Tag Archives: Greece economy

EU should invest in Greece, not just lend it money

Brussels – A restructuring of Greece’s debt or a second bailout from the European Union and the International Monetary Fund coupled with austerity measures and structural reforms will not be enough to ensure the country’s long-term economic future, according to the chief economist at a leading Brussels think-tank who is urging the EU to generate greater investment in the debt-ridden country.

“The key here is to create a positive economic and political future,” Fabian Zuleeg of the European Policy Centre told Kathimerini English Edition. “It is abundantly clear now that simple austerity measures are not enough: they are not going to lead the Greek economy to a higher growth path. If we want to give economic and monetary union a long-term perspective than we need to find vehicles to channel investment from the stronger countries to the weaker countries: true investment, not a transfer – something that will give returns.”

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Secret talks, public discussions

Following the frenzied speculation prompted by Friday’s Spiegel Online report that Greece was involved in secret talks in Luxembourg about the possibility of it leaving the eurozone, the only thing that was missing was Finance Minister Giorgos Papconstantinou standing outside the medieval chateau where several eurozone officials were in discussion and telling reporters that no meeting was actually taking place.

The whole episode was poorly handled – at the same time the European Commission was denying any meeting, the Germans were confirming there was one. This only added to the jumpiness that already exists within Greece and other eurozone countries as well as on the international markets.

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The wrong battle

Illustration in linocut by Manos Symeonakis

“There is no Greek-German war,” government spokesman Giorgos Petalotis said last week. “Greece and Germany are not on collision course,” said Foreign Minister Dimitris Droutsas. All these statements can only mean one thing: Greece and Germany are very much at loggerheads. But their dispute is not just a bilateral squabble; at its heart it’s about divergent views on how to respond to the crisis threatening the euro and, beyond that, on the very purpose of the European Union.

The frantic attempts by the government to play down any rift between Athens and Berlin came after Greek Prime Minister George Papandreou decided on November 15 to dust himself off, stand on the ruins of the Greek economy and hit back at German Chancellor Angela Merkel with a rebellious passion. Speaking in Paris, Papandreou accused Merkel of driving up bond yields for weaker eurozone members by insisting that private investors should foot part of the bill for a permanent mechanism to support countries with failing economies, like Greece’s. “This could create a self-fulfilling prophecy,” said Papandreou. “This could break backs, this could force some economies into bankruptcy.”

On the face of it, there seems little wrong with Merkel’s insistence that private bondholders should accept losses, or a “haircut,” on their investment as part of a debt crisis mechanism to be adopted by 2013. Most Europeans would accept that this would create a fairer system although, clearly, German taxpayers would benefit the most as they’re the ones who would be called on more often to bail out failing eurozone members. But the self-serving element to Merkel’s position is not what should be of most concern to Europeans. Instead, it’s the way Berlin has tried to steamroller other EU countries into accepting the inclusion of the “haircut” clause ahead of a decisive EU leaders summit in Brussels next month. It’s this lack of consultation and the absence of consideration for struggling eurozone members that is undermining the Union.

Papandreou argued that making such a big fuss about investors having to pay their share simply gave jumpy bondholders a seriously aggravated case of the jitters, pushing up the yields on government bonds for Ireland, Portugal and Spain to dangerous levels. Few EU leaders backed Papandreou openly but there is great concern about Germany’s stubbornness. “When the history of the eurozone is written, last month’s German-driven EU summit agreement to devise a crisis resolution mechanism for countries to service their debts may well be cited as the event that pushed Ireland over a cliff,” Bloxham, Ireland’s oldest stocbrockers, said last week, a few days before Dublin turned to the EU and the International Monetary Fund for emergency loans.

In Germany, though, there is a different view. “If Merkel were to abandon her plans, then it would be paradise for investors and weak governments,” wrote the Suddeutsche Zeitung newspaper last week. “The speculators could charge higher interests on Irish or Greek bonds without any risk of losses. And the Greeks could continue with their record indebtedness because they would have no more pressure from the financial markets and in an emergency would be rescued by their euro partners.” However, this ignores that when Greece tries to go back to the international bond markets in 2013, its borrowing costs will be pushed up anyway, as investors will be wary of having to take a haircut should Athens have to revert to the permanent EU mechanism for further loans.

The Greco-German dispute is symptomatic of the differing views emerging within the EU about how to combat the debt crisis. There is a tendency for the EU to speak with two voices and to pull in two different directions. “The euro, which was supposed to make European integration irreversible, could become its undertaker,” wrote the Frankfurter Allgemeine Zeitung daily last week. Every day the debt crisis gnaws away at the EU’s confidence, making the Union seem an exhausted shadow of its former sprightly self. This dissipation of energy and will is leading to division and, whether through bad luck or design, Merkel is at the forefront of creating ever-deeper rifts.

Speaking at a rally of her Christian Democratic Union (CDU) in Karlsruhe on November 15, the same day that Papandreou challenged her scheme for private investors, Merkel said her predecessor as chancellor, Social Democrat Gerhard Schroeder and his Finance Minister Hans Eichel had blundered when they allowed Greece to join the eurozone. “In 2000, Schroeder and Eichel couldn’t let Greece join the euro fast enough and they ignored all the warnings,” she said. “It was a political decision… political decisions are important but those which ignore the facts are irresponsible.”

It’s now obvious that Greece was not ready in 2000 to stick to the single currency’s fiscal guidelines, as prescribed by Germany. It’s also clear that allowing Greece into the eurozone was a political decision — one aimed at giving the nascent single currency numerical, if not necessarily economic strength, but also the opportunity to encourage economic reform and German-style efficiency in a sluggish European state. A decade ago, it was a convenient political decision for Germany — Greece, after all, became another market in the eurozone for its exports — but now it’s a terrible inconvenience for Berlin. But that’s the thing about political decisions: You take a risk. Sometimes you ignore the facts because you have a conviction that something greater is at stake, even if the numbers don’t back you up.

Merkel might consider, for instance, that the Marshall Plan, which ensured Germany’s post-war reconstruction and helped it become the economic powerhouse it is today, was a political decision. The United States, which led the effort, could have decided that paying to help rebuild Germany did not make economic sense but Washington chose to look at the bigger picture — the opportunity to fight “hunger, poverty, desperation and chaos” as US Secretary of State George C. Marshall said when he unveiled his plan in June 1947. Using words that are eerily relevant to today’s Europe, Marshall said: “The United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace.” Peace in Europe is not under threat in 2010 but the EU’s faltering economic health is putting its unity at risk.

While leaders argue over bond yields, haircuts, bailouts, deficit and debt, one very important factor is being overlooked. As was the case in the Europe of 1947 before the Marshall Plan, it’s the people that are suffering. They are the ones that pay the cost of failed economic policies and soaring bond yields — people who have fulfilled the wishes of politicians and bankers by mortgaging their futures to buy houses and cars and who believed the euro would bring the permanent stability they were promised. This is why unity must be restored.

Somewhere between Papandreou’s rebelliousness and Merkel’s intransigence, we’ve forgotten that the EU and its institutions were created to improve people’s lives. Many of these people are now losing their jobs, homes and hope. That’s why, even though Greece and Germany may not be at war, their dispute is confirmation that Europe is fighting battle, but the wrong one.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on November 26, 2010.

No countries for old ideas

Illustration in linocut by Manos Symeonakis

Brussels – There’s a homeless man who sits with his back against the wall of Gare du Nord railway station in Brussels and begs for money. He chooses a spot near the station’s side exit, where few people pass. It also rains a lot in the Belgian capital, so he doesn’t look like a happy man. But by the end of Friday, when European Union leaders will have finished negotiating on new, stricter budget rules for member states just a couple of kilometers from where the beggar sits, they could make him look like the happiest guy in town.

Such has been the intensity of disagreement over how to take economic governance up a notch in the 27-nation bloc that there will be a lot of fraught faces in Brussels this week. Of course, if a deal is reached, the smiles will break out – until people start questioning the implications of what has been agreed.

The negotiations leading up to the summit, which began on Thursday, have been overshadowed by events on October 17: Just as a task force of EU finance ministers led by European Council President Herman Van Rompuy and assisted by the head of the European Central Bank, Jean-Claude Trichet, was putting the finishing touches to proposals designed to stop member states like Greece from overspending, Germany and France decided they would save everyone the trouble and decide on the final scheme on their behalf.

The task force had come up with a system of issuing sanctions against countries that violate the 3 percent of gross domestic product (GDP) limit on their public deficits and the 60 percent of GDP limit on debt, as set out in the EU’s Stability and Growth Pact. Countries that fail to conform would face the prospect of being fined. Both the ECB and the European Monetary Affairs Commissioner Olli Rehn had wanted this process to be semi-automatic, in other words not to be open to political interpretation or manipulation.

Before the mechanism – which for now will only apply to countries that use the euro – was even properly conceived, German Chancellor Angela Merkel and French President Nicolas Sarkozy announced they had agreed on a different method. In a two-way compromise, Merkel agreed that a qualified majority of eurozone governments would be required to start disciplinary action (including political sanctions such as withdrawal of a state’s voting rights) and that a permanent emergency fund should be created for members that can’t balance their books, while Sarkozy conceded that any changes to budget rules should be included in an amended EU treaty.

The Franco-German power play prompted dismay – Trichet insisted a footnote be added to the final version of the proposals stating that he did not agree with all of them – and horror – Luxembourg’s Foreign Minister Jean Asselborn accused the French and Germans of dragging the EU back into the 19th century with the idea of removing members’ voting rights: “You are threatening states, threatening peoples, humiliating them.”

Rehn, meanwhile, insisted in Brussels on Tuesday that he would push up to the last minute for the sanctions process to be free of political intervention and disagreed openly with the prospect of denying offending members the right to vote, which he said is “not in line with the idea of an ever-closer Union.”

The Finn was speaking at the launch of a new system for monitoring the performance of eurozone economies. Dubbed the Euro Monitor 2010, the report compiled by the Lisbon Council think-tank and the Allianz financial services provider uses a range of 15 indicators in four key categories – fiscal sustainability; competitiveness and domestic demand; jobs, productivity and resource efficiency; and private and foreign debt – to evaluate performance rather than just fiscal measurements. The idea is that the Euro Monitor would provide a better early warning system of failing economies and would be a more comprehensive way of monitoring and encouraging balanced growth in the member states.

Given that he’s had more numbers thrown at him this year than a bingo hall announcer, perhaps Rehn, who expressed his support for such an analytical tool, could be excused for missing the irony of the occasion. He may well favor a more rounded approach to assessing economic progress but the measures due to be approved this week use purely fiscal indicators as their totem poles. Even though the EU is more acutely aware of its failings thanks to Greece’s spectacular implosion, the Union is about to commit to a form of “reinforced economic governance” that is predicated on the same terms that have underpinned eurozone economies for the last decade and which failed to prevent the current mess in which many member states find themselves. It uses the same debt and deficit limits that were consistently violated, not only by rulebreaker Greece but by rulemakers France and Germany as well.

Also, the proposed mechanism pounces on failure rather than encouraging success. It threatens to punish member states that fail to comply with somewhat arbitrary fiscal limits but does not suggest how they can drive their economies to stay clear of trouble. It proposes sanctions when there is no evidence that financial penalties bring states into line. Greece, for example, was the first EU country to ever be fined for an offense – for the operation of an illegal trash dump on Crete – in July 2000. It spent the following 10 years amassing fines for breaching EU environmental legislation. At the end of the decade, Greece still had one of the worst environmental records in the Union. It had neither reformed nor conformed as a result of the fines.

There is a deeper problem, though, with the proposals. They show the EU to be running short of ideas at a most crucial juncture: When countries across Europe, from Greece to Britain and Ireland to Portugal, are taking the austerity hatchet to their troubled economies, there seems to be no attempt to develop a more sophisticated and nuanced economic model to deal with the challenges of the 21st century. Europe appears to have accepted the cost-cutting, tax-hiking philosophy of the International Monetary Fund without question.

This undermines the Union much more than any disagreements or backroom politics. The EU was once about breaking through the waves; its budget proposals are only about staying afloat. The measures reek of bleakness and there is nothing there to inspire the Union’s 500 million inhabitants. As John Rentoul, a commentator for the British daily The Independent, wrote in the wake of his government’s drastic spending cuts: “This isn’t about economics – as ever, that can be argued either way – it is about a strategy for the country.” Or in this case, the Union, and there doesn’t seem to be one.

Whatever is finally agreed this week, EU leaders will not be able to escape the fact that they are talking one language — that of debt, deficit, austerity, limits and sanctions – when many of their people would like to hear them speak another – that of jobs, security, prospects, fairness and quality of life. Even the homeless man in the street would be able to tell them that avoiding financial bankruptcy does not prevent you from being morally bankrupt, balancing your budget does not mean you have an equal society and reducing your deficit does not preclude you from being short of ideas.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on October 29, 2010.

Out of the darkness

Illustration in linocut by Manos Symeonakis

There’s a short audio clip played almost on a daily basis on Skai radio’s political satire program, Ellinofrenia. It’s of Prime Minister George Papandreou saying: “Viva Chile, viva Grecia.” Presumably, it was recorded when Papandreou, then head of the opposition, visited Vina del Mar in Chile last March for a meeting of Socialist leaders. The clip is played randomly during the irreverent show. Its effect is to make Papandreou seem a dreamy globetrotter with an appetite to pursue international contacts rather than solve Greece’s problems. But since the rescue of the 33 miners from the San Jose gold and copper mine last week, those four words have taken on a new life and their abstractness has been replaced by an urgent relevance.

Watching Luis Urzua, the last miner to be winched to safety, sing the Chilean anthem as he stood next to President Sebastian Pinera and the team of rescuers in the early hours of Thursday morning, the parallels between Chile and Greece seemed as crisp and clear as the night air in the Atacama Desert. The Chilean anthem has a line, which seems prescient in the case of the miners who spent 70 days in an underground shelter fearing for their lives: “Either the tomb will be of the free / Or the refuge against oppression.” In this respect, it is very similar to Greece’s national anthem, Dionysios Solomos’s “Hymn to Liberty,” which is also dedicated to the ideal of freedom and contains the lines: “From the graves of our slain / Shall thy valor prevail.”

Freedom is such a highly valued concept in Greece and Chile because they wear the scars of oppression — from outside forces but also from within: Both countries have experienced damaging military dictatorships in their recent histories. But even in 2010, there are still struggles for freedom in Chile and Greece. In the Latin American country, despite the economic prosperity and political stability it has enjoyed over the past two decades, some of its people still feel the tug of history’s shackles. Despite the fact that Chile produces more than a quarter of the world’s copper and that prices for the metal are at a two-year high, bringing the country almost 4 billion euros a month in export revenues, some miners are still not truly free from the exploitation of firms taking deadly risks for profits.

In Greece, freedom has been compromised in different ways. As a result of its irresponsibility in the past, Greece’s economic sovereignty is largely in the hands of the European Union and the International Monetary Fund rather than the country’s elected government. While the foreign overseers plot a course for economic recovery, Greece is trying to free itself of the stale ideologies, practices and hangups of the past that held it captive.

It’s in this effort to save itself that the rescue of the Chilean miners provides Greece with food for thought. Speaking of the mesmerizing effort to pull the miners to safety, Chilean writer Isabel Allende said it had been an “odyssey of solidarity,” just as Prime Minister George Papandreou had said Greece was embarking on a “new odyssey” when he announced in April that Athens was turning to its eurozone partners and the IMF for financial assistance. Solidarity, however, has been in short supply in Greece, as opposition parties, unions and even aloof members of government continue to play the same tired roles to which the Greek people have become accustomed over the last three decade. Even at this most crucial hour, there is only the flimsiest of consensus on the gravity of the situation and what needs to be done. For instance, the country’s two main parties, New Democracy and PASOK, have been able to agree on few strands of economic policy, such as the opening of closed professions and the overhaul of the Hellenic Railways Organization (OSE), which is losing 1 billion euros a year. It is hardly as if they have become brothers in arms.

One of the greatest lessons of the San Jose rescue is that when suspicion and anger — as the miners were justified in feeling after being sent into a patently unsafe mine — and scepticism and doubt — as Chile’s government and the rescuers would have felt in launching a seemingly futile rescue mission — are set aside, wonderful things can happen. “It is proof that when men unite in favor of life, when they offer their knowledge and effort to the service of life, life responds with more life,” wrote Chilean novelist Hernan Rivera Letelier in Spanish daily El Pais. But for life, or at least a life worth living, to have a chance of existing, people have to put their faith in each other. “You just have to speak the truth and believe in democracy,” said shift foreman Urzua in his first post-rescue interview.

In Greece, the truth is a rare commodity at the moment. From deficit figures that keep changing to the cagey talk of ministers and the unfeasible promises of opposition politicians, nobody speaks honestly. The failure of our democracy was evident last week right in front of its greatest symbol, the Acropolis. Culture Ministry contract workers protested the non-renewal of their contracts in the hope that this government, like others before it, would cave in and ignore the law limiting such agreements to two years. The government, on the other hand, dodged a face-to-face meeting with the protesters because it had not paid some of them for 20 months.

The rescue is also evidence that for society to function, all its agents need to work together. State mining company, Codelco, led the effort to save the 33 miners, who had been working for a private firm, but it relied on help from other countries and private-sector funding. It was on the basis of this sound structure that the emotional support network for the miners, made up of families, friends, doctors and psychologists was built. “What we have recovered here… is our self-confidence as a nation, and sense of community, of Roman ‘communitas,’ of some well-being which depends on others: our neighbors, our friends, our most efficient [political] representatives,” explained Chilean writer Jaime Collyer. In Greece, the individualism that came with the economic prosperity of recent decades stands as one of the biggest obstacles to progress. Those who for so many years have evaded tax, landed themselves comfortable public sector jobs, enjoyed the privileges of closed professions, lived off state subsidies or simply disregarded the laws of their state are not going to trade this bliss of isolation for the give-and-take of a functioning community very easily. The decision this week of many bar and restaurant owners to flout the recent ban on smoking in enclosed public spaces because they feel it harms their business is evidence of how deeply mired Greece is in the “me first, me only” way of thinking.

The successful rescue of the miners, though, is a reminder of the reward of overcoming fear, selfishness and lack of vision. “We aren’t the same as we were before the collapse on August 5,” said Pinera. “Today, Chile is a country much more unified, stronger and much more respected and loved in the entire world.” Unlike the burst of media interest in the Chilean miners’ plight, Greece has been the subject of prolonged media exposure this year. There were roughly 60 journalists for each miner at the San Jose mine and at times Athens has felt a bit like that with the international media probing every aspect of Greece’s misfortune. It has been uncomfortable but, as Chile has shown, there is no bigger news in the world than a catastrophe being turned into a triumph. “For the moment, Chile has received a reputational windfall,” wrote Mary Dejevsky in UK newspaper The Independent. “It has a chance to join countries such as Canada and Finland that genuinely do punch above their weight internationally by virtue of the benevolent impression they create on visitors, their quiet diplomacy and the competence with which they seem to run themselves.” A trickle of positive comments about Greece’s economic reforms has already begun but it can’t compare to the cathartic effect that a deluge of praise would have if the country completes the metamorphosis from pariah to shining example.

Chile experienced a moment of salvation when the miners were lifted safely from the depths of the Atacama Desert. “It started as a tragedy but ended as a blessing,” said Pinera. As a result, the South American country can now look to the future with more hope and its spirits lifted: Viva Chile. For Greece, redemption still seems to be at the end of a long, dark tunnel. It’s now clear that grabbing a lifeline will not be enough — the country needs togetherness and belief to haul itself into the light. Only then will it be in a position to turn to the world and shout: “Viva Grecia.”

This commentary was written by Nick Malkoutzis and was published in Athens Plus on October 22, 2010.

Barbarism at the gates

Illustration by Manos Symeonakis

Politicians often say things during election campaigns that they later regret. Looking back on his first year as prime minister, George Papandreou must be wondering what possessed him ahead of last year’s October 4 poll to utter – with excruciating regularity – the words: “The money is there.” Unless, of course, by “there” he meant in the back pockets of pensioners, civil servants, motorists and most middle and working class families that are now footing the bill for Greece’s economic rescue effort.

The money was never there and everybody, including PASOK, knew it. This didn’t stop Germany’s Werkstatt Deutschland organization from awarding Papandreou the Quadriga Prize for “Power of Veracity” on Sunday. The award, named after the sculpture of a horse-drawn chariot that sits atop the Brandenburg Gate in Berlin, was in recognition of Papandreou revealing the truth about the state of Greece’s public finances, which seems a bit like giving a lollipop to a child who admits its part in smashing a vase but only after discovering there was nowhere to hide the broken pieces.

Nevertheless, the trip to Berlin may have given Papandreou an opportunity to contemplate one of the other regrettable statements he made before last October’s election. “Socialism or barbarism,” the PASOK leader had said, echoing Marxist activist Rosa Luxemburg, a late resident of the German capital who believed adopting Socialism was the only escape from an unjust existence. Papandreou spoke in a slightly different context, arguing that the global financial crisis was proof that the capitalist model was unsustainable and that a center-left structure, with more emphasis on regulation and the state, should replace it.

However, 12 months on, his dreams of 21st century Socialism have vanished into the same vortex that is consuming the billions of euros Greeks are paying to prevent their country from going bankrupt. In the meantime, the threat of barbarism has become very real.

Some of the measures taken over the last 12 months were undoubtedly necessary and long overdue but the manner in which they are being applied and the IMF/EU market-driven philosophy that underpins them is brutal. While all eyes are trained on safeguarding financial capital, little attention is being paid to the negative effect on social capital.

The recent liberalization of the road haulage sector set a dangerous precedent. Apart from the truck owners themselves, most people would argue that time had run out on the closed-profession privileges the truckers enjoyed for so many years. Yet, it’s unsettling that the forced end to their lengthy strikes – first with a civil mobilization order in the summer and then with legislation threatening truckers with jail sentences in September – should be met with such satisfaction within the government and among some of the public. After all, this was a failure of democracy and had a distinct totalitarian element to it. PASOK backtracked on its promises to the truckers, one of the many groups that have been pampered by successive governments, and then portrayed them as being unreasonable and obstructing progress. Unable to engage in debate and then formulate policy – functions of the democratic systems we uphold and the governments we vote for – PASOK rammed the liberalization through Parliament and down the throats of the truckers. The government’s heavy-handedness throughout the dispute does not bode well for the future.

Greece’s experience is being replicated in other European countries, such as Ireland, Portugal, Spain and Britain, where citizens are being presented with a fait accompli. Their governments, regardless of political hue, are telling them that austerity measures must be adopted without question. In doing so, elected politicians are not only perverting the very system that put them in power, they’re also sowing the seeds of deep discontent as people grow increasingly aggrieved with the impact of the austerity measures and the lack of alternatives.

The United Nations work agency, the International Labor Organization (ILO), warned last Friday that the global employment market, where 22 million new jobs are needed, would not recover from the crisis until 2015 and that this would only fuel social unrest. “Fairness must be the compass guiding us out of the crisis,” said ILO director general Juan Somavia. “People can understand and accept difficult choices if they perceive that all share in the burden of pain. Governments should not have to choose between the demands of financial markets and the needs of their citizens. Financial and social stability must come together. Otherwise, not only the global economy but also social cohesion will be at risk.”

While scenarios of popular revolution are pure fiction as far as Greece is concerned, the country is no stranger to social unrest. The longer that measures which impact on people’s viability are passed one after the other, with no discussion or effort to present a vision for a better future, the more resentment will fester and the threat of a backlash will grow.

The possible breakdown of social cohesion creates the conditions for another, even darker, reaction to austerity. While understandable to some extent, the glee some citizens and commentators expressed at the abrupt way the government dealt with the truckers is a tell-tale sign that, given the current circumstances, a larger proportion of the population than usual thinks the use of force – psychological or physical – is acceptable. The danger is that the longer the government depends on this tactic, the more people will become accustomed to it and start believing it’s a perfectly legitimate way to run a country and get things done. In Greece, where society has been fragmented for many years thanks to each group pursuing its narrow interests, the flourishing of this mind-set will lead to even graver polarization.

Hungary, which was discovered in 2006 to have been fiddling its economic figures and had until this year been applying the austerity measures prescribed as part of the rescue deal it signed with the IMF, offers a salutary tale for Greece. Earlier this year, the extreme right-wing Jobbik party won 850,000 votes in the parliamentary elections on the back of a campaign that targeted the Roma but also played up the failures of the traditional guardians of power in Hungary, the conservative Fidesz and the Hungarian Socialist Party (MSZP). “The main factor behind Jobbik’s rise has been its ability to make political hay out of popular demand for extremist policies,” writes Peter Kreko for the Political Capital think tank in Budapest. “The primary driver behind extremist sentiment is a decline in public morale: Many Hungarians feel they can no longer trust the political elite or their governing institutions. The other fact is a rise in prejudice, especially toward foreigners.”

So, as Greece takes stock a year on from when Papandreou made his foolhardy election campaign pronouncements, it can draw some timely conclusions from its own and others’ experiences. It’s clear that the money is not there, nor is Socialism. As for barbarism? It’s creeping through the gates.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on October 8, 2010.

Waiting for the great leap forward

Illustration in linocut by Manos Symeonakis

To paraphrase the Chinese proverb, if you wait on the banks of the river long enough, your enemy’s corpse will eventually float by. This essentially reflects Greece’s longstanding philosophy on attracting foreign investment: If we sit back and do nothing, then someone, somewhere, will sooner or later want to give us some money.

At this most crucial of times, it’s the Chinese and their capital that are floating into view but Greece is still having difficulty shaking off its passiveness. It’s perplexing that just a few days before the Chinese Premier Wen Jiabao visits Athens accompanied by Captain Wei Jiafu, president and chief executive officer of the China Ocean Shipping Company (COSCO), the government is allowing creases to form in the fabric of this new relationship rather than ironing out any problems.

COSCO, the world’s second-largest shipping company, is about to complete the first 12 months of its 35-year, 3.5-billion-euro concession deal for one of the container terminals at Piraeus. Secured under the previous conservative government, the momentous deal has been threatened by this administration’s intractability and incompetence.

State-owned COSCO was due to take over control of Piraeus’s Pier 2 on October 1 last year but this was delayed for a month because of a strike by port workers who’d been told by PASOK that the contract with the Chinese would be renegotiated if the Socialists came to power after the September elections. This, of course, never happened as PASOK realized it risked entering a legal minefield and blowing Greece’s reputation to smithereens.

Having shown patience with the strike, COSCO, which has hired 300 Greek workers of its own this year, is now in dispute with the government over its failure to give back to the company some 20 million euros in value-added tax (VAT) payments. The delay is due to the Finance Ministry holding back a series of VAT returns for fear of creating a gaping hole in public finances. Although 20 million euros might seem a drop in the ocean for a huge company like COSCO, it’s the difference between the firm showing a profit or a 10.6-million-euro loss on its investment in Greece for the first six months of this year.

Also, according to reports, the Chinese side has expressed concern that the Piraeus Port Authority (OLP), which operates the other container terminal, is not competing on an equal footing with COSCO and is benefiting from the privileges it’s afforded as a state-owned company. The Chinese were also reportedly surprised by the Thessaloniki Port Authority’s (OLTH) announcement this month that it would hold a tender in October for the 220-million-euro contract to expand one of its quays. Possible Chinese investment in Thessaloniki port was expected to be one of the items to be discussed by Wen and Prime Minister George Papandreou on October 2.

Wen’s trip follows a May visit to Greece by Captain Wei, when the government beseeched him to invest in anything that moved, including the Hellenic Railways Organization (OSE) – although given the slowness of its trains, it’s debatable whether they do actually move. Wei politely pointed out that COSCO was a shipping company, not a railway, electricity or any other kind of firm but promised to convey to the Chinese government Greece’s supposed willingness to do business. This precipitated China’s Vice Premier Zhang Dejiang’s visit the following month, when he signed 14 investment deals.

So, having cultivated this budding relationship with China, Greece would be expected to prove there is fertile ground for further cooperation. The situation doesn’t require anyone to bend backward but simply to project forward and envision the benefits to be gained from enticing further Chinese investment. COSCO is set to spend a further 500 million euros on improving Pier 2 and building Pier 3 at Piraeus and is interested in investing more than 150 million euros in constructing a logistics terminal in the Thriaseio Plain, west of Athens, to transport goods to the rest of Europe. So, by the time the Chinese premier visits next week, Papandreou and his team have to be clear in their minds about what they want to gain from this relationship and how they can gain it. The visitors from China will have little appetite for any more of the shilly-shallying of the past few months.

Some might argue that if the Chinese were to withdraw their interest, then someone else would step in to fill the void — but Greece has a miserable record of attracting foreign direct investment and the current economic conditions have left few major players in the game. Papandreou spoke this week to wealthy Greek-Americans in New York but they cannot match the financial muscle of the Chinese. Greek-Americans have repeatedly shunned invitations to plough their money back into Greece, which suggests they know their homeland and its traps too well and are reluctant to get involved in political games that only outsiders like the Chinese – who did a deal with the New Democracy government but executed it under the PASOK administration – can avoid getting tangled up in.

Others might express concern about the apparent disparity in the way that China and Greece, as a European Union member, view work-related issues like safety and laborers’ rights. After visiting the Piraeus port earlier this month, the International Dockworkers Council (IDC) described the employment conditions at Pier 2 as “substandard.” IDC complained that COSCO is employing “union-busting” tactics and endangering workers’ safety. Presumably, the Chinese company would respond by saying that it successfully manages ports in other EU countries such as Naples in Italy, Antwerp in Belgium and Rotterdam in the Netherlands without any labor problems. Also, although worker safety is often compromised in the rapidly developing Chinese economy, the Communist Party has shown a growing willingness to address the problem. Deaths in Chinese mines were down from almost 7,000 in 2002 to about 2,600 last year, according to The Guardian newspaper, and Wen recently ordered pit bosses to go down into the shafts with miners in a bid to encourage safer conditions.

Skeptics will also emphasise that the line between a sell-off and a sell-out is extremely thin. COSCO, for instance, has been linked with a 500-million-euro investment in Crete, where it has plans to build a container terminal at Tymbaki, on the island’s southern coast. Locals, who have protected the area from excessive tourist development, oppose the scheme as they fear it will damage the local environment, including endangered sea turtles’ nests. It’s a conundrum for the government: Greece cannot afford to shun foreign investment but is it willing to pay the price of investment at all costs?

These are all questions Papandreou and his ministers will have to be in a position to answer in their talks with Chinese officials next week. Other countries came to terms with these dilemmas many years ago but, as with so many things, Greece is only now facing up to the rigors of reality and time is not on its side. The late Chinese leader Mao Zedong wrote in one of his poems: “Time passes. Ten thousand years are too long. Seize the day, seize the hour.” If Greece doesn’t do so now, it’s possible the only thing floating by will be another wasted opportunity.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on September 24, 2010.