Sunday, 20 December 2009

PASOK takes first steps for serious anti-corruption investigations

I am happy to give credit to PASOK where credit is due. Last Thursday, 128 PASOK MPs tabled a request to Parliament to establish four investigative committees:

• For the manipulation of share prices on the Athens Stock Exchange for the period 1999-2008
• For the Siemens bribery scandal
• For the structured bond scandal
• For the Vatopedi land exchange scandal.

Kathimerini reports that the Siemens file is re-opening and investigation re-starting after the Supreme Court found the information was missing and the case was badly handled.

The Hellenic Parliament has also recently publicised its report on the Vatopedi land exchange scandal on its website. I’m going through the file this week.

I was also pleased by the resignation of Deputy Minister Dinos Rouvlias last week.

These are all steps in the right direction. I sincerely hope that the motion to re-open these cases is approved by the Parliament, and criminal and civil responsibilities allocated. Better times ahead? Or just another smokescreen?

Wednesday, 16 December 2009

The Incredible Citigroup Tax Exemption

Yet more good news out of Washington this week (I speak ironically, of course). The Washington Post reports today (U.S. gave up billions in tax money in deal for Citigroup's bailout repayment) that Citigroup will retain its tax exemption on losses carried forward once the government exits the company.

Binyamin Appelbaum writes:

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.


The news gets better: a photo caption in the same article reads that Citigroup incurred $ 38 billion in losses. The change in the IRS ruling allows Citigroup to claim $ 38 billion as a tax exemption against future profits.

So let’s get this straight:

• Citigroup was saved thanks to a $ 45 billion government bail-out, of which $ 25 billion was converted to equity (which is now being sold);

• Citigroup additionally received a $ 306 billion government asset guarantee;

• Citigroup has been making obscene profits from the $ 1 trillion in low-interest "quantitative easing" credit window from the Fed at an interest rate between 0.25%-0.50%, as well as the Fed's purchased of mortgage-backed securities;

• Citigroup now get a further $ 38 billion tax exemption from losses carried forward.

The irony is why this should be happening. There is no objective hurry for the government to exit Citigroup and thus forsake a fair compensation for its role in saving the company. The reason is buried a little further down in Appelbaum’s article:

The banks say the strings attached to the bailout, including limits on executive compensation, have restricted their ability to compete and return to health. Executives also have chafed under the stigma of living on the federal dole. President Obama chided bankers at the White House on Monday for not trying hard enough to make small-business loans.

The Obama administration also is eager to wind down a program that has become one of its largest political liabilities. Officials defend the program as necessary and effective, but the president has acknowledged that the bailout is "wildly unpopular" and officials have been at pains to say they do not enjoy helping banks.


So if I read this correctly, the reason the government is granting the tax loss is due to two reasons:

a. So Citigroup can pay higher bonuses to its incompetent bankers, who caused this mess in the first place, and

b. So Barack Obama's popularity ratings can improve?

I’m amazed there has been no further reaction from the American public. Although I would like to express on this blog exactly how I, personally, feel about this, my professional obligations and basic courtesy preclude me from doing so.

All I can safely say is that this appears to be an obscene give-away. What US individual taxpayer has ever been allowed to carry forward a $ 38 billion tax exemption for losses?

The only way this transaction will make Obama more popular is if people don’t understand what’s going on, or forget what happened by mid-term elections next year. I don't believe either of these events is going to happen: people do understand what is going on, even if they don't understand all the details, and people will react in the next elections.

Some questions to consider:

• Do we now really believe there has been no quid quo pro for the massive amounts of electoral contributions the financial sector gave the Obama campaign last summer?

• Do we now really believe that financial sector regulation is going to work?

• Should we claim to be surprised if the “average American” outside the Beltway is furious with the Obama Administration and Wall Street?

A while ago, I wrote about how much money I could make running a customer-focussed bank in Greece. I think I'm going to work at Citigroup instead. Communism never had it this good.

Tuesday, 15 December 2009

The North Waziristan Conundrum

The New York Times reported today (Pakistan Rebuffs U.S. on Taliban Crackdown) that Pakistan’s army was refusing to open a new front against the 12,000-odd Taleban forces led by Siraj Haqqani, a member of the Quetta shura and erstwhile leader of North Waziristan. Three main reasons are listed for this refusal:

a. Pakistan is already engaged in open warfare in South Waziristan, and cannot afford to open a “third front”;

b. Pakistan’s intelligence service has long had Haqqani as an asset, and is positioning itself for influence in Afghanistan after the US withdraws;

c. Pakistan needs a loyal counterweight to prevent an “encirclement” by India, which is investing $ 1.2 billion in Afghanistan.

It shows just how twisted the logic has become when the article reports that

"It considers Mr. Haqqani and his control of broad swaths of Afghan territory vital to Pakistan in the jostling for influence that will pit Pakistan, India, Russia, China and Iran in the post-American Afghan arena, the Pakistani officials said."

Really? What could be so interesting about Afghanistan that would cause all these countries to “jostl[e] for influence?” Afghanistan has few resources, and conspiracy theories about Caspian Sea oil pipelines aside, there’s practically nothing there worth fighting for. Any benefits will be far less than the costs.

To compound the irony, Siraj Haqqani’s father, Jalalludin Haqqani, received weapons from the CIA, channelled through Pakistan’s Inter Services Intelligence, during the Soviet invasion of Afghanistan. The son is now fighting against his father’s former paymasters.

But leave it to the ISI to come up with a convenient solution:

"Because Mr. Haqqani now spends so much time in Afghanistan — about three weeks of every month, according to a Pakistani security official — if the Americans want to eliminate him, their troops should have ample opportunity to capture him, Pakistani security officials argue."

Yeah, you can find him at the Khost Burger King every Thursday at 19:00.

You have to pity the United States: it bombed it’s way through Afghanistan in 2001, thinking it would be just another quick military campaign. It would now like nothing more than to withdraw, but withdrawing is perhaps a worse option than staying. In the meantime, the US taxpayer channels billions of dollars in aid to Pakistan each year, but sees the Taleban firmly entrenched on Pakistani territory, with no apparent solution to get them out, with the Taleban using this territory as a safe haven from which to attack US forces in Afghanistan. With friends like this, who needs enemies?

At one point in the very near future, it’s clear that public support for continued US and European engagement in Afghanistan will no longer be possible given the multitude of contradictions and fundamental irrationality of the current situation.

Friday, 11 December 2009

Five Questions to the Prime Minister on Corruption in Greece

Two days ago, the head of Transparency International Greece briefed the televised Cabinet of Ministers meeting. Among other points, he mentioned that Greece had among the lowest ratings on corruption of any EU Member State. The Prime Minister responded by promising a renewed fight against corruption. Yesterday, the Prime Minister met with the President, and repeated various promises to fight corruption.

Since this issue is suddenly a priority, I’ve like to ask five specific questions on specific incidents of corruption or questionable practice that have occurred, but for which it seems that not a single member of government has been prosecuted.

Siemens
Testimony of Greek and German officials made during the prosecution of the Siemens corruption scandal in Germany indicate that over a period of 17-20 years, Siemens payed bribes of between EUR 2 – 6 million per year in Greece. The estimated total amount was between EUR 80-100 million, depending on different sources of testimony. This money was payed to political parties, staff of the Hellenic Telecommunications Organisation and others, in an attempt to swing public sector contracts.

Both main political parties are implicated in the scandal. Individual Members of Parliament are also implicated. In the case of PASOK, testimony of a former PASOK MP indicates that part of these bribes were paid directly into the PASOK party treasury (which PASOK of course denies).

Question: Does PASOK intend to investigate this matter and assign criminal prosecution? This past spring, it called for a full investigation. Now that it is in government, will it continue the investigation? Will any criminal responsibilities be assigned?

Vatopedi
Between 2008-2009, the Vatopedi land exchange scandal erupted in Greece. In this scandal, the Vatopedi Monastery traded marshland to which it had questionable, even false, title deeds, for prime land in Athens, Thessaloniki, Halkidiki, and many other locations. The land exchange was made possible apparently due to a first decision during the prior PASOK administration, but gained speed and was finalized during the previous ND administration. The value of public land involved is conservatively estimated at EUR 120 million: at actual construction rates, it will be far higher.

Question: What steps is PASOK taking to reclaim the land, assign criminal responsibilities to the various parties involved, and ensure that this never happens again? On a related matter, what steps is PASOK taking to tax land owned by the Church, from which it is currently tax-exempt? This was a key electoral promise of PASOK in the October 2009 elections, but we hear nothing of it now.

Ministry of Culture / Zahopoulos
In late 2007, news came of the Zahopoulos scandal, a sordid affair in which journalists were allegedly attempted to be bought off in return for dropping their coverage of the business and personal affairs of the former Secretary General of the Greek Ministry of Culture. Equally importantly, though it was not reported as extensively, was the revelation that the Ministry of Culture, as a beneficiary of OPAP (the state lottery organisation) funds, was spending this money “off the books” on a range of highly questionable publications, conferences, events and staff remuneration.

Question: Is all OPAP money properly accounted for? If we want to reduce “public waste”, are we sure that off-budget income is actually being used for the public, as opposed to the partisan, benefit? Is PASOK going to perform a forensic audit on money spent by the Ministry of Culture which did not derive from the central government budget to determine if the money was well-spent? Will any criminal responsibilities be assigned?

Structured Bonds
In 2006-2007, it emerged that several state pension funds had been purchasing structured bonds which, before the funds became final beneficiaries, traded hands 3-4 times (each) from the time the pension fund had decided the purchase, until the final transaction. This was done to general commission income for multiple intermediaries. JP Morgan, for instance, is reputed to have earned EUR 14 million on a EUR 280 million bond, and at least two other intermediaries earned similar amounts before that bond was finally “sold” to the pension fund. Testimony-or rumours?-circulating in Greece at the time claim that part of the proceeds of these commissions flowed directly into the coffers of one of Greece’s political parties.

Question: Has PASOK taken steps to ensure that Greece’s tremendous debt burden is being purchased through transparent auction? In the current reform of the pension system, is Minister Loverdos taking steps to improve the financial competence and oversight of the state pension funds?

Parliamentary Immunity
The greatest source of immunity from prosecution for public corruption occurs because every Member of Parliament has a statute of limitations on crimes committed while in office which extends to the life of that Parliament. When a new Parliament is sworn in, the statute of limitations ends. This means that any MP who becomes a Government Minister receives a “get out of jail free” card for any crimes committed while in office.

Question: What steps will PASOK take to end Parliamentary immunity and institute real accountability for crimes committed by MPs and Ministers?

The confidence of the average citizen would be greatly restored if we saw any serious action being taken on these issues. Unfortunately, it seems that, as in many other cases, there is one law for the political elite, and one law for the rest of the country. The only difference, perhaps, is the degree of immunity offered, and what you have to pay for that immunity.

Thursday, 10 December 2009

A Better Plan for Restoring Greek Consumer Liquidity

The vast contradictions in Greek government policy regarding the financial and banking sector were on full display in yesterday’s televised Cabinet Meeting. The Cabinet session was opened with an impassioned plea by the Prime Minister that—due to problems inherited from the previous government—Greece had lost its credibility in international markets, and was in danger of losing its territorial integrity. Unfortunately, he didn't say much about what he was going to do about it, except that they were working hard on the issue.

This was eventually followed by Dr. Louka Katselli, Minister of Economics, Development and Shipping, who presented a draft law on restoring liquidity in the Greek market. On the one hand, I was struck by the background to the presentation: it was made on Powerpoint, and it involved consultations with over 1,000 citizens. This is a good first step towards more rational policy-making.

On the other hand, the bill is logically incoherent. Among its major provisions are a court-ordered moratorium on personal debt payments, a restructuring of personal debt, and a forgiveness of a small part of debt for the chronically unemployed or other at-risk groups. While these are all worthy goals, I couldn’t help but be struck by the overall incoherence of government policy:

• On the one hand, the government has pumped EUR 28 billion into the Greek financial system, with the demand that banks lend money to SMEs and individuals. Banks have done this.

• Despite the fact that banks have received this financing, as well as additional credit lines from the ECB, at an extremely low rate (the ECB benchmark rate is 0.5%; Greek banks have higher lending rates), they are loaning this capital onwards in the Greek market at a minimum of 7% for certain corporate loans; 10%+ for corporate overdrafts; 10% minimum for consumer loans, and 22% for credit card loans. Thus, the banks are making record profits on public money.

• The government now steps in and says, “Hold on: because you’ve lent too much, to people who are not really qualified to take on a loan, we will now force you to restructure the debt.” The immediate question which arises is: “What did you expect?” Did the government really believe that lending money to Greek consumers, most of whom are on fixed incomes, or are operating micro-enterprises in a disastrous market environment, is a sustainable solution to Greek problems? Yet both main parties have repeatedly called for more bank lending.

• If the government is worried about liquidity, how will it handle the contradiction of encouraging lending on the one hand, and then penalising banks for lending on the other? What is the impact of moral hazard on personal financial decisions? We already have a country where people build houses even though they know they are illegal: they figure these houses will all be legalised in the future anyway. Are we now entering the same territory with consumer lending?

• If the government wants to avoid the issue of credit defaults or excessive interest rates, it has to tighten credit policy. In fact, it has done precisely the opposite. Real estate loans, for instance, are now given for 100% loan-to-value, in an attempt to shore up the real estate market (another over-leveraged, over-supplied sector). Credit cards are approved for practically anyone who applies. Between the 20:00 evening news and the 23:00 late news programmes on Greek TV, you will probably see 75 advertisements for consumer loans—especially popular now that Christmas is here.

• The idea that the Greek court system will be in a position to handle debt restructuring and moratoria is a joke. Given that 21% of Greeks live (in terms of official statistics) at the poverty line, and given that thousands of people will be expected to take advantage of this law, it is inconceivable that the court system will be able to handle the burden. Court cases are already 5-7 years late due to the tremendous backlog, and frankly, from what I know of most judges in the Greek justice system, this is going to turn into an ideological rubber stamp process than a real assessment of debt forgiveness.

I have two sets of recommendations for solving the root cause of the problem, which is in fact two problems. The first problem is that most Greek consumers and businesses are overleveraged: they have too much debt, at a too-high interest rate, and no way to repay the debt even under normal business conditions. The second problem is that the Greek state, which controls 40% of GDP in public expenditure in Greece, is the largest problem in terms of liquidity: it does not pay its bills on time.

The suggestions are the following:

1. Rationalise credit policy
Taking on more debt will not solve the crisis. The government needs to tighten consumer credit policy, at least for consumers who are over-leveraged. Lending money to banks to lend onward at predatory rates merely postpones the problem. The government should implement three simple and temporary rules:

a. That any new credit offered to Greek consumers or companies using ECB or Greek government public capital should be at a preferential rate: perhaps about 4% per year.

b. The government should make available a consumer debt refinancing line at preferential interest rates, offered through the major banks. Thus, a consumer who owes Eurobank EUR 20,000 at a 10% rate, would be able to borrow EUR 20,000 from this credit line to repay Eurobank, and would be charged a preferential rate—perhaps 4%. This would simultaneously (i) solve the problem of non-performing consumer and credit card loans in the Greek financial sector, and (ii) generate a small but substantial interest income for programme management. Greek banks could have an additional benefit from a small processing fee—perhaps EUR 50—for each application, paid for by each loan applicant.

c. That any credit offered to Greek consumers or companies using capital of any resources should use a mandatory credit rating on the borrower, using accepted international practise. Thus, there should be no further consumer lending if the consumer already has consumer or credit card debt of over 35-40% net annual income.

2. The Government must promote liquidity beginning with itself
In order for the government to increase liquidity in the market, it should consider the following policies:

d. The government itself should pay its debts to suppliers on time. At over 40% of GDP, the government is the largest contractor in Greece. In some sectors, it has not paid vendor invoices for over 48 months. It does not even pay the salaries of its permanent and temporary staff on time.

e. The government should allow a 12-month moratorium or restructuring of debt owed to government entities, including for income taxes and/or social security taxes. This should be interest-free.

f. The government should increase the minimum wage by 15%, should decrease all social security obligations by employers and employers, by an equivalent percentage, and should increase the tax-free bracket to EUR 15,000 per adult, regardless of family status. This will result in greater take-home income for wage-earners, which can be used to pay down debt or otherwise maintain their standard of living.

These six measures would do more to increase liquidity in the market and solve the problem of excessive leverage than any others. The main problem, of course, is that the government does not have the funds to undertake any of these initiatives. This is the root cause, for instance, why the government takes 48 months to pay a vendor for hospital equipment.

I therefore suggest the ECB and the Greek government cooperate to issue a quasi-sovereign loan of about EUR 20 bln, to be released in four tranches of EUR 5 bln each. This loan would be made to:

• A consortium of major Greek banks, co-headed by the National Bank of Greece and the Central Bank of Greece.

• The ECB loan rate would be 1%; the loan capital would be used for credit re-financing under points a-b-c of this proposal.

• Each tranche would be released per quarter, and subject to the proper monitoring and due diligence of loan refinancing and loan repayment.

• The loan would avoid the central budget: it would be made directly to the Central Bank of Greece, for setting up credit lines in the major banks. It would not require an act of Parliament or any government interference of any kind, which would likely slow or cripple the loan policy.

• The Greek banks would agree to accept early loan repayment for outstanding principle and only that interest levied until date. In exchange, they would receive an immediate capital injection through loan refinance by ECB capital, and assured income from a processing fee of EUR 50/application. This would also help stabilise their balance sheets, account for non-performing loans, and hopefully restore their credit ratings after the Fitch downgrade.

• The spread of 3% (between the ECB base rate of 1% and the onward loan amount of 4%) should be used for by the Central Bank of Greece and the participant banks for setting up the programme, monitoring repayments, and eventual future credit interventions in the Greek banking system.

I believe that such a plan would, in the short term, increase liquidity, stabilise credit risk and shore up the balance sheets of a significant portion of Greek consumers and banks. If the programme is successful, it can easily be replicated for micro-enterprises and SMEs and extended further to consumers. But it should be implemented in tranches, and its deployment carefully monitored and audited to make sure that neither the Greek banks nor the Greek government take unfair advantage with the financial resources provided by the ECB.

Wednesday, 9 December 2009

Fitch Downgrade Greek Public Debt; Sends ASE down 6.1%

By unhappy coincidence, Fitch downgraded Greek sovereign and bank debt yesterday from A- to BBB+, the lowest level in the Eurozone. The press release was released at 07:47 EST, about the same time as I was finishing my forecast of Greek public debt. The Fitch downgrade sent the Athens Stock Exchange into a 6.1% tailspin as foreign and domestic investors took flight.

Fitch’s announcement reads:

The downgrade reflects concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece, exacerbated by uncertainty over the prospects for a balanced and sustained economic recovery. Though it is probable that fiscal adjustment under the auspices of the Stability and Growth Pact will be sufficient to forestall penalties under the Excessive Deficit Procedure (EDP), Fitch's current assessment is that the government debt burden is likely to rise to close to 130% of GDP before stabilising. Given the poor historical track record of public finance management, Fitch is not convinced that the substantive pension reform and other measures necessary to contain public spending pressures and broaden the tax base will be sufficiently strong to materially reduce debt over the medium- to long-term and hence Greece's vulnerability to future adverse shocks.

While Fitch believes that the government's target to narrow the fiscal deficit by 3.6pp of GDP to 9.1% in 2010 is achievable, the lack of substantive structural policy measures reduces confidence that medium term consolidation efforts will be aggressive enough to ensure public debt ratios are stabilised and then reduced over the next three to five years. Present government proposals rely more heavily on revenue-raising measures, particularly moves to counter tax evasion - where the pay off is highly uncertain - rather than current spending where structural fiscal weaknesses are most acute. About half the proposed cuts in the deficit rely on temporary one-off measures, while little of the recent fiscal deterioration can be attributed to the economic downturn, which has been relatively mild, or to support for the financial sector which has been minimal.


There is little to contradict this judgement, either in Greece’s 2010 budget, or in its historical record of public revenue and expenditure management.

Bloomberg carried an interesting article today on the impact of the downgrade on the Athens Stock Exchange. I personally believe that this is panic selling, and that some Greek stocks are now at very attractive investment valuations. The ASE should rebound within the next week, perhaps sooner.

But the long-term problem persists. The debt forecast I published yesterday shows almost no signs that the public debt will fall to sustainable levels, i.e. certainly below 100%, and preferably below 75%. I will run one more forecast using the government’s forecast for annual deficit levels, once these are published in January.

Tuesday, 8 December 2009

Forecast of Greek Debt to 2015

As part of our corporate planning, I’ve been developing a forecast of Greek public sector expenditure, revenue, debt and GDP to try to understand how the economy will develop over the next 5 years.

This is more than just a simple forecasting exercise: over the last 6 years, I’ve become deeply disturbed by the inability or unwillingness of successive administrations to address this issue. If Greek debt continues to rise at on its present track, we can expect a continuing fall in national competitiveness and possibly a technical default on debt payment in the next few years.

Either way, the reputational damage to my firm will be significant. I can’t imagine how we can bid on new work as a Greek investment advisory consultancy, when Greece has the highest debt-to-GDP in the Eurozone, and has consistently flouted EU regulations since its entry in 1981. After one point, it won’t matter how good our proposals are: we will have no credibility as a service provider associated with Greece.

This forecast, together with a number of other factors, will be used to make a decision on whether to remain headquartered in Greece or not. I would therefore appreciate any comments of feedback on this model, its assumptions or its outputs.

My base case model for Greek debt is seen below. All data has been based on Eurostat stastistics, accessed from the Eurostat website on 8 December 2009. For 2009 estimates, I have relied on general press reports that (a) the annual deficit will reach 12.7% of GDP, and that (b) public debt will reach approximately 120% of GDP. My model captures the deficit target but not the public debt target.

The base case model is based on the following assumptions, and provides the following results:

• GDP (market rates) falls by 1.5% in 2009 and 1% in 2010, before resuming positive growth in 2011. GDP rises from EUR 239 bln in 2008 to EUR 286 bln in 2015.

• General government revenue rises from EUR 97 bln in 2008 to EUR 120 bln in 2015. This is achieved through a crack-down on tax evasion and higher tax collection. Government revenue as a share of GDP rises from 40.6% of GDP in 2008 to 41.9% of GDP in 2015—a historic high in the Greek economy. Specifically, I’ve estimated a fall of EUR 7 bln in 2009 as an effect of the recession, and an increase of EUR 5 bln per year thereafter as the economy rebounds and tax collection efforts take hold.

• General government expenditure rises from EUR 115.5 bln in 2008 to EUR 169.6 bln in 2008. In 2009, expenditure rises by EUR 5 bln in line with spending promises and measures already undertaken by the two administrations. Thereafter, government expenditure rises by 5% per year. This is lower than historical expenditure growth, and again in line with government promises for higher spending on education, healthcare and salaries and pensions. Government expenditure reaches 56.4% of GDP in 2015.

• The annual deficit widens to EUR 30.4 bln in 2009, or 12.9% of GDP. The deficit continues to increase in absolute terms every year, reaching EUR 41.1 bln in 2015. The deficit calculation shown here is the difference between government revenue and expenditure, and does not reflect additional income gained from privatisations or other measures. Unfortunately, it also does not reflect the rising interest income the Greek government must pay for its debt: I estimate that in the base case, the expenditure and revenue changes of this type will cancel each other out.

• Total public debt rises from EUR 237 bln in 2008 to EUR 483 bln in 2015. As a share of GDP, it rises from 99.2% of GDP to 169%.

I have also tried to estimate annual interest payments on outstanding debt, using a relatively low interest rate of 3%. This is below the historical average. Under this scenario, annual payments rise from EUR 8 bln in 2009 to EUR 14.5 bln in 2015. At this stage, interest payments account for 12% of general government revenue.

The forecast results are shown graphically below; my data set follows.



This admittedly simple forecast provides a number of disturbing conclusions:

a. Greece does not have a serious plan to reduce long-term debt. PASOK’s electoral promises and the early signs of its policy are aimed at managing electoral expectations and balancing this with Greece’s national obligations to the European Currency Union and the Stability and Growth Pact. Reducing the annual deficit from 12.7% of GDP in 2009 to 9% in 2010 is a start, but much more radical deficit and debt reduction measures will be needed if the total debt is to be reduced. Neither PASOK nor ND have announced any meaningful measures in this respect.

b. The public expenditure calculations provided here are based on current spending: they do not include the costs of financing long-term, unfunded liabilities such as the need for public financing of social security obligations (for retirement and healthcare funds). The expenditure calculation does not directly include the costs of higher debt financing, particularly if interest rates rise (as they are expected to do). We can therefore expect public expenditure to rise by at least 5% per year.

c. The public revenue forecast is below the historical average between 2005-2008: perhaps higher expenditure could be booked, although it is difficult to see how: privatisation income is falling; the construction market is frozen; VAT cannot easily increase. Nevertheless, I ran a scenario in which government revenue increases by EUR 10 bln per year from 2010 onwards. The results are seen in the figure below:

d. Raising government revenue by EUR 10 bln per year from 2010 onwards is not considered realistic. This would bring total revenue as a share of GDP to 52.4% of GDP in 2015, up from 40.6% of GDP in 2008. A rise of some 12% in 7 years is extremely difficult to imagine.

e. The only scenario in which debt falls to below 100% of GDP would be one in which revenue grows while expenditure is stable (or falls). In the next scenario, I plot a EUR 10 bln rise in revenue per year, against stable government expenditure. This would be sufficient to bring the debt-to-GDP ratio down to 84% in 2015. However, such a scenario is clearly impossible to imagine: it is equivalent to eliminating 5% of Greek public sector expenditure every year for 6 years. Desirable, but highly unlikely given the current political party in power, and given the factors already discussed: rising interest rates, unfunded liabilities, etc.


Greek public sector debt will continue to rise under the PASOK administration. Assuming this government lasts for 4 years, I estimate that by 2013 public debt will have reached over 150% of GDP, unless drastic policy measures are taken. This would require a fundamentally new budget approach at the end of 2010, once the [current] economic crisis is in its final stages in Greece. No such current approach is discernable at any level of the government.

Because we receive so little from the Greek public sector, and because it is clearly destroying our country, my own decision on where to base my company in the future will be made in early 2010. I would welcome any comments or opinions which could help me revise my opinion, or the data I have presented here.

Monday, 7 December 2009

Giving away Iraq

The withdrawal of US forces from Iraq continues. The Washington Post ran an article today ("Millions worth of gear left in Iraq") on the effort to move or dispose US equipment during the withdrawal of forces: part of it is being donated to Iraqi forces. The cap is apparently $ 30 million per facility, with 280 facilities affected.

Besides the discussions over whether this equipment could be used in Afghanistan or some other theatre, it’s interesting to reflect that the $ 30 million presumably relates to depreciated US dollars. Assuming an air conditioning unit, for instance, has spend 3 years in-country (or 3 years from the date of sale to the US military), it’s already lost 60% of its value, assuming a 5-year depreciation term. So the $ 30 million in depreciated terms could be as high as $ 150 million in new purchases.

Assuming a mid-range of $ 75 million per facility for newly-purchased equipment, and multiplying by 280 facilities, then the US taxpayer is looking at a give-away of $ 21 billion. It probably won’t be that high: let’s assume it’s only half this estimate. That’s still $ 10.5 billion.

And, in one of the final, humiliating codas of the US invasion and occupation of Iraq, as soon as US soldiers leave, the facilities are looted. The Post article writes:

Some U.S. military officials worry that much of the equipment left behind could be looted. A U.S. officer whose unit turned over a Joint Security Station in Baghdad to the Iraqi army this summer said Iraqi soldiers looted the facility within hours of their official departure.

"When we returned to the outpost the next morning, most of the beds had already been taken, wood walls and framing had been pulled and several air-conditioning units had been removed from the walls, leaving gaping holes," said the officer, who spoke on the condition of anonymity because the event reflects negatively on the Iraqis.

Weeks later, the Caterpillar generator the Americans left behind was barely working, the officer said.


It’s interesting to note that in the United States, over 65% of all US federal government revenue derives from personal income taxes. Which means that this give-away is financed by—who else?--the US taxpayer. A frightful waste of money. Except, of course, for the lobbyists, contractors and perhaps even government officials who all earned their commissions from the process.

As with the phantom weapons of mass destruction, here goes the phantom reconstruction of Iraq. I wonder what will happen in Afghanistan when the US withdraws?

Sunday, 6 December 2009

The Costs of Poor Customer Service

I’ve often wondered how much money I could make if I had the capital to open a truly customer-focussed bank in Greece. To put this question differently: how much money is my prime bank losing because it is not concentrating on my needs?

We’ve been at the same bank since 1997, when the small Credit Lyonnaise chain was bought out by Eurobank. Every year, our corporate account in Greece brings in a 6-digit figure in billings from foreign clients. It’s all legitimate income: consultancy fees from development banks, chambers of commerce, manufacturers, business schools and other clients, and it’s all declared.

We have no uncovered banking debts, not delayed payments, no credit problems. We do not use cheques, so cannot bounce them. We are not on any black lists or credit watch lists. We declare our income, corporate and personal, in Greece.

In all this time, our bank has never once called me to ask me if I would like another product: a corporate credit card, a corporate overdraft; a higher credit limit on our personal visa cards; a life insurance policy. Nothing: not a single attempt at analysing our corporate and personal financial needs, and taking the initiative to offer something we could actually use.

The idea of personal contact is a joke: our enterprise account managers at the bank last an average of 18 months in our branch before they are rotated out somewhere else: Melissia, Elefsina, maybe Timbuktoo. Yet whenever I call the bank to ask a question, I get the standard response: “Who do you speak with in this branch?” I inevitably tell them the name of one of the lowest staff on the food chain–the nice, quiet fellow responsible for international bank transfers—because he’s the only one who hasn’t changed in all the time we’ve been banking at this branch.

This deliberate policy of ignoring customer needs carries a major financial price. I’ve become so fed up with the lack of basic courtesy and professionalism at Eurobank, that when it came time to take out a mortgage, I did a careful survey of all the other banks in Greece, and decided on Ethniki, the National Bank of Greece.

Now, think carefully about this. Ethniki will earn interest income of about EUR 275,000 on a 25-year mortgage of EUR 300,000, plus a further EUR 36,000 in mandatory homeowner insurance. That’s more than Eurobank will make off all our financial products—credit cards, corporate account, personal accounts, etc.—in about 550 years.

Does Ethniki have better customer service? Of course not. It happened to have a better mortgage product. I estimated the difference on interest costs over the life of the loan at about EUR 23,000 when compared with Eurobank. I would have been willing to negotiate with Eurobank to give them the chance of meeting this offer, if only I had the confidence that Eurobank gave damn about me. Since it does not, I did not, and we are now banking elsewhere.

None of this is rocket science. I'm sure Eurobank has a Customer Relationship Management (CRM) module on its banking network. I'm sure that if they wanted to, they could rank their customers by product, and do a quick cross-sale or up-sale analysis. They can even do it without software: it's simple. The failure is one of management: management cares about the bank; it does not care about its customers.

As long as we focus on individual transactions or gaining individual sales at the expense of the customer relationship and the customer’s needs, we will lose. Today’s world calls for careful planning, analysis and the reassurance that decisions made today will have a beneficial impact one, five or twenty-five years from now. Few companies in Greece seem to understand this; fewer still do something about it.

Thursday, 3 December 2009

The Afghanistan Surge

On December 1st, President Barack Obama took the long-anticipated step of sending an additional 30,000 US combat troops to Afghanistan. This will raise the total US troop commitment to between 100,000 – 105,000 troops, taking into account the 71,000 already in the country. NATO and other allies have an estimated additional 42,000 troops in Afghanistan.

I was struck by the negative reaction by Michael Moore and other liberals. Obama’s actions are somehow seen as a betrayal of core ideals, as war-mongering. Many commentators stated that Obama’s speech could have been delivered by George W. Bush. Take a look at the opening paragraph of Michael Moore’s November 30th letter to Barack Obama:

If you go to West Point tomorrow night (Tuesday, 8pm) and announce that you are increasing, rather than withdrawing, the troops in Afghanistan, you are the new war president. Pure and simple. And with that you will do the worst possible thing you could do -- destroy the hopes and dreams so many millions have placed in you.

Yet a surge of troops in Afghanistan has been a core platform of Obama’s election campaign. The plan to draw down troops from Iraq and re-deploy combat brigades to Afghanistan has been one of his earliest campaign pledges, as his website still shows:

Barack Obama will refocus our efforts on Afghanistan. He has a comprehensive strategy to succeed in Afghanistan with at least two more U.S. combat brigades, more resources and training for the Afghan Army, and a comprehensive development strategy.

What strikes me most of all is that the American public has perhaps finally realised that the war in Afghanistan is increasingly difficult to justify. On the one hand, the elected “government” of the country has lapsed into unbridled corruption and in many cases collusion with the Taleban. On the other hand, the situation in Pakistan is dire, all denials by that country’s government notwithstanding. All these facts have long been known to anyone with even the most cursory interest in the matter.

The costs of a combat deployment of 100,000 US troops in Afghanistan are likely to exceed $ 100 billion per year, using the rule of thumb that each 1,000 troops cost about $ 1 billion. This does not include the costs of replacing or repairing damaged equipment, treating long-term casualties, etc. Taking all associated costs into account, I doubt that this engagement will be any “cheaper” than Iraq, as some commentators have said in recent months.

Another interesting point: the lessons of the Iraq surge have been incorporated into the current plan for Afghanistan. There are resources for development, although these are a small proportion of the amount spent on military operations. There are sufficient analyses and policy statement on the causes of terrorism and extremism, methods of countering them, and ways forward, dating all the way back to the original Afghanistan Compact of 2001.

What remains to be seen is whether the West has the political will and the financial resources to actually implement these lessons. I sincerely doubt that it does, and I do not say this as a means of criticism, but of simple, rational evaluation of costs and benefits.

At one point, the alliance that is fighting in Afghanistan will have to decide whether it can afford to sacrifice men, blood and treasure to this conflict, for which it has no real strategic reason to be in which could not be better addressed by other means.

My feeling is that this point occurred in 2005-2006 for the majority of countries involved. It is only the self-interest of individual politicians that has sustained the level of troop commitment until now.

My predictions for the next two years: the surge will partially succeed, but 18 months will not be enough to create the conditions for lasting peace and prosperity needed to provide stability to Afghanistan. In contrast, the Taleban and Al Qaeda will play a waiting game in this time until political costs force the inevitable retreat of western troops.

In these 18 months, we will see higher casualties from IEDs and other indirect attacks than by open combat between western and Taleban units, and we will see that even 30,000 additional troops will not be able to “clear and hold” the ground in the south east of Afghanistan. The 1,500 mile border with Pakistan will continue to be porous. Despite active combat operations, I expect US fatalities to remain [relatively] low in this period, perhaps on the order of 150-200 troops.

Conditions in Pakistan and Afghanistan will deteriorate in terms of governance and political involvement. In Afghanistan, I doubt President Karzai will make any meaningful reform of the public sector or the involvement of warlords in governing the country. He will probably use every opportunity to criticize the west to detract attention from the real problems of the country. He will become increasingly despised and denigrated in the western media.

In Pakistan, I would not at all be surprised to see a new military dictatorship within the next 24 months, either in open or concealed form, and a new arrangement reached with Taleban groups to halt open warfare between the Pakistani Army and the Taleban. It is regrettable that neither Presidents Karzai or Zardari appear to be able to unify their own countries, at least in terms acceptable to western public opinion. But there are no easy answers to this issue.

The ultimate question is: “Is it worth it?” The easy answer is “no.” Bringing peace and stability to this area will take at least 25 years and civilian spending of at least $ 25-30 billion per year in excess of military spending. I don’t see any signs that anyone in the West is prepared for such a commitment, and indeed, most countries are considering their exit options. The US surge itself has a built-in expiration date.

However, you also have to ask what other options exist. Are we really prepared to exit Afghanistan and usher in a new dark age as the country sinks back into the pre-Taleban, Somali-like condition it was in before the Taleban consolidated control? What happens to Pakistan, and its 100-odd nuclear warheads? What happens to neighbouring countries such as Turkmenistan or Uzbekistan, which will be the next dominos to fall?

Difficult questions to answer. No such discussion can make up for even one life lost. On the other hand, very few such discussions highlight the good taking place on the ground in Afghanistan by international development efforts, or outline what should be done to expand these efforts so that within a generation, they can provide a lasting effect.

We seem once again condemned to launch grand initiatives destined to end in failure. Is the right course to try in the face of overwhelming odds, spending hundreds of billions of dollars and “sacrificing” hundreds of lives? Or to withdraw in the face of overwhelming odds, thus spending tens of billions of dollars and condemning thousands of lives to death and repression?

Wednesday, 2 December 2009

Going Postal in Terpsithea

One of my favourite Ukrainian sayings is that “no good deed shall go unpunished.” And indeed, since my blog post praising the Hellenic Post (ELTA) Office staff at The Mall appeared, I suppose it was inevitable that a catastrophe would occur. And it did. Let me explain:

On Monday, November 23rd, we sent a project invoice to a client in London using ELTA’s registered, express courier service. We’ve done this several times in the past, without any problem.

This past Monday, November 23rd, I called the client to see if the invoice had been received. After being bounced through four different departments, it was ascertained that the invoice had in fact not been received, and that the final deadline for accepting documentation for payments this year was on Thursday.

So, I logged onto ELTA’s Track & Trace service, and found, to my vast surprise, that the invoice never made it out of the country. On November 25th, the package was marked “Return to Sender” by the Central Post Office. Since I had not received the package back, I had to try to find it by calling ELTA and trying to sort out what happened.

There was no telephone number for the ELTA office at The Mall, so we drove over. The normally helpful office manager switched very quickly in typical Greek public sector mode:

“Please call the ELTA customer service number. They are responsible.”

I had already called the ELTA customer service number three times: no one bothered to pick up. (This is a classic procedure in the Greek public sector)

So the ELTA lady escalated: “Well, there’s nothing we can do. It must have been your fault – you probably didn’t write the sender’s address correctly.”

“Absolutely not,” I said. “First of all, the envelope was printed, not hand-written. Secondly, you (or your staff) hand-wrote the postal ticket, not us.”

“No sir, that’s impossible. We never do this!” She responded vehemently.

Bullshit. Every time I’ve ever been to an ELTA office for a registered letter, the staff fills out the ticket. But there was nothing to do. It was like a brick wall had descended: deny all culpability, blame the client. Any further rational discussion was futile: I didn’t want to “go postal” in my favourite post office.

This morning, I had sufficiently recovered my calm to call the Halandri post office (our office address is in Halandri). It took literally 10 minutes to explain the situation to a succession of disbelieving ELTA employees. Their first response?

“Call the ELTA Customer Service line!”
(I’ve already tried this – the system says it’s been returned to sender)
“What’s your address?”
(Pentelis Avenue – it’s in your jurisdiction)
“Why didn’t you send it from here?”
(What difference does that make?)
“Well, I’ll check, call back in 10 minutes”

…10 minutes later….

“I haven’t found it. Why do you assume it’s here?”)
(I told you – the ELTA Track & Trace system says “return to sender”)
“You have to call the office where you sent it!”
(I did – they say you have it)
“You have to call the Central Post Office!”
(I tried – the system says you have it)

Deadlock.

Finally, I was got them to log onto the ELTA Track & Trace System.

“Oh yes, I see it! It was returned to the Terpsithea Post Office.”

Stunned silence. Terpsithea? Where the f**k is Terpsithea? That’s somewhere down by Glyfada, nowhere near our office.

“OK,” I said, trying to control my panic “can you give me the telephone number of the Terpsithea Post Office?”

“No, I’m afraid I can’t. I don’t have the number” said the ELTA lady.
"Well, I’m actually on the road, can you just log onto ELTA’s website and find the number there?"
“No, I can’t do that either: we don’t have internet access here.”

OK, I gave up that avenue of approach. So I called 11880, a Directory Assistance line.

“Terpsithea … where’s that?” asked the phone guy.
I nearly lost it at that point, but managed to be constructive. “So what should I do?” I asked.

“Try the Glyfada Post Office – here’s the number.”

So I called the Glyfada Post Office. “Hello, can you give me the number of the Terpsithea Post Office”? "Sure," said the lady, "it’s 210-961-5251.” I was amazed.

I called the now-famous Terpsithea Post Office. “Yes?” another bureaucratic lady responded. I launched through the explanation, and got the typical responses:

“Call the Central Post Office!”
(The line doesn’t work – they already told me it’s here)
“Why would it be here – you don’t live here!”
(I know, but this is what your system says)
“We don’t have the system to check this”
(Can you please try – this is really important….)
“OK, please wait until someone responsible has time to look into this.”

Minutes passed. I had the nightmare vision of canceling a really important meeting, driving down to Terpsithea, and starting to scream. Then someone picked up the phone.

“Hello?”
(Yes, I’m trying to track a package which is lost….)
“You have to call the ELTA Customer Service Line, 800118200.”
(I tried – no one answers – the system says the package is there.)
“But we don’t have any such record”
(But the system says you have the record – check the tracking number)
“No, I see no record of this in our post office. You must go back to the post office from which you sent it.”
(But I already did this - they said you had it.)
“But we don’t have it – you have to go back to the post office where you are registered.”
(But I did this – they said you had it.)
“But why would we have it?”
(Because that’s what the system says!)

This was apparently good enough for her: if the system says it…it must be true. So she looked through her records. Nope, nothing on hand from Navigator, for London, to be returned.

Another conversation ensued. Finally, she had the inspiration and the initiative to look back in her hand-written log.

“Oh yes,” she said. “We found this package in our post office on November 26th, and sent it on to London.”

I was stunned. I didn’t know whether to laugh or cry. Perhaps both. The best part came just 30 minutes ago, when my client confirmed that yes, they did receive the package.

What I can’t understand in all this process is what’s more absurd: the fact that ELTA sent the invoice to Terpsithea, which has absolutely no relation to me or my business, or that ELTA has a Track & Trace system which apparently I know how to use, but few ELTA staff do, and which apparently doesn’t work anyway.

Luckily, the package got through in the end. No good deed goes unpunished. And, it seems, perhaps no bad deed goes unrewarded either. Now, if only I can get paid!



PS As a public service, take down the following telephone numbers:

ELTA Office, The Mall
210-619-6804
ELTA Customer Service Line
8001182000
ELTA Customer Service Line (internal)
210-335-3373, 210-335-3100
ELTA Office, Halandri
210-681-2230, 210-684-1650
ELTA Office, Glyfada
210-964-3095
ELTA Office, Terpsithea
210-961-5251

Thursday, 5 November 2009

Good night Dnepropetrovsk!

My last night in Dnepropetrovsk. Our business dinner ended unexpectedly early, and I find myself in the hotel restaurant, reflecting on how things change-and how things remain the same.

The first time I visited Dnepropetrovsk was almost exactly ten years ago, at the end of November 1999, for a company named Ista Battery. Dnepropetrovsk was a different city then: freezing, grim, caught in the throes of the economic collapse following the Russian ruble devaluation. On Karl Marx Avenue, few stores had anything to sell. At the vast, crumbling Hotel Dnepropetrovsk, a 19-storey Stalinist hulk on the Dnieper river, there was no hot water on the upper floors, and the floor monitors cast a jaundiced eye on all our comings and goings. There were perhaps three restaurants worthy of the name in the entire city of over 1 million, and very few people had money to eat in them.

The snow came early that year, and the temperatures quickly reached freezing. A few Ladas and Zhigulis sputtered and coughed their way down the streets; the world was a perpetual state of grey. Crumbling factories, crumbling apartments, crumbling hopes.

Fast forward to November 2009, and it’s a different place. Karl Marx Avenue is lined with expensive stores: Escada, Ermenegildo Zegna, Levis. Good restaurants are on every block: Nobu, Pastoral, Paris, Charly, Kadri. Wifi connections are everywhere. New shopping centres and office blocks have been built, their marble and granite brightening the crumbling Soviet-era apartments. People are better-dressed, better-fed, optimistic.

Despite the current crisis, there is a feeling of potential in the air. Things are tough, but they will get better, and eventually things will normalise to the point where Ukraine is indistinguishable from other European countries, at least for the young. Indeed, for most of them, this point has already been reached.

My client this time around is another manufacturer. In just 8 years, they have built a plant which is among the largest and most modern of its kind in the world. All-new Western machinery. A sparkling factory floor. Top quality products. A capacity for 7 million units per year. To most Ukrainians, manufacturing comes naturally, instinctively. Their thinking is Cartesian and linear. Their ability to plan and improve a manufacturing process is unlimited by tradition or custom.

Nearly every Ukrainian oligarch I meet begins our meeting with the line: “In the next five years, we will be one of the top 10 companies in Europe.” Many of them have actually achieved this. Some of them grow complacent: they drive around in black Porsche Cayennes and spend their money on extravagance. But most of them buckle down. Seven million batteries is just a start: the next step will be another plant for industrial batteries. Then a lead recycling facility. Then renewable energy solutions. There is no limit to the progression. The only limits are of time, capital and human resources.

Sitting in this hotel restaurant, I feel rather humble. In Greece, my country, we are still arguing about the basics. Should university education be public or private? Should the government re-nationalise ports and telecoms? Should an investor dare to build a soccer stadium and mall in the wasteland of Votanikos? Should a 5,000-room hotel complex be licensed on a barren peninsula in Crete?

Looking at it from the perspective of this city, we are frivolous and spoiled. We complain about forest fires, yet every day drivers toss their cigarette butts from their cars. We expect other countries to admire our history, but seem to have forgotten that our historical achievements required sacrifice and self-discipline to achieve them. The notion of arête, of the search for excellence, has largely been forgotten. Instead, we spiral into mediocrity, into the drone of morning TV and failed expectations, empty words in a hollow echo chamber.

This city started only a short time ago from nothing. Generations of Soviet planning had turned Dnepropetrovsk into a vast zone of grey, crumbling concrete. People were disciplined to follow orders. The concept of market cost or market price had not meaning. Just 20 years after the fall of the Berlin Wall, this city has made tremendous progress. Immeasurable, if compared with our western standard of living.

And a small group of business entrepreneurs built one of the most modern factories in the world from scratch, in 8 years, from nothing, and show no signs of slowing down. I have two more meetings tomorrow morning, then sprint for the airport and the long flight home. I return to Greece inspired, with different expectations, and a higher standard of achievement than I had when I left just a week ago. Of all the places to find inspiration, I found it in this industrial city on the banks of the Dnieper River, 10 years after I first arrived.

Good night Dnepropetrovsk!

Campaigning versus Governing: Understanding the Republican win of Virginia and New Jersey

The elections this week in NJ and VA illustrate the classic split between campaigning versus governing, and highlight the problems the Obama administration currently faces.

In both elections (as in the national elections last November), the campaign challenger held the upper hand over the incumbent (or the challenger associated with the incumbent party):

• Most regular voters were concerned with the rapidly declining economy and faced with personal insecurity. This remains the main driver of public perception in the present time.

• A challenger can easily challenge the incumbent’s record: public debt in both NJ and the US has reached historic levels. In this scenario, it does not matter, for instance, that Governor Corzine managed to reduce NJ’s debt by $ 2 billion: it’s still too high, and still restricts public initiatives to manage the economic downturn.

• The Democratic incumbents in NJ and VA had all been in power for at least 5 years. This gave the challengers abundant scope to raise the red flag of change, which, it should be remembers, is not a campaign trademark of Barack Obama.

We can take a quick look at the national stage and understand what this presages for the Democratic incumbents of the White House, Senate and House of Representatives:

• Far too much political energy is being focused on healthcare, climate change and a range of other initiatives which, though worthy, do not readily translate into a change in the daily life of most regular voters.

• Most regular voters continue to be affected by declining (or stable negative) economic conditions: unemployment; negative or nascent demand; employer cutbacks in compensation and working weeks; etc. There is precious little coming out of Washington dealing with these issues.

• Most politically-informed voters of the independent mindset (which includes as much as 40% of the voting public according to some polls), are upset by the fundamental inability or unwillingness of the Obama administration to address the mounting deficit. In addition to the deficit, the impact on the public debt of health care (where the final debt amount is still unknown, or challenged), as well as foreign wars, is deleterious.

• Finally, most voters are increasingly concerned about the wars in Afghanistan and Iraq. While we have accepted the “loss” and withdrawal of Iraq, it’s impact is mitigated by the fact that this commitment is over. On the other hand, there is mounting concern over the US direction in Afghanistan. Most voters see that we have been caught in Afghanistan for over 8 years with little to show in terms of results. The financial costs are rising; more casualties or fatalities are coming home, and the Afghans have just elected a corrupt president who apparently won the election on the strength of over 1 million tainted votes, while the US Secretary of State offered some inane platitudes.

All this adds up to one message: the Obama Administration has lost track. It is dealing with complex issues in domestic and foreign policy which have little to do with the everyday economic concerns of most American families.

The tremendous idealism generated by the campaign has not survived —and probably could never could—the tedious process of legislation and governance. This is why most younger voters have either stayed home or split their votes in the two races for governor.

If I have one message for the Obama administration, and politicians everywhere, it would be to prioritise on the economy and the economic issues which affect the majority of Americans. No one, not the hardest union worker, nor the most independent professional, nor the most well-paid CEO, is happy with either the state of the economy, or the state of public debt.

There have to be two types of measures:

a. Short-term measures to stimulate employment and raise real wages, and
b. Long-term measures to cut public debt.

Structural interventions, such as healthcare, education and renewable energy, should be addressed only once the economy has returned to a sustained growth track, and there is a clear understanding of how the debt will be reduced (and how policy in other domains will be funded).

Everything else should be prioritized against these two fundamental objectives. While our political classes may think we have the luxury of spending time and money as if there were no tomorrow, most taxpayers think otherwise.

Sunday, 1 November 2009

Does Deputy Minister Panos Beglitis Actually Work?

It seems that whenever I turn on Greek TV these days, Deputy Minister of National Defence Panos Beglitis is there, waiting to enlighten me with his views on a vast range of subjects. Morning, afternoon or evening, I see him holding forth on the Stage programme, the national deficit, and the electoral system of Greece. In fact, I see him commenting on all subjects except the ministry for which he hold a portfolio: Defence.

Prime Minister George Papandreou, in his first, televised Cabinet Meeting, warned his Ministers to keep a low profile and work hard in the interests of the Greek people. How does the behaviour of a vast number of Greek officials since then measure up to this?

Instead of being “hard at work” in their respective ministries, they seem to spend a good deal of their day going from studio to studio. And don’t think they have anything specific to announce: rather than outlining any specific plans for resolving a vast range of problems Greece confronts, they bicker, kafeneio style, about who’s fault it is.

For instance, a major issue confronting the government is that of the Stage “crisis”. Under the EU-conceived Stage programme, young people were offered the chance to work on a temporary basis in government, semi-governmental and private sector organisations. This was conceived as temporary work, for a period of 12-18 months, at reduced salaries, in exchange for job experience.

Greece being Greece, this programme has apparently metastasized into a huge patronage programme for political supporters of the previous government. These tragic, though rather hapless individuals, have been screaming on television for the past 2 weeks about how they have been doing “real work” for a very long time (some have been working for over 40 months in their “temporary” positions), and are now threatened with the termination of their contracts, with no opportunity for favourable terms of recruitment as permanent public civil servants.

What is equally surprising is that no one in the Greek government can give a precise figure for how many people are actually employed, and under what terms. The Minister of Labour has held repeated consultations with OAED and other authorities to try to sort things out. For his trouble, he is under fire not only from the Stagiares, but even from the main trade unions, who refuse to countenance public sector recruitment under favourable terms for anyone except, of course, their own members.

Yet despite the absence of core data, politicians, reports and other commentators of every stripe have an opinion to offer, each one more strident than the last. But the public doesn’t need more confusing hot air: it wants solutions. PASOK was elected on the strength of its promises: now it’s time to implement them, in the face of a high public debt and a continually-declining economy. Political point-scoring on talk shows is not a recipe for this.

Mr. Beglitis, with all due respect, the next time I see you on TV, I hope you will be speaking authoritatively about Greece defence priorities and strategies, and not a subject outside your remit. I realise you are a Member of Parliament, and of course fully entitled to your opinion. But under your watch (and that of Minister Venizelos), Greece has to deal with strategic issues such as:

• Achieving air parity, or at least deterrence capability, in the face of overwhelming superiority from Turkey. This involves strategic decisions on future purchases of the F-16; resolving the issue of Greece’s possible commitment to purchase the Rafale; and decisions on the next-generation fighter, particularly given that Turkey is a consortium member of the F-35.

• Resolving the issue of the four submarines currently on order from the Skaramangas shipyard, and the eventual fate of the first of this series, which has serious problems. This issue needs to be solved among the wider issue of the competitiveness of the Greek shipbuilding sector, and Greece’s political relationship with Germany.

• Strengthening the ability of the Hellenic military and political forces to deal with a military crisis. The recent anniversary of the Imia crisis, and the publication of a major book on this subject, reveals a wide gulf between PASOK’s civilian elected leadership, its military generals and its forces on the ground. Has anything been learned from this?

• Resolving the general modernisation and professionalisation of the Greek army, including the future role of the conscript force in an age of electronic warfare and the integration of C3I into battlefield operations. What are the Ministry’s plans for real-time satellite or drone intelligence on the battlefield? Do we still have the capacity to hold Greek islands in a conflict given Turkish air superiority?

• Optimising the force structure of the Hellenic Armed Forces, including long-term strategic roles and offensive/defensive capabilities. A key issue here will be sustaining military investments in an age of growing deficits and total public debt. A further key issue is providing adequate salaries and living allowances for military officers and professional soldiers.

I look forward to hearing your—and PASOK’s—policies and ideas for these subjects. I’d prefer to hear comments about the Stage programme or the national debt from the relevant Minister. The election ended on October 4th: please use this window of opportunity to work on the crucial issues confronting Greece.

Thursday, 22 October 2009

Come to Dinner

Last week, I received news that a project in Ukraine that was supposed to start this past Monday was moved to Monday, November 2nd. Being in Athens, I decided to invite some friends to dinner that I hadn’t seen in a long time.

First I emailed Stratos and Olga: Come to dinner. Fifteen minutes later, I received an email from Olga: “Stratos is in Cairo this week, getting back on Thursday.”

Then I emailed Kostas: Come to dinner. An hour later, Kostas calls me: “Re file, I’m at the airport now, leaving for Skopje. I’ll be back on Wednesday, but landing at 21:30, and it will be too late.”

“OK, I said, “how about next week?” “Next week I’m leaving for Bulgaria…will be gone the whole week.” “Kala,” I said, “let’s keep in touch.”

Then I emailed Alexandros and Christiana. Alexandros could make it, but Christiana had a university session after work and would arrive later. I count myself lucky to see them: apart from a totally chance meeting in Thessaloniki last week, we’ve only managed to see each other twice in four years, despite being holiday neighbours.

Luckily, Eri and Christos agreed to join us, and I managed to get the magic number of four friends together.

But then I had to call the cleaning lady. “Jenny, hi, will you come on Wednesday?” “No Mr. Philip. I’m leaving for Canada to see my relatives.” "Great Jenny. When will you be back?" "In three months sir."

In a fit of reflection, it occurred to me that we’ve all become a bit like the Massively Productive Business Executive I knew while living in Paris, scheduling breakfast meetings two months in advance.

But writing this blog post, I suddenly realise that yes, we’ve actually become “Europeans." Our goal of convergence has been achieved:

• The spontaneous visits of friends and relatives has been replaced by rigidly scheduled meetings, planned far in advance and ending early due to the need to wake up for a demanding next day.

• The emphasis on personal contact over a coffee or ouzo has been replaced. Now, we far more available in terms of communication--we are logged on to Facebook or Skype nearly 24/7; we have email and GSM. But while this medium provides ready contact, it is impersonal and superficial, dominated by the technological channel and in some cases can lead to dramatic misunderstandings.

• The days we used to know where our parents would work until some time in the afternoon, and then leave their business and worries behind, are over. We are now in business mode 24 hours a day. If not actually working until 20:00 or so, we are still thinking about work issues. Or logged onto Internet. Or watching TV. Or doing something solitary rather than collective.

• Our vacation habits of decamping to the village for weeks on end are over. We are lucky to get much vacation time at all, and we typically split that between multiple locations over the year. As a result, we have almost no ties to the rural environments our families come from.

So we face a shortage of these two most valuable resources—time and friends—as a consequence of our professional success and our modern lifestyle.

Another irony is that in a time of high unemployment and massive investment in vocational education and training, finding skilled labour in Athens today is practically impossible. Our cleaning ladies travel to Canada and simply can’t be replaced. And if your regular plumber disappears, try finding a new one.

Don’t get me wrong: We had a great dinner! The [new] plumber finished installing a new kitchen faucet 5 minutes before the first guest arrived. We managed to pull off a cleaning job in record time. And I didn’t burn the food.

But the best part of it was enjoying the company of good friends and great people that we all too rarely see. The simple act of breaking the weekly routine and taking time out for something different, for ourselves, was revitalising. It’s a habit we will develop more of.

Wednesday, 21 October 2009

Going Postal in Greece

The phrase “going postal,” for those readers of this blog unfamiliar with American culture, has its roots in a series of violent incidents by United States Postal Service employees. The most serious of these occurred in 1986 on Oklahoma, in which 14 people were killed and several wounded. In popular vernacular, “going postal” refers to someone who, goaded beyond his endurance, breaks out into violence.

It’s a feeling that anyone standing in one of the seemingly interminable lines which afflict Greek public administration is familiar with. The last time I visited the Geraka post office (ELTA), there were literally 30 people in line, served by 2 postal employees who, while making every effort to be helpful, probably would have lost a footrace with a snail.

And yet, yesterday, Christine and I had an experience in the ELTA Post Office at The Mall which contradicts all previous experience. We visit this branch often because (a) it rarely has more than 2 people waiting in line; (b) parking is easier; and (c) there are convenient outlets of Cosmote (for paying bills) or Eurobank (for other transactions) right next door.

Yesterday afternoon we were sending brochures for a training/consultancy programme I’ll be delivering in Cyprus on November 10-11. There were 57 envelopes to send; each envelope cost precisely 1.42, and required four stamps: 2 x 50 cents; 1 x 40 cents and 1 x 2 cents.

To my vast surprise, after watching Christine and me struggle with the stamps for about 5 minutes, two of the three staff in the room came over and started to help us separate the stamps from the sheets, stick them to the envelopes and prepare everything for mailing.

I was astounded. This was a simple, spontaneous act of kindness which one sees all too rarely in the public sector. As a result, we were finished in about 20 minutes rather than the 40 minutes it might have taken.

Unfortunately, besides my profound gratitude expressed at a personal level, there is probably no chance these employees will be rewarded for their effort. “Customer” feedback is, as far as I know, unknown at ELTA. If anyone knows of any way for me to send a formal letter of thanks to ELTA, please let me know.

Tuesday, 20 October 2009

Greek Political Madness

I can’t help but be impressed by the apparent lack of any shame or sense of personal responsibility of politicians in general, and in this case, the politicians in Greece.

At lunch I briefly turned on NET, the Greek public television, and saw none other than Mr. Antonis Samaras. While I greatly respect his personal abilities, I was struck by the fact that in the interview, he stated that his goals are to re-unite ND, and re-connect it with the citizens. I couldn’t help thinking: isn’t this is the same politician who’s defection from the Mitsotakis government caused the fall of that government in 1992? Exactly which unity is he talking about?

NET then showed a GPO poll with the four contenders for ND President. Once of these candidates, who’s name I will omit, was widely known as “Mr/Ms. 10%” during their term in office. The 10% was a reference to the kickback level requested when confronted with a licensing request or other regulatory issue.

Just before this, NET showed Minister Filippos Petsalnikos, now Speaker of the Hellenic Parliament, receiving an update on the Greek economy from the Governor of the Central Bank of Greece. Mr. Petsalnikos is the same politician who, together with Theodoros Pangalos and Antonis Papadopoulos, was forced to resign over their handling of the Ocalan affair in 1999. Today, Mr. Pangalos is Deputy Prime Minister.

What to make of this? Should we assume, as the optimists do, that everyone is entitled to a mistake, and that a re-election is sufficient grounds to wipe away past sins? Should we assume that no one is perfect, and therefore we cannot cast any stones?

Should we relativise the issue? Since all Greek politicians are corrupt, why do we worry about these individuals in particular?

Should we assume that there is quite simply no accountability in politics?

One thing is quite clear to me: I’m disgusted at seeing these same faces, preaching their tired speeches of responsibility and duty, when they apparently consider themselves exempt from this. Given that none of them has shown any particular sign of competence in terms of good public administration, I honestly wonder why they are there.

It’s too bad that neither the heads of our political parties, nor our voters, have determined that the best thing to do with a useless politician is to retire them. This does not mean promote them, it means send them home to anonymity, where [one hopes] they can do no more harm to the country.

Instead, we have the opposite system: politicians collect a long and impressive record of failures, omissions, accidents, errors and corrupt or at least highly questionable decisions. And to reward them, they are not only re-elected, but re-nominated to sensitive, executive posts.

This apparently lasts for generations, either until they suffer a crushing electoral defeat, or they suffer a debilitating health crisis, or they parachute their children into their Parliamentary seat.

Is there such a collective failure of innovation, creativity and effectiveness in our political system? And what are we going to do about it?

Monday, 12 October 2009

Living in a Parallel Reality

All last week, I had a powerful sense of living in some form of parallel universe. The dislocation began sharply on Sunday evening, when the election results in Greece rolled in: PASOK won by a landslide. In this universe, it did not matter that PASOK has no economic platform to speak of: it was elected by a margin of 10.5%.

It did not matter that in the week before the election, PASOK shadow Minister of Economy Louka Katselli made repeated references to the state re-nationalising “strategic enterprises”, such as Olympic Airways or the Hellenic Telecommunications Organisation, or the ports of Athens and Thessaloniki.

In this parallel reality, it was not impossible that a bankrupt government would conjure money for this like candy-cane. Nor was it a problem to believe that a government role in these organisations was beneficial. The disastrous result of previous government ownership would be miraculously annulled; a new era of Socialist efficiency would flourish.

In this utopia, it was possible to believe that a efficient government was possible, when Socialist dinosaurs like Theodoros Pangalos, perhaps best known for his role in the Ocalan case, or Evangelos Venizelos, who’s capers in the Ministry of Culture are still celebrated, hold key positions.

It was a parallel universe where speaker after speaker representing the defeated New Democracy would claim on television that self-reflection was needed, and ignore what so many voters know: that New Democracy failed to deliver most if not all of its election promises, and leaves a mess behind it.

No, of course it can’t all be blamed on ND. But enough can: two disastrous fires; the Siemens bribery scandal; the Vatopedi scandal; the structured bonds scandal; the Zahopoulos “revelations” on public finance in the Ministry of Culture. Each of these dossiers today is either closed or unresolved, and something tells me PASOK will not be in a hurry to re-open them.

It was a parallel reality where the hapless leader of the Coalition of the Left (SYRIZA) got up and proclaimed victory because “we are in Parliament,” despite having lost nearly ½ his electoral strength. As if the electoral result was not enough, we heard renewed promises of some kind of “real” socialist revolution in the years to come.

And, I’m afraid it was a parallel universe where on Friday morning, the Nobel Committee awarded the Peace Prize to Barack Obama, “for achievements already made.” I was almost sure this was a hoax, but no, it was true. Somehow, his meager diplomatic triumphs—including paying some destitute South Pacific island to resettle Uigher “terrorists” from Guantanamo, or convincing Turkey to drop its veto of Anders Fogh Rasmussen as Secretary General of NATO—were sufficient for the prize. Certainly, there have been no other achievements in the international realm that I can think of.

And here I was thinking that Mother Theresa or Woodrow Wilson had actually achieved something. Not any more, not judging by this standard.

We are asked by politicians across the world to suspend our disbelief, to turn off our historical memory, to cease any form of independent or objective analysis. And instead of this, to slavishly accept election slogans as a substitute for reality. It’s really no surprise to me that our countries or our societies are in such a mess. What is unfortunate is that I see almost no serious signs that we are prepared to do something about it.

It was with great relief that Friday evening arrived, the weekend started, and I resolutely logged off my news accounts and turned off the TV. Forty-eight hours of peace, calm and sanity returned to our little neighbourhood of Geraka. I’m really dreading what this week will bring.

Monday, 5 October 2009

Karamanlis deserved to lose; did Papandreou deserve to win?

A powerful sense of surrealism hit me upon my return to Athens on Monday evening. For those unaware, national elections were held on Sunday: the opposition PASOK party received what amounted to a landslide victory, winning some 44% of the popular vote and a majority of 160 seats in Parliament. The ruling New Democracy (ND) party received some 33.5% of the vote, and 92 seats in Parliament (down from 151 in the previous government).

The results were unequivocal. Yet I watched the evening news in disbelief as successive ND worthies gave variants of the standard line: “We need to investigate the reasons of our failure.” “We need to engage in a dialogue as to what went wrong.” But aren’t these reasons obvious?

The past 5.5 years of the two Karamanlis administrations have been a litany of failure and lost opportunities. Kostas Karamanlis was elected with overwhelming support, precisely to implement the same electoral promises he has made in the most recent election:

• Reform and streamline public administration
• Reduce the public debt
• Eliminate corruption
• Improve public services, particularly in education, healthcare and public security.

Instead of using this mandate, it’s been business as usual:

a. A succession of corrupt practices, ranging from the improper re-selling of a structured bond to the Zahopoulos fiasco to the Vatopedi scandal to the Siemens corruption probe was essentially allowed to go unpunished. The public simply does not believe that “all cases have been sent to justice”, when it was obvious that not a single person has faced criminal prosecution, and the statute of limitations on crimes by politicians has been repeatedly used to provide immunity to key parliamentarians. No justice has been served. To this day, we still do not know who was responsible for the Vatopedi scandal, how much property was illegally “transferred” and what the government got back when it “froze” the deal.

b. Government debt rose from EUR 195.3 bln in 2005 to 237.2 bln in 2008, according to Eurostat. Taking into account government borrowing which has already occurred in 2009, debt is forecast to rise to between 108-110% of GDP by the end of this year: over EUR 260 billion.

c. In addition to heavy borrowing, there are high unfunded liabilities in pension funds, healthcare and salaries of temporary staff. IKA and OAEE (the two main insurance funds) stated that they needed at additional EUR 553 million to cover obligations in November – December. Hospitals owe over EUR 4 billion to suppliers (some estimates are as high as 6-7 billion). Some temporary staff in the public sector report that their salaries are 3-4 months in arrears. All this indicates that despite the high on-record borrowing, there are still large amounts of operational budget arrears which are not funded.

d. There has been no discernable fall in either public administration headcount, or rise in public administration efficiency. Some strong steps have been taken, such as budget consolidation, limited online interaction, privatisation of Olympic Airways, etc. But few core structural reforms have been made.

e. The Greek state educational system is irrational and uncompetitive against most of its OECD peers. The continuation of Article 16 and the issue of university asylum remain deadlocked. Greece is in violation of the spirit and letter of EU law on academic and vocational education, and shows no signs of addressing this in a coherent, systematic way. The fact that private higher education is unrecognised in Greece by the government is incomprehensible. The fact that primary and secondary education has among the shorted school hours and the most theoretical, centralised standards for curricula and teaching may have been acceptable in 1929, but is no longer acceptable today.

f. Public security has not improved. Complicated the situation is the influx of hundreds of thousands of undocumented immigrants who live in an illegal limbo, with no recourse to law and no means of support.

Karamanlis was elected in March 2004 to solve these problems. One of his memorable campaign lines at this time was “Η Ελλάδα εχει γίνει ξέφραγο αμπέλι” (“Greece has become a fenceless vineyard”). What has changed since then? Not much. Yes, there have been positive changes, but these are mainly at the periphery of public administration and national competitiveness. As a whole, his leadership has been a disappointment. He has never demonstrated a control over his own party, let alone the functioning of the government. Without this basic pre-requisite, it is impossible to take control of the issues and work systematically towards their solution.

For me, at least, it’s clear that Kostas Karamanlis justly deserved to lose this election. It is not at all clear to me, in contrast, that George Papandreou deserved to win it. His party, like Karamanlis’, suffers from the presence of party “barons”, many of whom have a long and painful history of blunders, errors and corruption. His political promises were nebulous, and often relied more on stringing positive adjectives behind a noun than offering any meaningful number or innovative policies.

Several leading PASOK members (and soon to be ministers) are Socialist academics with no real private-sector work experience, and a worrying willingness to re-insert the state in sectors “of strategic interest”, such as Olympic Airways or Hellenic Telecom. This ignores the disastrous consequences of government management of these companies in the past.

Yet Papandreou’s greatest problem is a lack of credibility. I don’t see how you can leave your walled villa, get into a chauffer-driven Lexus 4x4 each morning, and be driven downtown to practice Socialism. I don’t see how being leader of the Socialist International qualifies you to solve the problems of Greece’s public administration, since many of these problems date back to previous Socialist administrations. And I don’t see how the issue of corruption or the public debt or healthcare or education or any of the other pressing problems will actually be solved.

In my opinion, we’ve changed one outmoded political party for another. There do not appear to be any serious plans for meeting Greece’s obligations either under the Lisbon Agenda or the Stability and Growth Pact. Instead, it’s nice words, incremental promises to special interests, but no willingness to take the cross-party, clean-slate, cost-benefit approach which is critically needed to solve Greece’s problems.

My feeling continues to be that unless a totally new political party, indeed a post-ideological political movement is created, we will be arguing exactly the same questions four years from now.

Tuesday, 29 September 2009

Enjoying the Greek Elections

National elections have been called in Greece for October 4th. Although this may sound counter-intuitive, it struck me last night that the Greek electoral process is vastly superior to its American counterpart:

1. In Greece, everyone knows the politicians are lying, including the politicians themselves. Despite their best intentions, they cannot or will not implement about 85% of their campaign promises. This is a huge advantage over the United States, where true believers still hail George W. Bush as a “compassionate conservative”, and where Barack Obama still walks on water.

2. In Greece, it’s a short campaign. Elections were announced in early September in a televised address by the Prime Minister; the election occurs on October 4th. That’s just over 1 month of campaigning, compared with a US process in which primaries take over a year, and the elections usually 3-4 months after that, and then administrations change two months after the election, in January. This means that in a four-year Presidency, the campaign starts some 2 years prior to the election: 50% of the term of the Presidency is spent campaigning.

3. In Greece, it’s a cheap campaign. Free airtime is provided by all channels. Most expenditure is on additional TV advertisements and outdoor advertising. It’s far less than the billions spent on US campaigns.

4. There is broad and real representation in both national politics and the Greek Parliament. The Parliament currently has five parties, representing the far left to the right. In the United States, despite the presence of the odd third-party contender such as Ralph Nader or Ross Perot, the House and Senate have essentially been duopolies since the beginning of the Republic. I think it’s far healthier having a more diverse political representation, rather than giving two decrepit political parties a monopoly of decision-making.

5. In Greece, in addition to hearing from the party leaders, we hear from party MPs who are slated to become ministers in government debate during the campaign. Yesterday morning, for instance, the PASOK and ND candidates for Minister of Economy & Finance, Louka Katseli and Iannos Papantoniou, were slugging it out on ERT’s morning show. This is great stuff: it permits a far greater level of assessment by the public. In the US, in contrast, the election is all about the President: we only find out about Cabinet nominations some 3-4 months later.

6. And, perhaps most strikingly, the Greek electoral process is straightforward and simple. Voters cast paper votes in their registered place of residence, displaying their legal ID cards. There is no possibility of hanging chads; no need for expensive, computerised voting machines that can be hacked; no way to disenfranchise a voter. Every Greek citizen of 18 years or more has a right to vote. The voting and counting process is overseen by the Bar Association and representatives of political parties. Results are announced by 22:00 of the day of the vote. Recounts, legal processes and Brooks Brothers mobs stealing the Florida election are unknown.

It’s also true that Greek politics are noisy, direct and personal. You may think that having six politicians of various stripes screaming intelligibly at each other in the “parathirakia”, or windows on evening news broadcasts is low behaviour. In fact, it’s politics in its purest form. Debates in the Senate of ancient Athens must have been just like this; debates in the early Congresses in the United States must have been quite similar.

I must say I am enjoying the Greek election far more than I enjoyed the interminably cheesy show between Barack Obama, Hillary Clinton and John McCain. This battle of the titans was long on superficiality and stupidity, but short on common sense and ordinary decency, and is unfortunately replicated in the broken-down, corrupt legislative process we see in Washington today. The American tendency to demand that Presidential candidates are immaculately conceived is ludicrous, particularly given the tremendous costs of the US electoral process which assures rich, special interests a seat at any decision-making table.

In Greece, it’s a far more human, far more simple process. The politicians scream a bit more loudly that usual on the evening shows, a few political rallies are held, and then it’s voting day. And at the end of it we will go back to our tavernas and offices and supermarket aisles without deceiving ourselves that too much has changed, or that the new saviour has come.

Thursday, 24 September 2009

America Exceptionalism (ii)

What is it with Barack Obama? He can give a great speech, but either he or his speechwriter have a streak of willful arrogance that is totally discordant with reality. Consider these lines from his UN speech:

"This is what we have already done, but this is just a beginning. Some of our actions have yielded progress. Some have laid the groundwork for progress in the future. But make no mistake: This cannot solely be America's endeavor.

Those who used to chastise America for acting alone in the world cannot now stand by and wait for America to solve the world's problems alone. We have sought in word and deed a new era of engagement with the world, and now is the time for all of us to take our share of responsibility for a global response to global challenges."


As I asked before in my blog post about Susan Rice’s comments, WHAT is he talking about? What problems has America solved alone?

Global warming? The US refused to ratify Kyoto under Clinton and Bush. Today, it is the largest emitter of CO2 in the world, and has no real plan for long-term environmental efficiency or CO2 abatement.

Terrorism? The US invasion of Iraq has led to hundreds of thousands of dead and trillions of dollars in damage, with no perceivable benefit in stopping terrorism or the proliferation of weapons of mass destruction. In Afghanistan, politicians dither while the troops make endless sacrifices and thousands of people are killed.

The global economy? US banks and investment firms are at the heart of the current economic collapse. After trillions of Federal dollars pumped into the system, the US financial industry now continues to lobby against any kind of meaningful regulation of the sector.

Mr. President, an objective observer of current events would conclude that rather than solving the world's problems, America has played a leading role in creating many of them. Let's keep this in mind when we lecture the world at the United Nations.