Tag Archives: Greece strikes

Missing the trees for the forest

Illustration by Manos Symeonakis

In a country where residents wake up in the morning not knowing if an illegal strike will take place and deprive them of the capital’s metro system, and visitors show up at its most revered archaeological site only to be turned away by protesting employees, it hardly seems that the prime minister’s priority should be to attend an island gathering of big thinkers. Discussing theoretical permutations when there are practical problems to deal with somehow doesn’t appear very fitting.

Rather than tackle more mundane issues in Athens, Prime Minister George Papandreou chose this week to visit Poros for the Symi Symposium, a brainchild of his which sees some of the world’s top politicians, economists, academics and opinion leaders gather in Greece every year. Like cicadas striking up across Athens, you could hear the disapproving tut-tuts of his political opponents but especially his government colleagues. In Papandreou’s absence, his PASOK party embarked on a new bout of schizophrenic infighting.

In fact, the past few days have epitomized Papandreou’s premiership — like the schoolchild who wants to sketch freely but is constantly forced to paint by numbers like the rest of his classmates — the PASOK leader’s attempts to allow his grand visions to take flight are repeatedly grounded by the complications of the day-to-day running of the country.

Yet, it seems churlish to criticize a leader for wanting to inspire and be inspired by great ideas or for broadening his contacts and the country’s allies by meeting with foreign leaders and experts. After all, his predecessor was castigated for remaining rooted to the spot, like a homing pigeon that didn’t have a message worth delivering.

Free from the burdens of protesting Culture Ministry contract workers and striking air traffic controllers, Papandreou was able to tackle meaty subjects at a symposium whose title alone — “Fast Forward: Progressive Ideas for Greece, Europe and the World” — projected positiveness. One of his big ideas this week was to express support for a Tobin Tax, also known as a Robin Hood Tax.

The idea — to impose a tax of as little as 0.1 percent on financial trades — was first proposed by American economist James Tobin in the 1970s as a way of reducing the volatility of currency exchange rates and, more significantly for today’s leaders, to “promote autonomy of national macroeconomic and monetary policies,” in other words to deter speculators.

As you might expect from a Nobel Laureate, Tobin had the intelligence to understand that the timing of his proposal was unfortunate. The idea of taxing transactions at a time when neoliberal economic policies were taking root meant that his plea fell on deaf ears. “It did not make much of a ripple,” he acknowledged some years later. “In fact, one could say that it sunk like a rock.”

However, the crises that have shifted the world’s economic paradigms over the last couple of years mean the idea is being floated again, especially as it would allow governments to build up funds that could be used for a number of things, from bailing out banks to driving development. The Tobin Tax sounds like something from Lord of the Rings and for years it seemed a work of fiction but now there is growing momentum toward making it become a reality.

“The proposal for the imposition of a tax on financial transactions, a so-called ‘Tobin Tax,’ which will bring in funds that we can invest in our economies, is very significant and one which we will insist on because investment is vital if we want to exit the current crisis,” Papandreou told his audience on Poros.

This week, both the French and German finance ministers Christine Lagarde and Wolfgang Schauble declared their support for such a levy (also known as a financial transaction tax or FTT), ahead of an Ecofin meeting where they raised the issue with their European counterparts. In declaring his support for the levy in the same week, Papandreou appears to be aligning himself with Europe’s big players. Isn’t this just what we want from a Greek leader — for him to put the country at the forefront of developments and progressive thinking rather than bringing up the rear?

You would think so but Papandreou’s attempt to grab at these big ideas somehow leaves a nagging feeling that he is overreaching, perhaps unaware of the full implications of what he is promoting. For instance, there is a strong counter-argument to the Tobin Tax. Some financiers claim it goes against the principles of wealth creation and would simply drive business to other countries where the levy does not apply. Sweden, where Papandreou spent part of his youth, applied such a tax on trades of local stocks and derivatives in the 1980s but the scheme was abandoned in the 1990s because many investors simply traded from other countries and the revenue generated by the levy did not meet expectations.

By declaring his support for a Tobin Tax, Papandreou may be showing that he’s in step with other leading thinkers but at the same time he is opening himself up to another, even more damaging, accusation that is often leveled at him — that he has a knack of identifying good ideas but just not the ones that would help overcome the problems he has to solve.

Papandreou’s statement of support for the levy came on the same day that Greece announced it had managed to slash its budget deficit by 46 percent during the first six months of 2010 compared to last year, but that it had fallen well short of its target to increase revenues by 13.7 percent. While public spending cuts seem to have done the trick, the idea of raising taxes, VAT in particular, has not had the desired effect.

Papandreou’s government had to scramble to rescue public finances but in its rush to do so, little thought was paid to the fact that hiking taxes when people are pushed for money leads to them spending less and will ultimately prove counterproductive, as the government collects less revenue. PASOK has not been able to find a way to compensate for this. It makes Papandreou’s bid to chase the world’s rich when Greeks become increasingly poorer seem like irrelevant folly rather than visionary politics.

Herein lies one of Papandreou’s greatest challenges. As he leads his band of not-so-merry men into the battles ahead, the prime minister must find a way of balancing his love of the broad, theoretical political brushstrokes with the need for precise, effective interventions that will address the pressing problems Greece faces. Anything less, and he’s in for a rather lonely and painful ride through the glen.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on July 16, 2010.

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No sleep till Athens

Illustration by Manos Symeonakis

There isn’t much to laugh about in Greece at the moment. So, it was with great pleasure that I read an e-mail last week from one of our readers in the USA in which he suggested how Greece could overcome its economic problems. One of his ideas was that Greeks should stop taking lunchtime siestas because they lose valuable working time. It was the first time I laughed out loud for weeks. I don’t know any Greeks under the age of 65 that take a nap at lunchtime, apart perhaps from my son. But he’s only 20 months old, so perhaps he can be forgiven for not using these hours to contribute to the country’s gross domestic product.

Although the e-mail from America provided a moment of light relief, it left a bittersweet taste because it also underlined how the crisis has created a negative stereotype of Greeks. It is patently obvious that many Europeans, especially Germans, are convinced Greece is full of freeloading slackers. The reality, though, is different. For instance, Eurostat’s figures for the average working hours in Europe for 2009 indicate that Greeks work an average of 42 hours a week. The EU average was 40.3 hours and in Germany it was 40.8. In fact, the Greek figure is the highest in all of the 27 EU countries.

So, if the Greeks work so hard why is their country in such a mess? Well, one answer is that working long hours does not necessarily mean you are productive. In fact, in Greece you often end up working longer because of the inefficiencies of the system. The time you could be using productively may be spent queuing at a public service to get paperwork stamped or writing out invoices by hand because there is no computerized accounting system.

Of course, there are very clear economic and financial reasons for Greece’s collapse but the causes of the illness go much deeper. One of the most serious underlying problems is a bloated and decaying public sector which neglects to punish inefficiency and indifference. Until 2007, according to World Bank data, it took 38 days to set up a business in Greece. In Djibouti it was 37 days. Of course, what statistics cannot measure is the frustration that causes so many people to lose the will to fight the system and eventually play by its warped rules, even if this involves corrupt practices. And what sustains this vicious circle? Political expediency. Governments created this monster and were afraid to tackle it because their support base, and therefore their destinies, were tied not just to the public sector but to the array of professions that are interlinked with it, such as doctors, civil engineers, lawyers, notaries and farmers.

Whatever you do in Greece, you cannot avoid dealing with the state and coming up against its inertia. According to Eurostat, roughly one in 10 Greek adults is a civil servant, which is the highest proportion anywhere in the EU. This is a legacy of the 1980s, when the governments of Andreas Papandreou’s socialist PASOK sought to balance years of right-wing rule and dictatorship by finding jobs for the party faithful. Since then, each government has treated the civil service as just another party apparatus, hiring more people even when the country couldn’t afford it.

But, again, the story of the Greek public sector is a symptom of the problem rather than the root cause, which lies in the country’s political system. Since the 1970s, Greece has been ruled by two parties that helped themselves rather than the country. They awarded their friends jobs or state contracts and as soon as any social group or sections of the media resisted an attempt to change the status quo, they would cave in and abandon the offending policy. So, it’s no surprise that an opinion poll by GPO for Mega TV this week indicated that 54.3 percent of Greeks believe all the recent governments, rather than a specific one, are responsible for the current crisis.

The previous New Democracy government of Costas Karamanlis is blamed by 20 percent of those questioned. Karamanlis and his ministers have a lot to answer for. At a crucial time for the global economy and despite having a comfortable majority in his first term, Karamanlis dodged any attempt at structural reform. Instead, he handed over questionable statistics, a spiraling deficit and no new ideas.

But the current PASOK government is not without blame. As assured as Prime Minister George Papandreou may look on the international stage now, he had no idea how to be a constructive opposition leader for the previous five years. In fact, the period from 2004 to 2009 will go down as a barren time in Greek politics, when no party could come up with a vision for Greece. The leftist parties — the Communists (KKE) and the SYRIZA coalition — were content to simply battle for control of the unions. This fight is continuing and, as the crisis puts the unions in the spotlight, it is clear they have failed to overcome their esoteric attitude. Even now, they have not been able to refine their tactics beyond that of blackmail — if the government does something they don’t like, they block ministry entrances or central Athens.

So, when people ask “Why did Greece end up in this mess?” perhaps the best answer is that it would have been a miracle if it hadn’t done so. It’s only now that Greeks are beginning to realize the damage that has been done to the country over the last decades and that, as voters, they actively encouraged it. They were happy to turn a blind eye as PASOK exploited the public sector in the 1980s; they were equally oblivious to the failures of socialist and conservative governments in the 1990s, when money from the EU began to flow into Greece; and during the last decade, when entry into the euro secured cheap loans and a comfortable way of life, nobody wanted to ask any difficult questions.

The realization is a painful one for Greeks — it’s like thinking you have entertained a friend by taking him out for a few drinks only to find out that you actually fed his alcoholism.

The recovery from this crisis will not just depend on the emergency loans from the IMF, Germany and the other eurozone countries. It will not depend just on growth rates and bond spreads. It will, to a great extent, depend on whether Greeks are now prepared to take the extra step to demand better of their public sector, push for the private sector to be allowed to flourish and, above all, be ruthless with incompetent and cowardly politicians. To do all this when your salary is shrinking, your taxes are increasing and your livelihood is at risk is not an easy task. For all these reasons, Americans, Germans and everybody else should know that Greeks will not be sleeping well at night for many years to come, let alone taking lunchtime siestas.

This commentary was written by Nick Malkoutzis and appeared in Athens Plus on May 7.