investments and foreign investors in general, then what better target would there be than a large international corporation which exploits the natural resources of Greece for its own profit. 

Tuesday, January 12, 2016

A Greek Success Story

It is a shame that any good news about Greece and/or Greek ventures one tends to only find by accident and not through a process. The latest 'accident' was that I came across this article describing how a Greek yoghurt firm rose from the ashes after a huge fire.

The company's name is Kri Kri and I looked up its website. One doesn't need to browse for very long to recognize that this company is a bit of a jewel. And not a small jewel at that: sales over 70 MEUR; significant international operations.

This company is not successful because because Greece is such a good or bad place to do business. It is not successful because Greece has a world-wide competitive advantage in the area of yoghurts. Instead, this company is successful - like most other companies which are successful - because it has entrepreneurial owners who recognize and pursue business opportunities with a can-do approach.

They started, 60 years ago, with a small pastry shop in the Northern city of Serres. Now, how many small pastry shops are there in Greece? Perhaps all of them could have had the same opportunities as Kri Kri. Let me just quote the following from the company's website:

"For our development to continue, we know that we must look ahead, identify the new trends and new potentials that are emerging on a daily basis. We know that we must be prepared for whatever is to follow, so we can tackle it effectively. We know that in preparing for the future, we must keep experience in mind, as 'Yesterday's successes are our guide for tomorrow'."

And another innovative venture of the company: "A recognized and fully equipped nursery for the children of employees operates in our corporate facilities, since 2005. Today, more than 100 'Little Stars of Kri Kri' have graduated."

I think the company's website speaks for itself. And yes, the company also seems to be very profitable, at least until 2004 which is the last year for which they publish figures on the website.

If the new party leader of ND, Kyriakos Mitsotakis, wants to differentiate himself from Alexis Tsipras, he should make a point of visiting at least one such 'hidden star' of the Greek economy every week and to talk about his visits afterwards. As the Greek economy strives to recover, voters should have clear alternatives between anti-business and pro-business forces. The anti-business force of Greece has now been most visible for about one year. The pro-business forces have yet to appear on the scene.

Monday, January 11, 2016

Kyriakos Mitsotakis - A New Greek Wunderkind?

When observing Greece from the distance, a most interesting phenomenon occurred yesterday: literally within 24 hours, a party which for months had appeared on its death track returned to center stage of Greek politics with a splash. And all of that because of a young man with a good family name!

If Kyriakos Mitsotakis satisfies only half of the expectations which were placed upon him in recent hours, he will go down into Greek history as a great leader. One wonders how a man who has been receiving accolades ever since it became apparent that he would win his party's leadership could have received so comparatively little attention before the election. Yes, I do remember that he was often described as a rising star ever since he joined the previous government and, yes, I do remember that his ideas about modernizing Greece were quite impressive. However, I do not remember that anyone ever put him on a pedestal and praised him as the answer to Greece's problems. If anything, I had the impression that he was being viewed somewhat skeptically, if for no other reason than for his family name.

Well, things can change quickly and now Mr. Mitsotakis has been announced by many as the answer to Greece's problems. Perhaps Mr. Mitsotakis would be well advised to take a page from Barack Obama's first election. Obama, too, had been showered with expectations which no mortal could ever fullfil.

No party, and certainly no party with an established history and with established structures and processes, will ever change significantly within 24 hours. If I understand Mr. Mitsotakis' election correctly, it came down to a choice between socalled statists defending the past and present; in other words: more or less defending the status quo. And, on the other hand, the more open-minded, change-seeking new generation. The jubilation on the part of the latter is understandable but they should not overlook the fact that the former still represent close to half of the party.

Robert F. Kennedy's famous campaign slogan, borrowed from George Bernard Shaw, was: "Some people see things as they are and say why? I dream of things that never were and say, why not?" Mr. Mitsotakis needs to be mindful of the fact that the former are always in the majority (if they were not, changers would never get elected). When a status quo is challenged, a lot of vested interests are being challenged at the same time. And vested interests do not leave the battlefield without a fight. In fact, few powers are as strong as status quo's defending themselves.

I would hope that Mr. Mitsotakis does not follow in Andonis Samaras' footsteps when it comes to the style of dealing with political opponents, particularly when the latter are in government. One may gain valuable TV exposure by verbally destroying opponents in parliament and without it. However, in order to promote significant change, within the party and without it, one has to propose constructive alternatives at ever step of the way.

To give a specific example: when the pension reform comes up for debate, I would expect Mr. Mitsotakis not to destroy whatever the government is proposing. Instead, I would hope that he presents his own vision of a pension reform, hopefully in such a way that a majority of Greeks thinks that he makes sense. Any pension reform essentially boils down to 3 major variables: retirement age, level of contributions and level of pensions. When one cannot make everyone happy, the trick is to make everyone evenly and fairly unhappy. Perhaps people would understand the benefits for society of making younger people less unhappy than older people. And probably everyone (except the ones concerned) would accept that early retiree's should be made more unhappy than everyone else.

To make a long story short: observing Greece from the distance is a bit of a masochistic exercise because whatever one reads or hears focuses on the negative. All the things which are wrong in the country; all the things which don't work. It would be most refreshing to, for once, hear of positive alternatives which are well thought out and convincing. And if a handsome young politician with a big family name promotes such positive alternatives, Greece might have a bit of an "Age of the Kennedy's" before it.

Thursday, January 7, 2016

Event Of The Year 2015 In Greece: The Bank Recapitalization!

For those who have already forgotten about the recent recapitalization of the four large Greek banks, here is a very informative summary. 2015 was full of major and unique events in Greece. To me, the bank recapitalization was arguably the most significant one. Not because it was implemented so flawlessly; not because it was so successful. No! I consider it as the most significant event for the simple reason that what happened there was so absolutely unbelievable. So unbelievable that it may not even have dawned yet on many people what actually happened there.

Think back 5 years to the beginning of the crisis. Imagine that a consortium of top-tier European banks would have made a proposal to acquire a majority of the four large Greek banks as part of an effort to stabilize the Greek banking system. Finally, imagine that those banks would have offered top Euro for the shares of those banks (and in those days, those shares were still quite valuable).

There would have been an outcry of public fury in Greece. Foregoing control over the domestic banking sector in favor of foreign banks? Having future policy decisions being made by foreign investors abroad? Such an outcry would have happened in most other countries where something like that would have happened as well. The banking sector is always a very sensitive sector of the economy and no one really wants to forego domestic control.

And what happened last year under a radical leftist government? Leftist who until then had presented themselves as protectors of national interests; as haters of financial speculators; as haters of profit-seekers? Well, get this: under such a radical leftist government, the majority of the four large Greek banks was sold off to foreign financial investors, to true speculators!

And going forward, whenever the boards of these four banks meet, possibly as often as once a month, a minority of radical leftists will sit around a conference table where the majority is composed of financial speculators. The radical leftists represent only a minority interest in those banks and when the majority takes decisions with which they disagree, they will simply have to accept them.

It is not too long ago that many observers feared that the leftist Greek government would decide to nationalize the Greek banks. Perhaps even expropriate private investors. Instead, they did something which not even the Chicago Boys would have dared to do in Chile 40 years ago --- hand over control over the domestic banking sector to foreign speculators and that for a little more than a song!

To pull something like this off in a short time and without the streets overflowing with (not only leftist) protestors is quite a feat! Whether is was a positive or negative feat remains to be seen.