Thursday 23 February 2012

Greece should sell islands to Turkey in Gratitude for the Troika bail-out.

Christoph Leitle, President of the Austrian Economic Chamber, has stated in an interview in Profil Magazine that Greece should sell uninhabited islands to Turkey as a sign of thanks for the European bail-out of Greece.

In the interview, he states (my translation, original text follows):

Over the long term, I see a very important convergence between the EU – that is to say, Greece – and Turkey. With such a gesture [selling islands to Turkey], one could perhaps even solve the Cyprus conflict. The surrender of part of own sovereignty would be a sign of thanks for the help. [referring to the bail-out].

Langfristig sehe ich eine sehr wichtige Konvergenz zwischen der EU – also Griechenland – und der Türkei. Man könnte mit einer solchen Geste vielleicht sogar den Zypern-Konflikt lösen. Der Verzicht auf Teile der eigenen Souveränität wäre ein Zeichen der Dankbarkeit für die Hilfe.

It is difficult to exaggerate just how insulting this idea is. 

The entire interview also confirms one very unfortunate fact: that European solidarity is apparently little more than a myth. As Leitl states

With every new bail-out package, the anti-Greek feeling in all Europe increases. With this, we will have to deal with a demagogic-populist movement.

Mit jedem neuen Hilfspaket steigt die Anti-Griechenland-Stimmung in ganz Europa. Wir bekommen es da mit einer demagogisch-populistischen Bewegung zu tun.

George Papandreou’s decision to trust in this myth will certainly go down as one of the greatest strategic errors in Greek history. It remains to be seen whether he or any other members of the Greek political class will pay the price for it.

(c) Philip Ammerman, 2012 
Navigator Consulting Group 

Tuesday 14 February 2012

Looting and Burning in Athens: Nothing to do with the Austerity Protests

Based on press reports last night and today, some information on the looting and burning of property in Athens follows. 

There were between 1,000 – 1,500 people, primarily young individuals operating in small groups, who participated in the looting. They were prepared; they had hoods and face masks, weapons and tools for breaking and entering. There are between 40-45 buildings or stores that have been destroyed by a combination of looting and burning. Others have been damaged less extensively: they were looted, or their facades were damaged, but they were not burned. The police report that over 500 molotov cocktails were thrown last night.

Owners of stores, including the Attiko theatre, report that they were first asked for bribes not to have their customers attacked. In the case of the Attiko, the owner apparently made one payment, and his customers left undisturbed. However, another group of looters started burning another entrance to the theatre. The entire building was finally burnt to the ground.

The police managed to make between 72 and 74 arrests (it is not clear if this arrest number pertains to the looting/burning or to subsequent street fights with the police). Most of the people arrested have a prior arrest record for similar incidents.

According to Kostas Pretenderis of Mega TV, “70 of the 74 people belong to a single political party”, without naming the party.

The staging point for the attacks was the Law School of the University of Athens. The premises were occupied on Thursday. On Friday, the administrative director of the Law School emailed the Rector of the University that the Law School was under occupation, and requested that all legal methods be taken to ensure their eviction.

The University Rector sent a request to the Police by mail to the Police headquarters. According to an article reported by Skai’s website today, the prosecution reports that two letters were received yesterday, 13.02.2012, sent by postαl delivery, signed by the Rector. The first states that the Law School will end its classes between 10-12 February and requests the guarding of the premises. The second, dated 10.02.12, reports the occupation of the Law School, by unknown students, and that authorities of the Law School have no access to the building. However, it also reports that there are no reports of damage. The letters are dated 13.02.2012, i.e. after the looting in Athens.

Adonis Georgiades, the ex-LAOS MP, reported yesterday that according to Article 3 of the ammendments to the law on university asylum, there is no longer any need for a specific request, or a request in a specific format, by university authorities to the police. In other words, the email sent on Friday was sufficient to prompt an investigation. Such an investigation never took place.

Skai reported today that in the wreckage of the occupied Law School, professors found a strong smell of gasoline in one room, and elements used to start fires.

A common complaint is that individuals arrested are frequently released by the legal authorities within any meaningful prosecution or fine. They are certainly not jailed. Several of those arrested for violence (including the attempt to burn the Municipality of Athens) are well-known figures; others are children of well-known figures.

As usual, not a single political figure has resigned to take responsibility for the events.


It is extremely important in the first instance to disassociate the looting which occurred with the protests against the austerity and government reform plan passed on Sunday evening.  These two events have become conflated in many international media sources, which reported on Sunday and Monday headlines to the effect that “Athens burns while the Parliament votes on austerity”.  

As with many similar events, it is clear that the violence was carried out by a relatively small group of individuals who were not directly related with the main political organisers of the protests. This was confirmed once again not only by political leaders on TV, but by first-hand accounts I have from unionists and participants in the marches.

However, it is also impossible to speak of a total separation between the mob’s organisation and political forces. There is abundant evidence from these and other events that several key organisers are linked directly and indirectly to certain political parties. They are linked directly, in that several key looters arrested are long-standing, senior members in the youth or university student branches of these parties. They are linked indirectly in that these members have been shown through arrest records, telephone intercepts, and university political activity to be large-scale organisers of a political nihilism which is linked to criminal activity. This activity involves drug distribution and sales of counterfeit software and DVDs, often within university premises.

A false political ideology provides cover for illegal activity; the illegal activity in turn is justified by this ideology, i.e. the “struggle against the state” and the usual rhetorical suspects.

The question as to why the police and legal authorities cannot or choose not to launch a full-scale legal prosecution of these individuals and networks is unknown. In theory, they have every legal right to do so. We can surmise, however, that there are multiple reasons:

a.     Objectively, there are no resources to do so. This was the case even before the recent austerity cutbacks. The Greek court system faces a massive backlog of criminal cases, a penal code which does not include sufficiently deterrent punishment for civil crimes, and overcrowded prisons. Even if these individuals were arrested, they would soon be allowed to go free, either because they would not be prosecuted, or because they would be allowed to buy off their sentence.

b.     Subjectively, there have been many instances where the police and the prosecution has been prevented from acting due to direct and indirect political interference. The direct interference occurs when politicians intervene in the arrest process to protect their constituents. The indirect interference is far more discouraging: the police knows that it is vastly outnumbered in certain areas of Athens. There is a tacit agreement on “go” and “no go” areas, where the police will simply not intervene. If they do crack down, the implicit threat is that police will then be targeted. This has already happened in the past on several occasions.

This same threat, incidentally, has been in force for years against university administrators and professors. Although universities technically now have full control over their campus security, in reality they cannot enforce this. They don’t have the financial resources to hire private security forces. Nor can they cannot rely on the police or the legal system. One well-known professor once told me that after every occupation, he knows which store he has to go to in Monastiraki to buy back his stolen computer hard drive.

As a result, it’s clear that the university staff must turn a blind eye to illegal behaviour, if they are to safeguard their own lives and property.

This post deals with the sad reality of a certain nexus of events, people and institutions in Greece today. On the one hand, we have a policing and legal system which has, since the late 1980s, been set up to protect and serve a political elite rather than enforce the laws of the land. On the other hand, we have a growing number of disaffected youth with no serious job prospects who turn instead to political utopianism and crime.

The result of this is seen in events which occur every week in Athens. Once in a while, the enormity of one event – burning and looting 45 buildings – becomes so large as to be impossible to ignore. But for every large even, there are thousands of small ones which illustrate how the system works.

If you want to see what the reality is, go to Exarchia Square on a Friday night, and walk down Stournari Street to Patission Avenue past the Metsoveio University building. 

This reality is not going to go away, and has nothing to do with austerity votes or reform. It’s been there since the late 1980s, growing each year and becoming institutionalised. And I have yet to see any serious solutions for it.

Related Posts

December 19, 2010

© Philip Ammerman, 2012
Navigator Consulting Group

Monday 13 February 2012

The Mother of all Carry Trades (ii)

In case you are still wondering how things work in terms of ECB liquidity, read today’s article on Bloomberg: Draghi $158B Free Lunch Boosts Bank Profits.

Banks are benefiting from a European Central Bank subsidy that could reach 120 billion euros ($158 billion), enough to pay every bonus at financial firms in London for the next 24 years at today’s levels.

Royal Bank of Scotland Group Plc, BNP Paribas SA (BNP) and Societe Generale SA are among more than 500 banks that took 489 billion euros of three-year loans from the Frankfurt-based ECB at a December auction. The loans carry a 1 percent annual interest rate, less than a quarter of the 4.3 percent average yield on euro-denominated senior unsecured bank debt of all maturities in the past year, according to Commerzbank AG.

With borrowing estimated to hit a record 1.2 trillion euros after a second auction later this month, banks may save 120 billion euros over three years. That could boost 2012 profit by about 10 percent for lenders in Italy and Spain, according to estimates by Morgan Stanley.

“This is very much a free lunch,” said Arnd Schaefer, an economist at WestLB AG in Dusseldorf, Germany. “Banks can get money for just 1 percent and then lend it on for much more. That’s pretty good.”

The ECB is flooding the banking system with cheap money in a bid to avert a credit crunch after the market for unsecured bank debt seized up last year and funding from U.S. money markets disappeared. Any bank in the region can borrow an unlimited amount, provided it pledges eligible collateral. Lenders won’t face curbs on bonuses or dividends.

Don’t you love ECB’s version of quantitative easing? And this was only the first round - there's a second round planned for the end of February. 

Angry yet? 

Related Posts

January 14, 2012

January 15, 2012

© Philip Ammerman, 2012

A New Era of Political Fragmentation in Greece

Monday morning dawns, and with it the absolute fragmentation of the present Greek political system has begun. 

A total of 45 MPs of LAOS (2), PASOK (22) and New Democracy (21) voted against the new memorandum, and have therefore been expelled from their respective parties. 

This leaves both New Democracy and PASOK fatally weakened before the elections, which based on previous agreement must be held by the end of April 2012. 

Although there is no guarantee that the expulsions will not be reversed in time for the elections, it is certain that lasting damage to both major parties have been done. Together with popular discontent against the austerity measures, it is highly likely that any imminent election will result in a coalition of at least two, and probably four, parties.

What is uncertain is which side of the political spectrum these will be on. One scenario is for a government led by New Democracy, supported by LAOS, the Democratic Alliance led by Dora Bakoyianni, and any other centrist or right-wing independents. This scenario is highly uncertain due to bad blood between Samaras and Bakoyianni over the succession battle at New Democracy will have to be put aside in order for a cooperation to take place.

A governing coalition of the left is equally uncertain due to the same factors. Although the four centre- and extreme-left parties collectively dominate the polls, differences between some, namely the Communist Party, makes cooperation difficult or impossible.  

Two outcomes of this Troika-forced memorandum are clear: 

a. If Antonis Samaras leads a next government, it is highly likely that the civil service and the parties of the extreme left will engage in a campaign of active civil disobedience. This will be characterised by violent strikes and occupations, and will fatally slow any implementation of public sector reform and privatisation. State-owned companies or parastatals such as the Public Power Company (DEH) will be nearly impossible to privatise. 

b. It will be almost impossible for any Greek government to pass any equivalent austerity legislation in the future. We should not forget that Greece had, before last night, already passed three broad austerity packages (in May 2010, July 2011 and October 2011) as conditions of the first and second bail-out packages. Last night was the fourth. The first three were only possible due to party discipline at PASOK: all other parties voted against the packages. Last night, the only way this law was passed was through the same process: party discipline, and an unprecedented 45 expulsions. 

The fact that any future governing coalition will have less of a margin for error, and will therefore have further difficulties in maintaining the discipline needed for a vote, effectively means that passing further such laws will be impossible. 

As a result, one could conclude that there is only one solution for an interim government to manage the crisis: extend the life of the Papademos government for another 2 years. 

It remains to be seen in the coming days whether Antonis Samaras will take the plunge and push for elections as planned in April, or whether he will suppress his personal ambition and continue the coalition government. 

It also remains to be seen whether such an option would be voted by the remaining PASOK and New Democracy members even if it were raised. 

In any case, Greece has clearly arrived at a new and dangerous stage of absolute political fragmentation. This outcome is a clear result of Troika policy, which has rammed through austerity bills without regard for either the narrow or broad political capacity of the country. In terms of "reform" strategy, this is a deal killer. 

Led by Germany, the Eurozone creditors and the IMF have managed to kill any political stability in this country, and with it any hope that real structural reforms will ever be implemented. 

Through a combination of theoretical economic policies which show little regard for basic financial practise or the Greek reality, and through their own double-dealing rhetoric in which they temper domestic political considerations by trashing Greece to their domestic electorates, they've managed to turn both the Greek people and the political system against them, and against "reform". 

What happens next is unknown.

© Philip Ammerman, 2012 
Navigator Consulting Group 

Greece passes the new Memorandum

Voting has started on the latest bail-out memorandum in the Greek Parliament. Prime Minister Papademos just gave a reasoned yet stirring speech that was greeted with applause. MPs are voting “yes to all” or “no to all”.

So far, the main PASOK deputies – Papoutsis, Diamantopoulou – have voted yes to all.

Dora Dora Bakoyianni voted yes. Procopis Pavlopoulos voted yes. Kaklamanis voted yes.

Some big names from PASOK voted no: Vasso Papandreou, Louka Katselli, Milena Apostolaki and Marileza Xenogiannakopoulou voted no. Eliza Vozenberg voted no. All the far-left parties voted no.

Few defections. The yes votes are overwhelming.

George Karatzaferis, the LAOS leader, is absent – no vote. Only Georgiades and Vorides from LAOS voted yes: all other LAOS deputies were absent. There are about 20 defections from ND and 20 defections from PASOK. All "no" voters are to be disbarred from each party, according to speeches made by George Papandreou and Antonis Samaras earlier tonight. 

Mega TV is running the vote on a right-hand screen, and on the left, footage of the rioters in Constitutions Square, right below the Plaza Hotel, on the corner where the Public store is located. It seem impossible that 30-40 young hooligans can’t be caught.

The new memorandum passes – most likely with about 200 votes.

© Philip Ammerman, 2012 
Navigator Consulting Group

Sunday 12 February 2012

Athens Burning (Again)

Athens is burning once again on the eve of the latest austerity vote. Organised gangs of anarchists and hooligans, many of them likely belonging to the extreme left, have attacked over 20 buildings in the centre of Athens, setting several of them on fire. The Municipality was attacked but was saved. Several other historical and neoclassical buildings are on fire. Several retail stores, including at least one Starbuck’s, have been trashed.

Needless to say, these events have been condemned by all political parties, with the possible exception of SYRIZA, who claimed this was actually a "provocation" by ultra right-wing elements. What is certain is that this violence has nothing to do with the vast majority of citizens and residents of Greece. 

The Greek Parliament continues its debate on the new austerity package prior to voting later tonight. Most observers, including myself, believe that the bill will pass with at least 175-180 votes.

The Prime Minister, Loukas Papademos, is expected to restructure the cabinet tomorrow to replace the departed Ministers of LAOS as well as potentially several other ones.

Assuming the bill passes, the government will have a nearly impossible task of meeting its own deadlines for some elements in the new package. 

Friday 10 February 2012

Losing the Plot on Greek Austerity

I have the impression European leaders have lost the plot when it comes to Greece.

Greek unemployment hit 20.8% in November 2011, or just over 1 million people in a labour force of five million. Real unemployment is much higher, as the government is funding approximately 450,000 labour positions with subsidies and training grants.

Eurostat revealed that 27% of Greeks are classified as living in poverty.

The leader of the Troika’s monitoring mission, Poul Thomsen, was quoted in The Guardian on February 1st as stating that fiscal adjustment had reached its limits:

Poul Thomsen, a senior International Monetary Fund official who oversees the organisation's mission in Greece, also insists that, contrary to popular belief, Athens has achieved a lot since the eruption of the debt crisis in December 2009.

"We will have to slow down a little as far as fiscal adjustment is concerned and move faster – much faster – with the reforms needed to modernise the economy," he told the Greek daily Kathimerini, adding that the policy shift would be "reflected" in the conditions foreign lenders attached to a new rescue programme for Athens.

In an extraordinary departure from the script the IMF has followed to date, the Danish official, who is also in charge of the IMF programme in place in Portugal, acknowledged there was a "limit" to what society could endure.

"While Greece certainly will have to continue to reduce its fiscal deficits, we want to ensure – considering that social tolerance and political support have their limitations – that we strike the right balance between fiscal consolidation and reforms," he said. As such, the IMF had cautioned against "an excessive pace" of fiscal reduction.

It is all the more confusing, therefore, to see the latest demands of the Troika (of which Mr. Poulsen is the lead negotiator), which are almost exclusively all fiscal austerity: reductions in the minimum wage, reductions in supplemental pensions, further reductions in government spending.

Hannes Swoboda, leader of the Socialist and Democratic Group in the European Parliament, sent a letter to European Commission President Jose Manuel Baroso, in which he wrote:

"I am writing to express the grave concern of the S&D Group over the terms of conditionality imposed by EU negotiators on Greece as the price of approval of the latest tranche of loan funds.

"Representatives of the Commission seem to have conducted themselves on the basis of the unfounded assertion that Greece has not made sufficient efforts to restore fiscal stability and have imposed conditions which have less to do with economics than with ideology.

"It is the ruinous policies of extreme austerity imposed on Greece, which have driven it into ever deeper recession.

"The S&D Group believes that the punitive and ideological approach of the Troika to the Greek sovereignty problem is a gross betrayal of the European social model and of the solidarity which is a founding principle of the Union."

Yesterday evening, Eurozone financial ministers gave Greece the cold shoulder, despite the fact that the government has just agreed to unprecedented austerity measures which will exacerbate the depression—austerity measures which had been demanded by the Troika.

I watched a late news conference Thursday night following the Eurozone meeting with great disbelief. Jean-Claude Juncker insisted on “implementation”, by which he meant passing of a law agreeing to the austerity. But the whole problem in Greece is that laws are passed which aren’t fully implemented. Ollie Rehn didn’t do much better, making vague promises on how the European Commission wants to both increase monitoring, and help Greece with structural reforms. There’s been almost no sign of anything practical so far, and certainly nothing which can counterbalance the deleterious effects of Troika austerity. 

The behaviour was so insulting, that it led today to the resignation of LAOS from the coalition government. George Karatzaferis aptly said:

"The creditors are asking for 40 years of submission,” Karatzaferis said. “Greece will not give itself up. Greece can survive outside the EU but cannot survive under a German boot.”

I am afraid that the more this situation continues, the more I agree with both George Karatzaferis and Alexa Papariga, head of the Communist Party of Greece. Although these two leaders represent the extremes, it's a sign of just how badly things must be when I, a financially-minded moderate, agree with them. 

I have never seen a simple financial restructuring handled this badly. It’s yet another indication that the great European experiment is probably coming to an end. Anybody who believes in “European values” after this process must be living in the twilight zone.

© Philip Ammerman, 2012
Navigator Consulting Group

Tuesday 7 February 2012

Greek Austerity Negotiations Continue

The Greek government’s political leaders were unable to reach an agreement last night over the renewed austerity measures demanded by the Troika as a condition for the second bail-out package. Pressure mounted after Angela Merkel indicated in a press conference in Paris that time was running out:

"I honestly can't understand how additional days will help. Time is of the essence. A lot is at stake for the entire euro zone."

Yet a review of the negotiations indicate that while some of the problem lies with Greece’s leaders, a lot of the fault lies with the Troika and its own negotiating process. A bit of background should serve to illustrate this problem.

The European leaders and the IMF have known since June 2011 that a second Greek bail-out was required. This was formalised at the summit meeting of October 26th, which resulted in a formal announcement that a second bail-out package of EUR 130 billion would be granted on the condition that an agreement on Private Sector Involvement (PSI) and a further austerity package would be reached.

After nearly a one-month delay due to the replacement of George Papandreou as Prime Minister, the new Greek government started work. While PSI negotiations were already underway, it should be noted that the final agreement will only be announced on February 15th. A large part of the delay to date has been due to these negotiations, which were effectively taken over by Germany in January. In other words, Greece is not solely responsible for this delay. 

A further problem is that of the Troika’s monitoring mission and how it works. This mission implements a quarterly review of the Greek “reform” programme (so far there has been very little real structural reform, but a lot of fiscal tinkering, which is why I use quotations marks).

The last quarterly review took place in mid- to-late January, and determined that Greece was far from meeting several key reform targets, including public sector cutbacks, liberalisation of certain professions, closing public sector organisations, and privatisation.

This resulted in the presentation of new demands for austerity, which were also mandated by certain Eurozone countries. Yet these demands were made approximately 2 weeks ago. Certain of these demands are set to lead Greece to an even deeper recession, and include:

·       Elimination of the 13th and 14th wage in the private sector
·       Reduction of the minimum wage by 20%
·       Reduction of supplemental pensions by 15-20%
·       Reduction of public sector headcount by 15,000 workers in 2012.

It is interesting to note that according to Minister of Interior Reppas, this last demand was made this past Friday, February 3rd.

I don’t know of many countries where the political leaders, confronted by such demands in a 2-week timeframe, would have done a better job. It is both hypocritical and unhelpful for Angela Merkel and Nicholas Sarkozy to hold a press conference and demand immediate concessions, given the magnitude of the changes requested, as well as the way in which they have been requested.

None of this, however, should excuse the Greek government from an almost criminal lack of urgency and prioritisation in terms of its policy planning and choices. However, we should reflect why this is taking place:

·     The original bail-out of EUR 110 billion occurred in May 2010, already delayed by four crucial months (due to German dithering), which worsened the credit climate permanently.

·       The original bail-out was wrongly defined and made no provision for interest costs. It mandated a face-value repayment of privately-held Greek government bonds, at the time when the private sector was discounting these by 35-40%.

·      The original bail-out package envisioned that Greece would continue to incur deficits to 2015, while returning to the markets in 2012. At the same time, it deliberately avoided the consolidation of Greek government debt, which occurred in November 2010. This caused a 3% rise in Greek debt, effectively destroying the credibility of the Greek programme. These problems were widely known, and have been extensively reported in this blog.

·     Structural “reforms” in 2010 led to a reduction in the public sector workforce of 82,000-85,000 people, together with a restructuring of the regional public administration, a reduction in public sector salaries and all wages above EUR 1,400 by 15-20%, an increase in the retirement age, and the effective end of early retirement in the public and private sectors.

·      These “reforms” led to a recession in 2010, with a decline in real GDP of 3.5% and a deficit of 10.6% of GDP. The recession grew in 2011, with a forecast real GDP decline of 5.5%. Inflation in 2010 was 4.7%; in 2011 it is forecast at 3.1%. This is largely due to the impact of indirect taxes on fuel and value-added tax. Greece is therefore in an inflationary depression. 

·        In mid-2011, it was clear that the Greek structural adjustment programme was losing traction. The Troika forced through a second round of austerity in July 2011, known as the Mid-Term Fiscal Adjustment Programme. This included the highly improbable target of achieving EUR 50 billion in privatisation income to 2015, together with a further EUR 28 billion in austerity savings by 2015. Yet it made no provision for interest income or the fact that Greek government bonds were being sold at a major discount. A quick analysis shows that accrued interest between 2011-2015 at a minimum rate of 4% would amount to EUR 76 billion, or just under the EUR 78 billion which was to be gained by privatisation and austerity.

·        This second round of austerity illustrated in a nutshell the abysmal failure of Troika policy-making. In Greece and elsewhere, it was painfully apparent that EUR 50 billion in privatisation in 5 years in the middle of a global financial crisis was going to amount to one result: a massive give-away of public property, which at the end would barely pay interest income, and which could not be used to purchase Greek debt on the open market at a discounted rate. Despite this, European leaders pig-headedly demanded this reform, and then expressed indignation when it could not be met. To soften the blow, an initial private sector involvement of 21% of net present value of Greek government bonds held by the private banking and financial sector was proposed. 

·     Greece has actually tried to privatise a number of assets in 2011, including the government’s stake in the Athens International Airport. Most of these failed, primarily due to a lack of finance for such deals, and uncertainty regarding Greece.

·        By October 2011, it was clear that further efforts were needed. European leaders forced through a PSI (private sector involvement) of 50%, in exchange for a further EUR 130 billion in bank recapitalisation and debt refinancing. A further condition for this was large-scale, further austerity. When the Greek prime minister tried to put this to referendum, he was called to Cannes, and forced to retire by his own party, as well as Nicholas Sarkozy and Angela Merkel.

·       It is ironic to note that this same prime minister, in an apparent bid to gain approval for the first bail-out, agreed to buy 6 French FREMM frigates, 40 French Rafale fighters, several German submarines and 120 German Leopard tanks prior to the first bail-out. This was estimated to cost over EUR 10 billion, at a time when Greece could not afford to pay salaries or hospital costs. We should be under no illusions as to the “solidarity” of the Eurozone in this case.

·      The October 2011 agreement was prefaced by the Finnish demand for a sovereign guarantee. This created at least a month of further useless negotiations which led nowhere.

·       In November 2011, a new government was formed, led by Prime Minister Lukas Papademos, but comprising mainly political figures from PASOK, New Democracy and LAOS. The record so far has been much of the same, with the government continually responding to Troika demands, with very little time to deal with anything strategic or sustainable.

The year 2011 closed with unemployment just under 20%, a deficit of approximately 9-10% of GDP, and a real GDP decline of approximately 4%. Under these conditions, and taking into account the impact on wages and pensions from the latest austerity demanded, it is almost impossible that Greece will meet either the privatisation target in 2012, or the deficit target.

In all this debate about “reform”, I have not heard of or seen a single pro-growth proposal, except for the very dubious “Helios” proposal, which is based on an incomplete feasibility study and a high government involvement. Without growth, no amount of austerity will result in Greece meeting it’s “targets”, which are themselves rapidly-moving targets.

The entire record of the Eurozone and IMF intervention in Greece has been disastrous. European policy-makers have compounded error after error; the Greek political system has clearly not helped.

Once again, we are in a situation where external sovereign lenders are threatening Greece with default or Eurozone exit if further “reforms” are not enacted. These lenders don’t appear to have the slightest understanding of basic macro and microeconomics, let alone the situation as regards “competitiveness” in Greece.

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(c) Philip Ammerman, 2012 
Navigator Consulting Group