On the fiscal pact, troika demands, the fiscal pact, snap polls

Troika wants labor costs lowered

It makes little difference now any longer if Greece stays in or out of the Euro. The first real cracks are starting to show in the Euro. The financial community are abandoning the Euro and Europe. If this continues it will be ground zero within 3-6 months.

Elroy Huckelberry

Past glories and lessons for a golden future?

Philip Andrews? dialogue with Mr Papachelas is really more than just a philosophy exchange: the argument is: In past history, only a common enemy have successfully united the Greeks who are otherwise ferociously individualistic. In a way that is also why, one might wonder if — in the foreseeable future — a federal state with local much stronger regional political, fiscal, etc, powers, might not be more adapted to the Greek mentality, than the current extremely centralized system. Spirituality is evoked in the discussion… it would be wonderful if all humans (not just the Greeks!) could manage a quantum leap) but until that occurs it might be a simpler fact than to see your mayor to get something done will prove more friendly and effective than to hope for your project to be accepted by parliamentarians in Athens! In other words a top-down totally centralised approach, as is witnessed today, might be an impossible and unnecessary exploit, even for Hercules, Ulysses, and all mythological heroes to accept undertaking, were he ever to enter the arena of Greek politics.

Marc Sursock

Geneva, Switzerland

13th and 14th monthly payment

I am sick and tired of the 13th and 14th monthly payment being referred to as a gift or a bonus. When I came to work in Greece in 1997 I was offered a gross annual salary. That salary was subject to 16% deduction for IKA, i.e. 6% more than I would have paid in the UK and income tax on a sliding scale that escalated far faster than in the UK. The remaining net salary was then paid in 15 instalments, i.e. an extra half month at Easter, and extra half month in the summer and a full half month at Christmas. Those payments were not a gift or a bonus. They were part of my rightful agreed salary.

Warwick Gibbons


Government plays down need for austerity

This is what happens when you put a lawyer in charge of the economy, especially when the economy is in shambles.

We have heard in the last couple of months from Mr Venizelos that targets will be met and at some point we would exceed expectations. Of course even a 10-year-old would know that we cannot pull out of this in a year or two and we should discount most of what we hear from the Ministry of Finance.

What this administration needs to do is an overhaul from top down.

Austerity cannot be imposed upon the weak while the powerful always have a cushy place to fall back on.

What happened to the 600 billion euros that were deposited abroad during 2010?

Has anyone reviewed the tax returns of those who had those deposits to send abroad for shelter?

What happened to the millions in back taxes owed by those powerful enough not to be mentioned by name even when they get arrested?

Why don?t we trim the MP numbers from 300 to the minimum required of 200? The savings from that overcrowded place full of incompetent fat cats will be tremendous and will allow those who depart to get a quick brush with reality.

Why can?t we dismantle the 6,000 government companies created since 1982 that did not exist before. How many of those companies benefit the Greek citizens one iota?

Who benefits and how much do they cost?

We cannot go forever to Europe hat in hand looking for loans at exorbitant interest rates with the hope that someday, something will happen and we will be able to pay our debts and keep our name clean.

Even citizens from countries deep in debt themselves look at us as if we are the only ones who spent more than we could or should.

Monica Lane


Re: Europe?s fiscal pact: The final irony?

The only ironic thing I find on Mr. Nick Malkoutzis? commentary is that it reeks of inaccuracies, first Germany and France did not let each other off, all countries signatory of Maastricht voted to except Germany and France from the strict rules.

Second, that was limited for Germany to the unique situation of the reunification (naturally if Germany gets it, France wants it too and attributed it to the unique situation that they were out of perfume or something) and by far they were not the only countries shortcoming the budget deficit.

Now, what was the difference between that situation in Germany, Ireland, France, Italy and whathaveyou? They negotiated deficit over 3% before they did it. Greece on the other side had a deficit over 3% every year since the signing of the treaty except for 2006 without negotiating anything… in fact not telling anybody and hiding the facts until the government was at the verge of bankruptcy.

Criticizing Germany falls short in that it has already applied, due to the fact that for a few years their deficit was over 3%, austerity measures (which at the end cost Schroeder his job putting Merkel in). And that they demand from others what they had to do themselves to be able to fulfill what they have agreed to is but fair.

Bashing the Germans for doing what works and being successful does not remedy Greece?s situation, and is getting to the point of ridicule by now. In fact, it just demonstrates the impotence of Greeks to solve their own problems, something that adds to my decision to just pull up the tent and go back across the pond.

Alf Meier

Author replies:

Dear Mr Meier, I?m afraid that the inaccuracies you refer to in my piece on the fiscal pact simply do not exist.

Firstly, France and Germany did vote to excuse each other from disciplinary measures when they breached the eurozone?s deficit rule and exercised considerable political pressure on others to do the same. Finance ministers from the other countries also voted to let the two countries off. The European Commission later agreed to suspend disciplinary procedures

This decision was criticized by the European Court of Justice and a number of commentators who suggested that it would set a dangerous precedent. Here are a couple of articles that might jog your memory:



You are perfectly right in saying that they were not the only countries violating the rules. Greece was the eurozone?s worst offender. Revised deficit figures show that it breached the 3 percent of GDP deficit limit every year from 2001 to 2010. During that time, Germany exceeded the limit for seven out of the 10 years. In France?s case, it was six times. Italy came close to Greece, breaching the deficit ceiling eight times. Spain actually only went over the limit three times.

There is nothing in my piece that suggests Greece did not offend, simply that the deficit and debt ceilings seem to be a flawed system.

I?m afraid, though, that your suggestion that Greece somehow sprung its deficits on the eurozone at the last minute while all the other countries were totally up front about their figures disregards the way that the EU works. All these figures and forecasts were submitted to Eurostat, which had the ability to check them. All the countries were required to submit their data at the same time.

What happened in Greece?s case is that changes in the way that deficits were calculated ? particularly in terms of how military procurements were recorded ? led to the figures changing as well. It is only over the last year or so that Eurostat has been addressing these inconsistencies. My colleague, Dimitris Kontogiannis, has a very good article on this issue and what the implications have been for Greece: http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_27/11/2011_416649

However, to return to the main subject, I would certainly take issue with the idea that I am ?bashing? the Germans. I do not see how pointing out the potentially damaging consequences of the fiscal pact that Germany and France have designed for the eurozone constitutes German-bashing. In fact, by indicating how beneficial the introduction of fiscal transfers within the euro area could be, I have highlighted how important Germany?s economic success could be for the single currency.

Nick Malkoutzis

Dear Marc Sursock

There are for Greece at present, two possible ?ultimate outcomes? to the present situation that I can foresee.

The one is to remain in the euro and to struggle like that famous Greek mythology charachter Sisyphos struggling with euro debt and every time there is a glimmer of hope, someone ?on the outside? makes his euro burden heavier by just a fraction and he rolls all the way back down again into new debt…

This is either an ancient version of the perpetual motion machine, or another version of ?the straw that broke the camel?s back?. In the euro Greece will be forever under an unworkable debt pile. Forever.

At least with the second outcome, with the drachma, Greece has ?tin paramikrotatin evkairian,? the very slightest chance to emerge from that situation.

How, you may ask?

Legitimately, if/when the drachma becomes cheap enough, Greece might, just might become a more attractive investment prospect. It will be akin to 3rd world investment, but a really cheap and relatively poor Greece might just manage to attract some interest.

There is the possibility of a ?less than legitimate? route. As and when Greece under her default burden hits rock bottom (believe me she ain?t there yet…) then sheer national survival could well prompt a ?strong man? reaction; another Ioannis Metaxas perhaps? In this situation, the first thing such a government ?kuvernisi ethnikis sotirias? might do might well be to unilaterally renege on all Greece?s debts.

This is a distinct possibility.

Such a government would be supported by the military, by a large part of a nation sick to the back teeth with austerity and disillusioned with bailout packages that simply increase the national debt to infinity while crushing the people with ever more and higher taxes (going to Berlin — the modern Ottoman Porte) and no salaries/pensions to speak of.

The outside world would either ignore this, being in its own sorry state, or it might declare Greece a rogue state and treat it like Serbia… After all if other debtor nations take Greece?s cue, then the finacial system will collapse (the straw and camel?s back syndrome) or Berlin?s economy, being based on exports to weak countries paid for by those countries debt to it and control of those countries as colonies, will collapse, leading to mass German unemployment, and a return of the Germans to the deutschmark and nationalism…

Take your pick…

Philip Andrews

Re: The scramble for survival

What a very interesting article! The international circumstances within which the Greek crisis is unfolding are in themselves of great interest.

I agree with you that the developing relationship between Athens and Jerusalem is an interesting one. However, I feel that the position of Turkey is more complex perhaps than you have made out. Turkey is trying to create a geopolitical influence for herself in the Middle East. The United States is only one player affecting her decisions. Turkey has the ever present Kurdish question, she has her deteriorating relationship with Israel over Gaza and over the East Mediterranean gas fields. And she has the Syrian situation. This latter is complicated by her relationship with Iran. Iran supplies Turkey with one third of her oil, so Turkey cannot afford to upset Iran in any way at all. This is presumably why Turkey has done so little in practice to ?interfere? in the Syrian situation. Iran is playing Syria for very long-term stakes and the whole situation is very much determined by Iran?s largely unseen influence.

The fact that Greece is now so reliant on Iran for much of her oil is a very significant concern for Greece and for the EU. Presumably the Greek military has first priority for oil supplies, while industry and private consumers come second and third, I would imagine.

Ever since the Iranians captured the American UAV all plans for an Israeli and/or American strike on Iran have presumably been put on hold. This is a somewhat significant setback and has to be weighed in the balance, especially with regard to what Iran may pass on to Russia and China. According to Debka file, the Israeli intelligence website, the Iranians were able to take control of the craft either in Iranian airspace or in Afghan airspace.

It is speculated that the Russians had something to do with this event. It has opened a huge can of worms to do with scientific and technological espionage and exactly how advanced the Russian and Iranian military industries are in this respect. It tells us perhaps that Western intelligence has been wilfully under-estimating Iranian capabilities and Russian capabilities for some time and this will impact upon all Western military activity including Israeli, in that region.

With all that is going on in the Middle East there is so much literally up in the air that it is very difficult for policymakers in the United States or Europe to come to any definite conclusions or decisions about what to do next. Greece is on the edge of this maelstrom of very much unexpected activity in that region. When you combine the effects of the Arab uprisings with the European crisis, the result makes the Greek crisis actually much more significant and more complex. At the same time the inability of the Greek political leadership to handle just the Greek aspect of it without regard to wider implications may have consequences further down the line.

Thank you very much for writing that article and for putting the Greek crisis in its broader context.

Philip Andrews

Snap elections?

The new Italian ?technocrat? PM seems to have been given good terms for his attempt to remedy Italy?s problems — freedom to appoint his own team, genuine support from the parliament and the president (who seems active and effective), and no talk of ?snap elections?, so no time pressure in dealing with what is obviously not a short-term problem.

Why are things so different in Greece, whose situation is even more difficult? Where did this February 19 date come from? I have only read that ?it was proposed? — by whom? Is there a written agreement to this date? — signed by whom? This date is plainly absurd, given that there is the holiday season soon, and electioneering, which has already started, will intensify after the New Year, making effective government even more impossible than it is normally in Greece. Almost without exception the necessary arms of government in Greece suffer are slow-moving, ineffective and corrupt — the justice system, government ministeries and officials, police, military, the church (interesting to read that while Greeks are suffering a senior bishop is off to Qatar to talk real estate deals), the Constitution (almost designed to block any progress), no Land Registry (EU funds provided for this were used ?for other purposes?) media (although they must be excused from my ?slow-moving? remark, rather being ultra-quick to stifle any hopes). In particular, why is the president such an invisible figure in Greece? — so that it is left to a former president to say the obvious.

I can suggest three answers: first, it is the personal obsession of Mr. Samaras and his ND team, who want to grab back the reins as quickly as possible, so as to have their ?15 minutes of fame? to dispense favours and protect their supporters — notice that the good of Greece and the Greeks appears nowhere here; second, a collusion of all the present parties wants to have this non-political PM in power for as short a time as possible, fearful that the voters will like the idea, and that new politicians and parties will emerge as the present ones break up — again about parties, not about Greece; third, the appalling system of state funding of political parties, based on their voting percentages, which the parties may disappear or become eroded during the interim government.

Robert Skailes

Mr. Kontogiannis on the importance of current accounts

Of late, there have been ?awakenings? to the issue of current account balances. Dimitris Kontogiannis wrote an article in the Ekathimerini. John Mauldin published an analysis by Anatole Kaletsky, Charles Gave and Francois Chauchat (GaveKal). Stephen King published one in the Financial Times. And those who are interested in simple, common-sense explanations should refer to Warren Buffett?s tale about Thriftville the major underlying cause are the current account balances. Without current account imbalances, there can be no cross-border debt! With current account imbalances, the cross-border debt is the consequence!

Let me briefly state what a country?s ?current account? really is. The English expression for it could not be worse. The German expression translated into English would be something like ?the international operational performance balance of a country? and that comes closer to the truth.

In essence, the current account is the cross-border cash-flow-from-operations-statement of a country. That is economics, but now to mathematics: a negative current account balance MUST find its corresponding entries in the capital account of a Balance of Payments (capital imports), as must the positive current account balance (capital exports). In short, if a country?s cash-flow-from-operations is negative, it needs to import capital and vice versa.

Confusion with a country?s trade balance must be avoided because the trade balance is only one part, albeit the most important part, of the current account balance. If a country manages to compensate the negative trade balance with operational incomes through services (e.g. tourism), the current account can be brought into balance.

A country?s negative current account balance represents the transfer of wealth from it to the rest of the world. Greece, for instance, transferred 199 billion euros of her wealth to the rest of the world between 2001-10 (and all of that ?wealth? which she transferred abroad was first borrowed from abroad). Note: this is only wealth transferred abroad out of operations. It does not include wealth transferred abroad via capital flight!

As with a company, a negative cash-flow-from-operations is not bad per se; it all depends what the cash is used for. If the cash is used for investments in revenue-generating projects, today?s cash-flow-deficit will in the future lead to cash-flow-surpluses. If it is used for consumption, the cash disappears but the debt remains.

Some opinion leaders (particularly Greek ones) have attempted to construe present-day problems of Greece as a German conspiracy to ?exploit? Greece. Facts do not support this because Germany, from 2007-10, has accounted for only 15% of Greece?s current account deficit. What Greece has to do, as she makes a long-term macro-economic plan for her economy, is to analyze her entire current account balance, i.e. not only the 15% with Germany but also, and foremost, the other 85% with the rest of the world outside Germany.

GraveKal come to an astonishing conclusion. They say that the bulk of the Periphery?s current account problems is not a function of deficits with Northern Eurozone countries but, instead, a function of essentially oil and imports from China. If that is true, then it represents a real problem!

If current account deficits are driven by the import of cheap products which could also be produced domestically or products which are not essential for the domestic economy, a strategy of import substitution through new domestic production or import controls could quickly show positive results. On the other hand, if the deficits are driven by the import of products essential to the domestic economy (oil, cars, etc.) or products where one cannot compete due to pricing (China), the task of correcting the current account deficit assumes enormous dimensions.

What applies to Greece applies also to the other deficit countries: the current account deficits must be brought under control! If free market forces cannot accomplish this, then the process needs to be ?managed?. Countries which have the industrial base to stimulate exports must focus on that (Italy). Countries which do not have an industrial base must do other things (Greece). Greece?s opinion leaders should feel obligated to discuss intensively what proposals should be considered. Without addressing the issue of the current account deficit, an economy like that of Greece has no chance to sustain a reasonable standard of living because, at some point, foreigners will no longer transfer cash through the capital account which cash is lost (wasted?) through the current account.

Klaus Kastner


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