Monday 14 March 2011

The Greek media and the financial crisis

One of the greatest challenges affecting Greek understanding of the current debt crisis is the apparent difficulty of the mainstream television channels to understand the key issues and ask the right questions.

This reticence may be a structural issue: most probably journalists do not have an in-depth understanding of economics or finance, and may be appointed to their posts for other reasons (including physical attractiveness, personal connections, and personal ratings). It may also have to do with the fact that the government exercises certain forms of control over the media, such as allocation of public advertising budgets or issues such as debt forgiveness (which is a major issue with Alter at the present time).

Yet the fact remains that in the public broadcasting channels (ERT, NET, ERT3), the quality of coverage is extremely poor. A typical example is seen in the coverage of comments today, Monday, 14 March, in which the results of the EUR 110 bln debt rescheduling led each broadcast, together with the Japan earthquake.

Some typical points mentioned in the afternoon (15:00) and evening (21:00) broadcasts were:

·         Coverage of George Papandreou’s press conference outside the Presidential mansion, that Greece had “won a battle, but that the war was still being fought.”

·         Coverage of Press Spokesperson Petalotis’ bombastic and contradictory press conference, in which he stated among others that “we did not ask for anything, no one gave us anything, whatever we have earned we have fought for”, etc.

·         That European leaders apparently commented about the unfair decision made by Moody’s.

·         That the revised agreement would, according to a statement by George Papandreou, “save” Greece EUR 6 billion per year.

·         That spreads had “fallen” while the stock exchange had rebounded.

The tone particularly on NET was triumphalistic: that Greece has one again prevailed in a war against external enemies, that Greece has been “saved.” Additional comments were made or implied that Greece was no longer part of the problem, but part of the solution; that Ireland and Moody’s were the new problems, etc.

As a parenthesis, I must say I was equally amazed at George Papandreou. Upon his return from Brussels, he summoned his Cabinet for an emergency meeting, and read them this speech. Honestly speaking, I can’t think of a graver waste of time than to summon 30 people into a room on a Sunday afternoon to read out a 5-page speech full of empty platitudes and inaccuracies. I am certain that North Korean reports on agricultural output are more interesting than this. 

Yet throughout this television coverage or the Prime Minister’s speech to his Cabinet, I didn’t hear any of the really important questions being raised:

a.       I didn’t see a single chart or table showing what the annual instalments and total interest paid were before the loan rescheduling and after.

b.      Because such data were not presented, no reporter asked how Greece would pay back the EUR 110 bln, which by simple calculation will cost at least EUR 18 billion per year from 2014 onwards, and which implies an 8% GDP surplus being allocated to debt repayment. (Such a surplus has never before been achieved in Greek history in hard currency terms.)

c.       Nor did I hear any reporter question Greece’s future payment capacity given that the budget deficit in the first two months of 2011 is EUR 1.028. Equally, no reference was made to the remaining EUR 230 billion (in present value) which have to be repaid, or what happens when interest rates on this re-set from 2013 onwards.

d.      Although reference was made to a lowering of bond yields, the fact that they remain over 12%, and that the average discount on the open market for a 10-year Greek bond is 35%, was not mentioned. This raises significant doubt as to how successful the European “solution” for Greece actually is.

e.       Although Moody’s was once again cast as the villain, no one bothered to present what was actually written in the downgrade notice, or explain the reasons Moody’s may have indicated for downgrading Greece. This caused the media to miss the basic fact that in a debt restructuring after 2013, the European Stability Mechanism (ESM) will likely lead to a haircut on securities held by private bondholders.

f.        In turn, no mention was made about the possible risk exposure of Greek and Cypriot banks to (a) Greek government bonds, and (b) the dramatic decline in domestic banking indicators and the rise in non-performing loans.

g.      No indication was given of the direction of the EUR 50 billion privatisation package, or whether the Prime Minister’s earlier promise to pass a law making it impossible to sell public land without a Parliamentary vote might act as a deterrent to potential investors.

Although I heard George Papandreou and George Petalotis speaking, I didn’t hear a single question being asked to them. All that was broadcast was their set remarks. It looks as if the reporters have accepted their “achievement” at face value, and are simply, and mindlessly re-transmitting these to the public.

This is literally astounding. Given everything we have learned about corrupt and incompetent politicians in Greece, the fact that today the media give them the benefit of the doubt is unbelievable. I have rarely seen such a misrepresentation of reality, because this is what we are dealing with. If the average Greek citizen gets his news from the mainstream television broadcasts, then he can be forgiven for thinking that everything is all right.

We should not be surprised if, 12 or 24 months from now, Greece’s fiscal situation has worsened, but we hear the same shameless cheerleading emerging from the media and the government. 

(c) Philip Ammerman, 2011
Navigator Consulting Group 


  1. Philip, is there anyway that you could produce these charts given what you know about what is happening in the country. I know it is a lot of work, but it would really help to know the depth of the hole we rushing into.

  2. Philip,

    Your comments are fair as always.

    However, in this post I think you are forgetting one important aspect of the situation. The Greek government is now managing for cash.
    Everyone knows that total debt repayment will be higher. The most acute problem Greece is facing now is running out of cash to pay salaries, pensions and debt to Greek businesses.
    Failure to do so will result to unprecedented social reactions that would make any financial plan fail anyway.

    This new agreement for the debt repayment is therefore very positive news and the PM should cheer for it, as he needs to keep the people motivated to support him going forward.


  3. Most of greek media are depending on state/government financing, overt or covert, through the well known, patron and client system of "diaploki". On the other hand, media owners are frequently using their power to achieve specific business goals in a corrupted political environment. So it is not surprising, that the crude, Kaddafi style, government propaganda is reproduced in such a blunt manner. On the other hand, George Papandreou urgently needs to demonstrate that some of the people's sacrifices are worth the price.
    However I absolutely share your bleak view of greek economy's perspectives, despite the triumphant tones of Mr. Papandreou statements. I would be very happy if someone managed to prove through a sound mathematic model that Greece is actually "saving" 6 bn, after last summit's political decisions and the rescheduling of greek public debt. And of course we will have to wait till the final texts are drafted in the late March meeting. Bear in mind that according to some information, and because cash is flying from the greek banks towards other destinations, the so called Emergency Liquidity Assistance plan has already been applied from the Central Bank of Greece. And I am wondering if the Greece's economic torture is the price for rescuing greek banks. Though I doubt that even this plan will be succesfull...

  4. Thanks to everyone for their comments. Yorgos (Zekliv): you are absolutely right: the government is managing for cash. Unfortunately, it doesn't appear to be working out. I don't have precise figures (have seen various items in press), but as I understand it, the governments unpaid bills last year amounted to EUR 5.3 bln. My latest post explores some of the unpaid bills.

    Why is this important from my view? We have all heard assurances that Greece's financing needs were met for the most part to end 2012 / early 2013 by the EUR 110 bln bail-out. Yet we can see that already today, this is not the case. Some salient points:

    - the settlement of public healthcare debts last year

    - the settlement (ongoing)of public construction debts (see the latest post about EUR 2.5 bln unpaid construction sector bills)

    - unpaid VAT returns (no firm data here: I've seen everything from EUR 1.8 bln still owed to far higher amounts, and have no way of confirming them).

    Yet now we are seeing any number of sectors, from police to hospitals to pharmacies and construction firms, striking because of ... unpaid bills.

    We are also about to learn how Eurostat evaluates the social security debt/surplus.

    We can see, in other words, that there are major, visible problems in cash flow. So for Mr. Papandreou to "emerge victorious" from renegotiating the EUR 110 bln loan term is, in my eyes, the wrong tactic.

    On the one hand, it creates false expectations, and is fundamentally untrue when one looks at the facts. On the other hand, this apparent "victory" is contradicted by the daily facts we see around us.

    This is not to say I underestimate the challenge Mr. Papandreou and Mr. Papaconstantinou are facing: it is a huge one. But "massaging the media" is not going to change the fundamental situation, nor Greece's credit ratings, in the absence of very clear, structural reform.

  5. Most of protests are Staged and very well Orchestrated, they pretend fighting but do not hurt each other. This is worth it to get hundreds of billions from EU. Greeks are very smart; the deception started with the Trojan Horse and is going on with very well orchestrated “PROTESTS”. If you want Greece to be paid off, for the Enormous Army, Universal Free Health Care, Lucrative Pensions, and Taxes that they never Pay, then you pay them by yourself, PAY THEM OFF, BY YOUR OWN POCKET.