Monday, June 18, 2012

Of Men And Their Donkeys

OK, Greek voters did what they could, never mind what they should.  In last Sunday's elections they favored one of the pro-eurozone, pro-bailout parties, admittedly with a slim (if comfortable at nearly 3%) margin over its left-wing competitor who called for tearing up the bailout agreement.

Greece is in an unprecedented fifth year of deep economic contraction with unemployment  over 22%.  If pushed too far by some of its dogmatic EU partners, Greece will simply fall apart and become a virulent failed state in the heart (yes, the heart) of Europe.  Certainly, reforms in the Real Greek Economy (tm :) are desperately and urgently needed, since the country had previously swallowed hook line and sinker the imported Pump - Borrow - Spend model for generating so-called "growth".

 It wasn't really its fault, if one of course overlooks cronyism, paternalism, corruption and cheating endemic in Greek politics since the early part of the 19th century (some would go as far back as Pericles).

There is no use, no profit, nay nay no gain at all in flogging a horribly overloaded donkey.  All we will get is a dead donkey and an upset cart, instead.


Stop Treating Greeks Like So Many Donkeys

What's to be done?  Here are some suggestions...

1) Stop beating the crap out of them.  Yes, that means mostly you Herr Schauble - God Above Mein Herr, STFU!!
2) Provide some immediate relief from the most onerous clauses of the Bailout Agreement by (generously) extending the time needed to reach a primary budget surplus AND reducing the size of the surplus envisioned.  Give them, say, five extra years and 1-2 percentage points less on the surplus needed.  In any case, I bet they will do better than that, if at the same time...
3) Promote sizable investments in the sectors where the Real Greek Economy has obvious comparative advantages: renewable energy (oodles of sunshine, wind, geothermal AND huge tracts of unused real estate up in the mountains of arid islands), shipping (e.g. at least three big shipyards sit empty), tourism (an old saw, but true nevertheless), second/retirement housing, organic/quality farming, software design (It's true, check it out. Highly educated and skilled professionals go for a song in Athens).

In sum, focus on REAL not just monetary/budgetary issues.  Go to it and lay of that damn whip, because what goes around comes around (and that also means you Mr. Fico, Prime Minister of Slovakia).

P.S.  An anonymous comment grabbed my interest. 

"...Investment? With your personal money, dear generous banker? Of course investment makes sense.
But no decent investment can start until REAL asset prices have come down in a significant way."

Here's a chart as an answer...

Greek share prices down 90% in five years

I think 90% is pretty significant, won't you say?  Here's another bit: at current prices, total market cap for the Athens Stock Exchange stands at a ludicrous 10% of GDP.

3 comments:

Anonymous said...

"Greece is in an unprecedented fifth year of deep economic contraction".

You seem to forget the unprecedented period of growth...

"Promote sizable investments in the sectors where the Real Greek Economy"

Investment? With your personal money, dear generous banker?

Of course investment makes sense.


But no decent investment can start until REAL asset prices have come down in a significant way.

Should that be prevented to happen. And it is at this stage, the only way out of the crisis is the Drachma.

Lord Blagger said...

And it is at this stage, the only way out of the crisis is the Drachma.
==========

Not convinced.

Default and look at who takes the hit. Largely Greeks, plus takes out the ECB.

Now Greeks repatriate their cash, so long as its not taxed which results in massive inflation. Or it is taxed, in which case it doesn't come back and you don't get the growth.

It's all about who takes the losses.

Now for paying taxes. Why pay taxes if you get no services in return? The question that isn't being asked.

live sports said...

nice