Midnight at the oasis

It’s a measure of the absurd situation that Greece and its lenders have got themselves into that it’s highly doubtful whether there is a single Greek MP or European official that believes the austerity package due to be voted through Parliament around midnight on Wednesday will contribute towards the country’s recovery.

Apart from the dewy-eyed optimists (it would be a shock if there are any of those left), there is unlikely to be anyone who has confidence that the 13.5 billion euros of spending cuts and tax hikes over the next two years will play a part in halting Greece’s incessant decline.

The 2013 budget foresees a primary surplus – the first in over a decade – of 0.4 percent of GDP on the back of the latest measures. While achieving this surplus is one of the milestones on the road to stability, there are serious questions about how it should be achieved. With approximately 9.5 billion euros of measures (equivalent to 4.5 percent of GDP) to be implemented next year, the program of cuts demanded by the troika makes a mockery of assertions by leading economists and even the International Monetary Fund managing director Christine Lagarde that frontloading will end up being destructive, not just counterproductive.

The fiscal multiplier for the spending reductions means that the Finance Ministry’s forecast for a 4.5 percent of GDP recession next year appears unjustifiably hopeful, as does the prediction that unemployment will be lower in 2013 than it is now. Economic output is due to travel back in time to the same level as 2004, while public debt will continue to be propelled forward, reaching the astronomical level of 189 percent of GDP.

The more one looks at the implications of what Greece is being asked to do, the more it begins to look like a suicide note rather than a recovery plan.

Yet here we are, being dragged towards this most unenviable option with no volition but with no alternative to offer either. It’s the story of the last three years that successive Greek governments, lacking the wherewithal to come up with their own answers, have relied on the supposed munificence of its lenders to guide them out of this crisis. The result is that both sides find themselves further from a solution than when they started.

Like camel trains traversing the desert in the hope their guide will lead them to water, each government has brought bills containing legislation it has agreed with the troika to Parliament with the promise they hold the key to salvation. Each time they have been approved, each time they have divided the House and Greek society, each time the economic fundamentals have worsened and society’s tolerance levels have been eroded. The caravan’s hopes of finding an oasis have turned to dust.

While the fiscal consolidation has always involved pain, there has been the opportunity to counter this somewhat with the soothing effects of structural reforms. Even this has proved a missed opportunity. Both Greece and the troika failed to appreciate the importance of pushing hard from the start reforms that would make for a more equitable society, changes that would, for instance, tackle cartels, remove bureaucratic barriers and improve public administration. Here too they have done what comes most easily: cut. Labor rights in Greece have been torn to shreds, the health, welfare and pension systems are being dismantled and education is withering.

Any progress that has been made – and there has been some – has been lost in the fug created by the lingering sense of unfairness about who is bearing the brunt of these changes and the growing feeling of desperation that each memorandum and each mid-term fiscal plan brings.

So, we reach today, when a three-party coalition that started off with grand designs for “renegotiating” better bailout terms with the troika finds itself having to swallow a pill more bitter than it could have imagined. It is indicative of the ground that the government has conceded over the past few weeks that Prime Minister Antonis Samaras initially insisted that wages of public servants earning “special salaries”, such as those in the army and security services, should not be reduced. His government will now vote to cut them by up to 30 percent.

Samaras will just about manage to hold his party together for the vote but PASOK has already begun to implode. Its MPs, like passengers dumped by a bus in the middle of nowhere, are clinging to each other for safety but it can’t be too long before they each decide to start wandering off in different directions. Democratic Left, meanwhile, is torn between the responsibility of governing and the abandon of opposition.

It is testament to the troika’s intransigence that this unique construct in Greek politics, a three-party coalition made up of disparate groups and elected following two divisive votes in the fifth year of Greece’s recession, should be pushed to the edge so quickly. Its synergy has been lost, its belief has been crushed.

This sense of helplessness has pervaded most of the political system. SYRIZA’s Alexis Tsipras calls for new elections in full knowledge that his party would be flattened by the weight of expectation and unmanageable circumstances if it came to power now. This was reflected in the recent comments of one of SYRIZA’s leading MPs, Panayiotis Lafazanis, who admitted the leftists were not ready to govern. The Independent Greeks and the Communist Party, meanwhile, have lost any foothold they had in the political debate and have been left flailing their arms in the hope someone takes notice.

We are fast approaching the point were Greek society will also feel utterly trapped, devoid of any hope that there is a way out of this situation. With one in four unemployed and the economy certain to shrink further, there is little left for people to cling on to. In terms of structural reforms, the current climate means that all people see are the onerous terms of the next package: the retirement age rising to 67, public servants salaries being slashed further, labor laws being dismantled, pensions being reduced and healthcare costs increasing.

Even Tuesday’s sparsely-attended anti-austerity protest in Athens was infused with an air of resignation. It feels as if the whole country is poised to give up hope.

In his victory speech on Tuesday, US President Barack Obama described hope as “that stubborn thing inside us that insists, despite all the evidence to the contrary, that something better awaits us so long as we have the courage to keep reaching, to keep working, to keep fighting.” Well, that noble sentiment is being drained from Greece’s lifeblood and the approval of structural reforms and spending cuts at midnight will not restore it.

In fact, it is difficult to see what can be done within the country that will revive hope. Reforms will still be implemented at a slow pace by the crumbling civil service and fading political class, public finances will continue to be brought in line according to the most abrupt fiscal adjustment conducted by any OECD country and healthy businesses will strive to remain afloat in a worsening environment.

This leaves Greece’s lenders, the bane of many Greeks’ lives, as the only source from which hope can be derived. The next bailout instalment, which will allow the bank recapitalization process to be completed, will only provide temporary respite. A move to extend funding for the Greek program combined with a decision to make debt sustainable seems the only way that people can be convinced there is a long-term aim to the current pain. A plan to reduce public debt so future generations do not face the same problems must now be the main driver behind Greece’s adjustment program but it has to be accompanied by measures that alleviate the agony in the short-term. Overcoming the European Investment Bank’s inexplicable obstinacy with regard to providing financing for Greek businesses, for instance, is just one positive step that could be taken.

By passing through Parliament the latest austerity and reform package, Greece will be doing all that has been asked of it by its lenders, even at the risk of political and social collapse. As of Thursday, the onus will be on the IMF and the eurozone, in particular, to provide a solution that keeps Greece in the euro and gives its economy a chance to recover. Otherwise, darkness will descend on Wednesday night and the oasis will be nowhere in sight.

Nick Malkoutzis


53 responses to “Midnight at the oasis

  1. Nick:

    You are about 8 months late. The crime was committed with the PSI which destroyed both the Greek economy beyond repair and removed any credible options other than to follow the German nonsense.

    But this is the price Greece has to pay for having financially unsophisticated people negotiating issues beyond their competence. The mess in which Greece finds itself now is the result of a political fight where Greece has been outclassed.

    The fact that Greek citizenry has reached its limit, or that the Merkel inspired nonsense is not going to work out are purely secondary. The primary issue is that Greece lacks the talent to defend and promote its own interests where it counts the most: in the arena of international opinion, in the halls of Brussels and anywhere else other than the irrelevant domestic Greek politics.

  2. This makes me angry even though he has a good track record as a conservative journalist. A real puff piece. I hate people that accept the status quo as if carved in rock. He’s just too close to it, and of it. Dean Plassaras comment is 100% correct re talent and competence.

    • Eleni, you are wrong to say that I accept the status quo. I am simply describing the mood at the moment. I’m sure you’ve noticed the malaise that’s set in. It has become clear that at the moment, there is little a hamstrung government and an increasingly dispondent population can do to change this. That’s not the same as saying it can never change or that we’re doomed. In fact, I conclude the piece by pointing out that a courageous move by the eurozone could change the atmosphere.

  3. Nick:
    Let me preface my remarks by saying that I am English (with all the inbuilt views and prejudices that come with it) I have lived in Greece for just over four years, I came for the tranquillity, immaculate timing I know! I felt utterly depressed on reading your article. You accurately highlight the traumas and tragedies that society is facing. And it is true that the systemic flaws that exist in the Greek State machinery and the archaic bureaucratic systems that seem to permeate civil society are largely as you describe. Yet, the solutions to Greece’s ills are not to be found by following the market driven path followed by the country of my birth. It is true that by doing so Greece would be given a slightly longer leash to play on by its economic masters. But to continue to adopt the model of change proscribed by the IMF and the European Banking Institutions will result in social catastrophe (another good Greek word!) and rip the very soul out of this country. One example of this is that Greece still has at its heart the notion of family. Not simply husband, wife and children but critically here within Greece you have held on to the notion of an extended and wider family. Your aged relatives are looked after within the family and respected. Greek kids of all ages are vastly more respectful and polite in their daily lives than their English counterparts. Stereotypes I know some will say but that doesn’t lessen the truth.
    Whatever the solutions Greece finds it needs to hold on to those things which elevate it. Things that become increasingly difficult to maintain when everything and everyone becomes a commodity.
    Why does your article depress me so? You are an intellectual thinker as well as a journalist, there are many like you. Journalists, Academics, Artists ,who will clearly have varying shades of political beliefs though not often to the extremes of left or right. Such a group should come together and form an intellectual non aligned commission that not only analyzes the problems, but also proposes reasoned out solutions. Such a commission could create a new manifesto for Greece that would resolve the fiscal challenges without stripping its citizens of dignity and making its workers into unrepresented serfs.
    It is for you and your peers to formulate these models for change not abdicate it to the next generation. If people of reasonable intent and intellect came together and began to set out tangible ways forward both immediate and long term. People, who are not running and therefore not constrained by running for political office could shape a ‘great debate’ not just in Greece but in the whole of Europe where its citizens grow more and more weary with the failure and vision of their political leaders.

    • Thanks Steve. Sorry to depress you, it wasn’t my intention. I simply felt that at this point it’s important to let people know that there are deep and growing problems in Greece that won’t be solved by Wednesday’s vote in Parliament. That’s not to say there is no way back but the longer we leave it, the longer we focus on just the fiscal, the more damaging the impact will be if the wheels come off. In this respect, thanks very much for your suggestion.

  4. Another interesting piece Nick. It is a depressing picture, just as it was when Karamanlis and Alogoskoufis were sticking their fingers in the cookie jar.

    One question though. Since Papandreou lifted the lid in 2009 on the extent of Greece’s economic crisis, has any government or outside agency ie the troika actually done anything positive? By that I mean have they done anything other than cut and tax? Have they created anything? Built anything that would allow Greece to start to put together a sound industrial base for the future? Is the money beçing handed to Greece in loans simply being used to pay back loans or is any of it actually being used to build a future?

    If not what is the point of Greece going on like this?

    • Welcome to the discussion, Barney. The European Comission’s Task Force for Greece, which is completely seperate to the troiks, has played a very constructive role. It has two purposes: firstly, to work with the Greek government to secure the release of a greater share of the structural funds allocated for Greece. This has already had an impact – I think Greece’s absorption rate was the highest in the EU last year. The other feature of their work is to provide technical assistance for reforms. This is true European integration and solidarity ast work. For instance, French experts are helping the government in Athens evaluate its civil servants. There has been significant work in other areas too.

    • > outside agency ie the troika actually done anything positive
      They persuaded foreign lenders to give more money to Greece (that probably will be lost for itslenders). And we speak about tens of Billions of Euro.
      So they abandoned the total financial bancrupt and breakdown of Greece.

      Of course you may question if a fast and hard bancrupt would have been better or worse than the “step by step budget cuts” of the last years resulting in a sliding degressional path.
      I would be really interested about this discussion, and the propable Greekoutcome (Total Anarchy, Military Coup, Communist Revolution or simply a Rebuilding in the Iceland style), because I could imagine Greece will have to face that challenge in the future too.

      There is always an alternative route. But that might be even more unpleasant than the already annoying presence.

  5. A very annoying piece, mostly due to the mix of lack of balance and sentimentality. “Any progress that has been made – and there has been some”

    yes, there has been some. Just to give four examples: How about mentioning tax simplification, or finally making a move on direly needed administrative reform (ending “job-for-life”)? Or making job-creation easier, or the labour force more flexible? Because that’s what redundancy payments capped at 12 months, or notice periods reduced to three months, actually do (and they’re standard, in europe). And yet you, an economically literate journalist , in a right-of-centre paper, describe as “Labor rights in Greece have been torn to shreds”,

    You must know the effect of those things on the rate of job creation. So why not say them? Why just buy in to the left-wing propaganda?

    Yes, the coalition does appear to be in tatters, at having finally (hopefully) actually passed structural reforms that have been promised by greek governments since long before this crisis (as Samaras correctly said, today). It’s a pity they had to be forced to the brink of bankruptcy and disintegration to actually pass them, but there it is.

    You want to look for sources of hope? You’re right to. So How about looking at what you write? But just to start you off:

    If they get the bank recap right (and that may mean “resolving” some non-viable greek banks), then greece only has to find 5% own financing for whole heaps of money – that hasn’t been fully drawn down for years now from EIB and EU Structural Funds. With funding, and lower job creation costs, greek entrepreneurship can do the rest. The country has the structural basis to actually reform revenue collection, gets an awful lot of valuable technical assistance for free.

    Oh yes, and prices can finally start to come down. nd in case you hadn’t noticed, the german media and the minor members of Merkels coalition have shut up about greece. Germany, too, has a learning curve, that it’s had to climb.

    Why do you have to rely on foreigners for hope, too? Greece has got a lot going for it.

    • Richard, you are clearly not familiar with my writing. Please take time to look at what I’ve written in the past and you will see plenty about the things have achieved – particularly, as a response to the impression abroad that nothing has been done in Greece.
      Clearly, though, each piece cannot be the same and the point of this particular op-ed was to make readers aware that behind the “Measures past by wafer-thin majority” headlines, there are some very serious problems that require urgent attention.
      You make some good points about where hope can be derived from but I am reflecting the mood in the country as a result of the immense strain that the political system and society has come under. The reality, as I mention in the piece, is that few people have the disposition at the moment to see the positives. It is important to turn this around. The point I am making is that there is little that can happen in the country in the short-term to transform the mood. A bold gesture from Greece’s lenders, however, could have an impact. That’s not relying on foreigners, it’s simply recognizing reality.
      With regards to labor rights, I refer to what has happened over the last two years, not just the measures in this package. As I have worked both in the UK and here, I can tell you that my rights as an employee in Greece are now non-existant compared to those I had in London. You mention making redundancy easier. Even in the UK, though, you have to follow certain rules if you are going to fire someone and there is always the option of mediation, which is also available when unions and management don’t agree. None of this exists in Greece. The rollong back of labor rights has acted as a subsitute for reforms in other areas.

      • Actually, I am familiar with your writing. I’ve been following what you write for over a year now. Your writing is often excellent.

        This pessimism, though. It’s a self-fulfilling prophecy, and very dangerous. I don’t doubt you’re reflecting the wider mood accurately. But why are the media so relentlessly negative on their own government?

        Some of the reforms in there are historic. The greek finance ministry might, just might, actually be about to get a grip on state spending in the ministries and external state-funded bodie!. Greece has never had that before (check the OECD report on greek governance, if you don’t believe me, or pretty much anything written by the Ministry of Administrative Reform – there’s going to be a lot more in Greek, than there is in english, after all, but I’m sure you know it already). That’s why the cuts in the past few years keep falling on pensions and social programs. Because they don’t have the administrative capacity and budgeting information to target cuts properly, where they won’t harm demand and drive GDP down further.

        And yet, nobody even mentions that positive change? Driven through in the teeth of bitter and entrenched opposition, at risk to their political careers (or possibly from a lot of the stupid rhetoric floating around, their lives). How about saluting their political courage?

        Heck, I can’t stand Samaras and Venizelos either. But when they do something hard, but right, it deserves acknowledgement.

      • Roger, thanks for your response and your interest in my writing over the last year or so.

        I think you’re misinterpreting the piece if you take it as a criticism of this government or the structural reforms. As I mention, this government will do what it can to implement those reforms under very difficult circumstances but there is no way this will be anywhere near enough.

        When the recession is so deep, when the austerity measures will be felt so widely and when such a large part of society is under such great stress (25% unemployment, remember) you need a game changer; something that will allow people to look beyond the next few months, when they are by and large in for more suffering, and see that better days lie ahead.

        At the moment, the only thing that can provide this is a comprehensive settlement of Greece’s debt sustainability. This will allow the coalition government to claim a breakthrough and people to realise that they can lay better foundations for future generations.

        Without this, this government won’t survive.

        So, it is correct to acknowledge the positives (primary deficit almost at zero, current account deficit falling, tax collection improving, reforms starting to have an impact, etc) but that doesn’t mean you take your eye off the danger of total derailment in the near future.

        If a child manages to swim halfway across a swimming pool, you should applaud it for its achievment. But if you see that instead of swimming, it is starting to flail its arms to prevent itself from drowning, then it’s time to speak up and make everyone aware of the danger.

      • > Heck, I can’t stand Samaras and Venizelos either. But when they
        > do something hard, but right, it deserves acknowledgement.
        Good point! If you want to raise up politicians to make politics with sustainible effect, so praise them if they did so.
        Probably with these reforms they subscribed the end of their future political career and even of their political parties. It requires courage to execute unpopular, but nessecary reforms (A courage Karamanlis totally lacked and Samaras found very late) and that courage deserves some praise too.
        Or, if it deserves blame, please show us a probably better way out of the muddle, out of the dependency to foreign lenders and foreign money.

      • Richard:

        What are you talking about?

        Are you asking Nick to become a German collaborator?

        And what about Samaras and Venizelos? What have they achieved? The only thing they have achieved is an active participation in a string of failures in aiding and abating the enemy.

        Do you have to be a political animal to understand that we have had 3 successive Greek governments -in less than one year -get burned because they adopted the German line? The formula is very simple “you collaborate and then you die as a politician”.

        Which part of there is no political future for those who collaborate don’t you understand?

        And why don’t you understand that your praise is basically a mark of death?

      • Roger:

        What’s wrong with you?

        Have you heard of the Pottery Barn rule? That when you break something you own it?

        German idiocy has broken the Greek economy. As a result, Germany pays to restore the damage and then some.

        Why would it be our task to find an alternative? When a guest burns down half of your house due to extreme ignorance/incompetence, what is the alternative? To forgive the stupid guest and then undertake the repair of your house on your own blaming yourself for the other person’s stupidity?

        Have you heard of justice? and damages?

      • > German idiocy has broken the Greek economy. As a result, Germany
        > pays to restore the damage and then some.

        Sorry Dean,
        only the Greeks could brake Greece, only the Greek did brake Greece.
        By trying to play the blame game towards Germany and Northern Europe, Greece
        – looses valuable time it could have used better to restore Greece.
        – comes to the risk of annoying willing lenders like Germany and other European Countries
        – failes to analyses the reasons why it got to the mud and how to avoid it in future
        – will not get on a path out of its troubles

        To take your picture: Greeks have to build up their house by their own – or stay living in tents, if they prefer ignoring realities forever. Do you love tents that much?

  6. This would be significant if true:

    And here’s more talk about possible Greek measures, this time courtesy of the Wall Street Journal:

    DJ FX Trader@djfxtrader

    Euro Zone Considers Cutting Rates on #Greece Loans to Around 0.8% Above Euribor, Sources Tell WSJ

    8 Nov 12

    DJ FX Trader@djfxtrader

    Our Costas Paris reports: Euro zone considers cut in interest rate on first #Greece bailout, doubling repayment period to as much as 30 yrs

    8 Nov 12


    • I am not sure which Euribor rate will be used, but if the effective rate of Euribor + 0.8% < 2% then this could result in savings in debt service, but only for the initial Greece bailout which roughly 1/3rd of the total debt. Obviously we need more info to judge.


      • yes, these eurobor rates are really confusing! As far as I can tell from searching “public debt bulletins” at http://www.minfin.gr, the bailout uses the “6month euribor rate + spread”. But there’s three different 6month rates too! http://www.euribor-rates.eu/euribor-rate-6-months.asp

        The spread is 150 base points currently (from the deal in february). So on the basis of the “1st day of the year” 6month euribor, currently it’s 1.6 + 1.5 = 3.1% interest. If they were to cut the spread to 0.8 it would be 2.4%. (Below EZ inflation = lending at a real loss. And yet people still talk about the interest rates being punitive).

  7. @ Nick Malkoutzis:
    If I read this blog text and the critiques you answered, then I come to the conclusion that the way you expressed your ideas in the blog text is not really understandable for me and other people with a different culture.

    If you intend to say “It has become clear that at the moment, there is little a hamstrung government and an increasingly dispondent population can do to change this.” you absolutely must use such words from the beginning.

    Same to the following: “I simply felt that at this point it’s important to let people know that there are deep and growing problems in Greece that won’t be solved by Wednesday’s vote in Parliament. … the longer we leave it, the longer we focus on just the fiscal, the more damaging the impact will be if the wheels come off.”

    You are fully correct that the fiscal measures are not enough. But if you intend to improve the understanding of the population, you must give understandable and detailed advice how to proceed. I tried longtime to find a publication of a list of what’s to be done in order to reform the Greek administration. Why does your blog or Ekathimerini not come up with a series of articles that shows it in detail?

  8. Dean,
    “Are you asking Nick to become a German collaborator?”

    What, pointing out when politicians act courageously = “german collaboration”?

    You need to get the WW2 / civil war mentality out of your head, sorry.

    • “Courageously” according to whose definition?

      What is so courageous about taking decisions affecting OPM (other people’s money)?

      Of course it’s a form of disgusting German collaboration. Who is black mailing here?

  9. Agreed, taking European and German OPM is not really courageous.
    But what about preparing for the time it stops flowing?

  10. France? I’m strongly impressed about the OECD-chrystal ball showing up to 2060. I am mainly interested about Europe surviving the next five to 10 years.
    And I seriously doubt Germany imploding in that time…

    • Roger:

      You tend to underestimate the vulnerability of Germany by framing it as an island.

      All it takes is a coordinated effort by major credit agencies to downgrade Germany to a B something and the game is over for Germany. Your borrowing costs will go through the roof and the resulting damage to Germany in economic terms would be beyond description.

      • > You tend to underestimate the vulnerability of Germany by
        > framing it as an island.
        I dont think that I do so. But I don’t consider Greece as a relevant commercial partner for Germany.
        Some Facts: In 2011, Greece was on place 38 for Exports and on Place 49 for Imports, regarding to the German Statistic Office: https://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/Aussenhandel/Handelspartner/Tabellen/RangfolgeHandelspartner.pdf?__blob=publicationFile
        And with the Asian Economic Growth, the relevance of asian countries is rising, not that of Greece.

        Germany and Europe want to help Greece with money to get on their feets again, and it hopefully pushes Greece to introduce reforms that inables it to stand on its own feets soon. But it is not doing so by reason that Greece were a trading partner it can’t afford to loose. That may be greek pipe dreams, but they are as far from reality as was a Romney landslide dreamed by American Republicans.
        So Greece can (legitimated) hope for payments due to solidarity, but not for payments due to blackmailing of its economical importance.

  11. Dean: You are true: If Germany don’t take care about its budget, there is a real danger it will have to get downgraded sometime. The very low dept time want last for long.
    If I would take your words dead seriously one logic consequence would have to be for Germany: Stop flowing lost money to Greece and use it instead for reducing the german deficit and as soon as possible pay back german depts.

    Is that your advice for Germany to avoid increasing borrowing costs?

    There are many Germans seeing that risk, and it’s a main reason the ever rising subsidies for Greece are quite unpopular in German population. And get even more unpopular if a main thank adress from Greece is blackmail and expression of hate.

    • Correction : “The very low interest time will not last for long.”

    • Roger:

      You are farming the issue on the wrong basis. The issue is not whether Germany tries to save itself via abandoning Europe and by economizing its cash flow. Already all credit agencies have come to the conclusion that the European mess is a 100% German cost. So the downgrade is just a matter of time. It’s not a question of “if”, rather a question of “when”.

      The issue that Germany faces today is that of magnitude. The more Germany delays action the more the costs compound.

      Therefore the issue for Germany is as follows: either you pay today or later at a much higher amount,

      There is no way for Germany to avoid either the present or future such cost. Even if German adopts the Deutsch mark, the rating agencies will strike regardless. The credit agencies don’t care what currency Germany is using. They only care to punish the guilty and they have already decided that Germany is the guilty party.

      • > It’s not a question of “if”, rather a question of “when”.
        Thats quite good possible.

        > Therefore the issue for Germany is as follows: either you pay today
        > or later at a much higher amount
        Indeed, Sooner or later Germany will have to pay much higher interest rate anyway, regardless of subsidizing Greece now.

        Both arguments don’t tells me, why Germany should pay for a Greece full of Hate and Blackmail toward the lender and without the motivation to stand of their own feet.
        They sound more like a further motivation for the argument of “Better stop throwing wasted money to Greece now, Germany (and other European countries) will need it for their own soon enough much more”. This argument is winning popularity in Germany ever more, so Merkel has no other chance than play act as being reluctant giving Greece too much money.
        Following your arguments and your logic I still miss any point, why Germany should continue subsidizing Greece. All your points come to a simple conclusion (that I don’t share, by the way): “Germany faces that big future riskis it has to better stop immediately wasting money by subsidizing Greece.”

        > The credit agencies don’t care what currency Germany is using.
        > They only care to punish the guilty and they have already
        > decided that Germany is the guilty party.
        Sorry, I have to disagree again. Credit agencies don’t care about guilt.
        They care about economic power and financial stability.
        Greece lacks both, due to its past failures.
        Germany (and other northern european countries) will start to lack it, when it subsidizes Greece and Soutern Europe more than it can burden. So it has to take care for not getting overburdend.

      • Roger:

        When you say “why would Germany pay for Hate and Blackmail” is not a logical argument at a country level. That’s the logic of a spouse who says “you have to be nice to me since we both share the same roof”. In other words an emotional argument.

        Germany has to pay in the end, regardless, because there is no one else to do that in Europe. The US and the BRICs will not pay for Europe, only Europeans will do that. Germany is the last resort payer for the entire European crisis.

        Therefore Germany’s choices are:

        1. Either you take care and fix the problem early and at a total lower cost to Germany, or
        2. Let the problem fester thus costing Germany a lot more down the road.

      • > The US and the BRICs will not pay for Europe
        I agree.
        > Germany has to pay in the end, regardless,
        > because there is no one else to do that in Europe.
        I agree with the second part of the sentence.
        For the first part: What makes you that shure that Germany will not also decline paying? What if Germany comes to the conclusion the is no (or not enough) reform and change in Greece so its time stopping to subsidize Greece for ever and ever? I think Germany was quite close to that decision in the last months.
        And with national elections and electon campaigns coming in the next summer I expect new and hard discussions, when there is not to see reforms and progress in Greece.

        > That’s the logic of a spouse who says “you have to be
        > nice to me since we both share the same roof”.
        But Germany only subsidizes Greece because they are still share the same roof and Europe and Germany still hopes, Greece may be able and worth and willing to stay there.
        But patience and good will with Greece is running low quite fast.

        > In other words an emotional argument.
        It is. Because emotion toward a united europe and goodwill are the main reasons Greece has not be dropped until now. But I’d not be shure that won’t change.

        > 1. Either you take care and fix the problem early and at a
        > total lower cost to Germany,
        > 2. Let the problem fester thus costing Germany a lot more
        > down the road.
        Fixing the German problems means reducing the national deficit, not increasing it by ever more and more subsidizing Greece. 😉
        Fixing the Greek problems – that can only the Greek society. Europe may help (if they think there is progress) but reforms und rebuilding have to be made by the Greek society and Government.
        I would be really happy to find a vivid Greek discussion about how to reform and rebuild the country and not only about how to demonstrate against reforms and how to blame game foreigners fpr own failures.

      • Roger:

        I found some sort of idealism and romanticism in your comments, therefore I will no longer attack.

        Turning into what we can do for Greece. Greece is very close to a primary surplus as figures for October (to be released this Monday) will show. And this is before this latest batch of very unfair and unpopular measures which look kind of unnecessary if the primary surplus progress is true.

        Here are the 3 things we need from Germany:

        1. Stop opposing the direct recapitalization of Greeks banks from the ESM/ECB mechanisms. Adding more debt to Greece makes no sense since are debt to GDP is approaching 190%.

        2. Stop opposing the OSI. This is a must and should be done ASAP.

        3. Lower interest rate on the Greek debt and release the EIB (European Investment Bank) allocations for Greece so that we shift the economy to a growth mode.

      • Dean:
        > Turning into what we can do for Greece.
        Good attitude!

        > Greece is very close to a primary surplus as
        > figures for October (to be released this Monday)
        > will show.
        That sounds good. It may strengthen the Greek hand by far, when it comes to dept reduction consultations. Greece can now poker to declare bancrupt.

        > 1. Stop opposing the direct recapitalization of Greeks
        > banks from the ESM/ECB mechanisms. Adding more
        > debt to Greece makes no sense since are debt to GDP
        > is approaching 190%.
        For the second part I join you. For the first part: I would really hate to approve just another bank-bailout. Maybe it is necessary, but I will really not like it.

        > 2. Stop opposing the OSI. This is a must and
        > should be done ASAP.
        I approve it has to be done. But I think it should be done at the end of the road.
        By cuttinng the depts the German government paid/guarantieed for Greece (so I understand OSI), the German Government has to tell the German public: “Guys, sorry, we did what we promised to never ever do, we bailouted Greece.” After that confession it will get much harder to convince the German public still subsidizzing Greece with more new money that probably will also not be seen back anytime. I dont know if the German Government will have the power required to do so or if they subsequently have to say : “Sorry Greece, we can’t give you new money”.
        So IMO a dept cut should come at a time when Greece wan’t require more fresh money from Germany, just at the end of the road.

        > 3. Lower interest rate on the Greek debt and release the
        > EIB (European Investment Bank) allocations for Greece
        > so that we shift the economy to a growth mode.
        Hmm, dept cuttin or lowering the interes rates both comes the same way, reducing the interest-burden.
        But maybe this proposal is a more elegant short-term-way to reduce it (the German public will get less furios about it), before the debt cutting like at your second proposal will be realised at the end of the road, reducing Greeks dept- and interest-burden in the long term.

        I am curious how the German government will react. Actually, the fresh Troika-report about Greek reforms is received quite well in the german media, increasing the public willingness to continue helping Greece.

      • Thank you, that reports sounds good for the first view. But I must confess that the automatic translater from Greek to Germany still is far from perfect, so I hope to be able reading these informations soon in English or German too. And I hope as well that independent persons call them to be trustworthy – the Karamanlis Government destroyed lots of trust to greek numbers. 😦
        At least it sounds as if the valley could have been reached. Thats important!
        As I suppose Greece won’t remain in the valley forever I hope the solid climb up may start soon. And I hope Europe will help Greece on that climb up.

  12. Hi Nick, you say that: “Even Tuesday’s sparsely-attended anti-austerity protest in Athens was infused with an air of resignation. It feels as if the whole country is poised to give up hope.”

    Do you feel that once the austerity measures due to kick in next year take hold it will increase the likelihood of further unrest or is the hunger for a fight diminishing by the day?

    • Hi Neil. Thanks for your comment. You must take into account that this is the third, and largest, austerity package since the start of the bailout. In itself it will have a huge impact next year but if you take into account the cumulative effect, it will be even greater. Coupled with the continued recession, the circumstances will be very difficult on a political and social level. There must be something to counterbalance this. The positive impact of structural reforms will not be enough on its own. There has to be a comprehensive decision on making Greek debt sustainable. This could help alleviate the building tension. Without it, I think we will see more pressure on the government. Whether this comes in the form of people backing opposition parties or whether there is an overspill into civil unrest is difficult to predict at the moment.

  13. Nick, I couldn’t agree more that there must be some counter-balancing ‘good news’ to prevent society from falling apart. I am just not sure that some abstract measure like making debt ‘sustainable’ (whatever that is) would do the trick. Frankly, I think even if all of Greece’s debt were forgiven, that would not immediately translate into new jobs. New jobs are tangible whereas the level of debt is not.

    I recently read about the Cosco-experience with half of the Piraeus port. I am not familiar with the details but it seems like this is one entire success story. It doesn’t seem to have created new jobs yet but as the Chinese invest 300 MEUR or so, there will be new jobs without a doubt. That would then be a real success story to me.

    Some time ago I read about Peter Economides’ plan for Ellenikon (I attach the post I wrote about it below). Now that is something which has fantasy (the emphasis being a bit on ‘fantasy’). Greece needs to create jobs in a hurry! That should really be the top priority. New jobs will only come with new investment and, I would venture to say, it should be foreign investment.

    Suppose Greece put together a package for foreign investors which offers those investors everything they desire. Suppose the package aimed at creating, in the short term, in a place like Ellenikon, say, 20.000 new jobs. Suppose Greece would offer to confirm to investors that they would put the package into a formal contract with the state so that investors have assurance. What would the investors say?

    I fear they might say: we don’t trust your treaty because the next government might disavow it and, secondy, how do we know that you won’t exit the Euro?

    This is where Greece could/should make a request to the EU which is of tangible value but costs the EU only a signature: I am talking about the EU’s guaranteeing the political risk of such contracts (including the convertibility risk). It is quite common in EU-countries that a government guarantees the foreign investments of national businesses. Typically, there are deductibles. In the case of Greece, the EU should be called upon to guarantee 100% of the political risk as described above.

    I know that the debt discussion is a fascinating subject and it seems that the smarter people are, the more they have to say about it. Except, that doesn’t create any new jobs. And to wait until a successful debt renegotiation translates into new jobs could be quite a wait. There has to be a new-jobs-offensive. Greece alone can’t handle that, in my opinion, in the present recession/depression. But Greece can set the proper stage so that, with the political support of the EU, new jobs come into existence.


    • Typo-free version.


      In case you are interested here are a few remarks:

      1. Economides is just a brand marketing guy. He does not understand the real estate business at all. If he could contribute something for Greece this would be in the area of tourism, but the fact he is not engaged by the Greek government ought to tell you something. Apparently he has failed to convince that he could and let’s leave it at that.

      2. The Hellenikon project (aka the old Athens airport) is a jewel piece of real estate with extraordinary potential if executed well. Not only it boarders some of the most expensive neighborhoods in Athens such as Kavouri, Vouliagmani, Glyfada but it has some breath-taking views of the Saronic Bay. This is clearly an area where housing would be at a premium (think of 20 – story high rises with panoramic views), but also a fantastic place with eclectic retail and office space. In other words an one of a kind mixed use environment.

      3. Already the Greek government has engaged a Spanish, award-winning architect who produced a rough master plan for the area, one that blends the various housing and commercial components along with green space(parks e,t,c) and other amenities.

      You can get some background info about the vision and the location here:




      And here is the Spanish, Jose Asembiyo plan:


      As you can understand, this is not a project for amateurs. It will probably require an approved Master Plan and then a phased take down of the various components by specialized firms (i.e. housing development firms, retail development firms and office development firms). These are usually different groups and the best in the business are in the US and UK. Greece has also some skilled developers in this area such as the Lamda Development group (owned by the Latsis family).

      The idea of Special Enterprise Zones does not apply here plus it is contrary to the Acquis Communautaire principles.

      The Hellenikon project is a long term project – over a span of 20-50 years until full execution – and is a project for the best talent (which by definition would exclude almost all of Europe). It’s success is guaranteed due to its superb location, but now is the worst possible time to establish pricing. The skill of a good real estate developer is to produce highest and best value. As such Economides has nothing to offer here except some exciting marketing concepts which by themselves and without the firm guidance of an experienced and higher authority (aka world class developer) are meaningless.

  14. Sorry to drop in on the conversation, gentlemen. Concerning Hellenikon, this is the award-winning master plan:


    Just thought I’d mention it…
    Regards, Alexandros

    • Thanks Alexandros.

      So, this is approved plan that any buyer has to abide by? Has there been an estimate of value based on the density shown? Does this plan increase or the decrease the 5 Bil. euro reported asking price for the entire piece?

      Thanks in advance if you know.

  15. Hmmmmmmm…..Has it really changed? I am not quite sure…

  16. Dean:
    Again, I don’t mean to hijack this thread. But I just couldn’t avoid reacting to something that unfortunately we hear or see too often in Greece (but in other countries too): how handing back a piece of the city to its people inevitably means building malls, congress centres and media parks. This is not what makes a city. Just as a fountain and a pedestrian area doesn’t make Omonia a square… But the investors don’t give a damn.
    Just the other day, some minister was suggesting rebooting the sea front, from Faliro to Sounio, with “high value commercial space” (not his exact words). Great, first they gave us a 6 lane highway, now they want to build shops…
    The link I gave was to the winning design by the French landscape design office OLM, dating from 2004. It won because it was one of the few projects that took into account the difficulties of the site (runway, run-off water from the hills, to name one) while implementing a program that takes into account all the needs of the city.

    As for Mr. Jose Asembiyo… Google doesn’t bring up anything on him. But if you do meet him, ask him how he plans on demolishing the runway… I’m curious 😉

    …and obviously I have no idea if this plan increases or decreases the €5bil asking price.

    • Alexandros:

      Good points. Hellenikon is a very long term project. And most likely it needs to start with residential. Then maybe office and retail/entertainment towards the last phase.

      BTW, you are not hijacking the conversation at all. This is precisely the participation we need.

      As you know there is an an axiom in real estate (and other investments) which says “you buy low and you sell high”.

      That’s fine, but when you have German investors eyeing stuff beyond their area of competence, I have a problem. Hellenikon by definition can not have German involvement because it will fail big time.

      I hear other reports that say predatory Europeans are coming to Greece to buy existing hotels for 20 cents on the euro and then quickly reposition them for profit. That’s not investment that Greece needs. That’s speculation.

      Therefore for Greece to maximize the value of Hellenikon we need the best in the business paying fair price and perhaps offer the Greek state a % participation into future profits. Greece could easily form a 70/30 partnership with an excellent group, by contributing the land into the partnership and getting 70% of future profits in return. The developer gets 30% of the profits. Greece could make a lot more money that way(though sales of finished product) plus remain a stakeholder of the whole process, thus making sure that whatever it gets built is done right and for the benefit of the citizens.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s