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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!