Part of a letter sent to a college room-mate in the United States.
You asked about Greece: the situation is infuriating most of the time, surreal at the best of times. The government here, together with the political parties that rule it, has been proven to be a complete and abject failure. Corruption and incompetence are the order of the day. By my count, 30% of the seats in Parliament are inherited from family to family. In the last 30 years, the prime minister’s position has been held by 3 entrenched political families and one professor nicknamed “the Chinaman”.
In the midst of all this, you would think that the voters would eventually say “enough is enough” and get rid of these idiots. Unfortunately, that hasn’t been the case. There has been political fragmentation as the two larger parties lose their dominance, but the irony is that the smaller parties which emerge are led by former members of the larger parties. This is going to create absolute political paralysis in a future government.
In the meantime, the real root causes of the crisis have not been addressed. There has been no real public sector reform, just spasmodic efforts to reduce wages and pensions. Rather than closing useless public sector enterprises and replace citizen-facing functions with online or automated solutions, they have kept nearly all enterprises and transferred all staff to other public sector organisations, keeping them on the payroll. Those staff that have been terminated have been those in temporary contracts, or those who have left for retirement. The number isn’t small—it’s about 100,000 out of pre-crisis employment of about 850,000. The point is that it is neither strategic nor planned. It’s happening by accident, not by design.
You probably don’t know this, but since 1997 my strategy has been to diversify my consulting away from Greece, and to have nothing to do with the Greek public sector. This has been a good decision ethically (though a difficult one financially), and I do not regret it. The result is that today I do real consulting projects, and make an honest living. The large majority of Greek consultancies made a lot of corrupt money during the boom years, and are now thrashing about looking for the next golden opportunity.
So I have as little as possible to do with the Greek state, and in this I consider myself blessed. Unfortunately, the problem of the Greek state and the corrupt political system behind it remains solidly in place. It’s signature achievement has been to portray itself as the “saviour” of Greece against the “voracious” Troika, which wants more heartless “reforms” in exchange for loans. This is a “bait and switch” of epic proportions, and is a perfect illustration of why politics is the dirtiest game in town.
This is not to say that the Troika has been doing such a good job of things (the Troika is short-hand for the European Central Bank, the International Monetary Fund and the Eurozone, which are supposed to be saving Greece). Most days I doubt they understand the difference between their ass and their elbow. Bashing Greece turned into good domestic politics in Germany and some other countries, so we have a situation where the same European politicians who were supposed to convince their parliaments to support the bail-out package did so by spouting nonsense at political rallies. This nonsense, unfortunately, was carried by Bloomberg, Reuters, and everyone else. So they basically have been doing their level best to destroy the very loan agreement they have spent so much energy and political capital to set up.
Add to this the fact that the structure of the bail-out package was a disaster. I’ve been running debt analyses on Greece every quarter: I don’t know what numbers the Troika have been using, but they have been consistently wrong in their modelling and their assumptions. They under-estimated annual interest on public sector debt by EUR 8 billion per year (in a GDP of EUR 310 billion). They phased in the public sector fiscal adjustment over 5 years, which means that they wanted Greece to “return to markets” for borrowing in 2012 when the country was supposed to keep incurring deficits in 2015.
It’s difficult to see how anyone in this story has covered themselves in glory. Greek politicians continue to do what they are best at, which is lie to the public. German politicians resemble Dr. Strangelove more than would seem reasonable in the real world. Eurocrats design plans which are properly left in an ivory tower. The educated people I know here, the professional class, are fed up with political lies, but have no political alternative to vote for. The uneducated people continue to believe in miracle solutions, conspiracy theories and snake oil merchants. The quality of public services, which was never high to begin with, continues to deteriorate. Elections have been called, so politicians are now thumping on soapboxes and promising higher pensions for everybody, when everyone knows that there will be another round of cuts in June-July.
The only encouraging thing I see is that ordinary society continues. Pensioners are begging on streets in the centre of Athens: people help. There has been a huge response to charities feeding and clothing the homeless. In our neighbourhood, there have been no changes – schools are open, people still shop at the baker. A few stores have closed in the centre of our neighbourhood, but somehow people make do.
The other thing than no one has managed to screw up yet is the weather. Sunshine and spring have returned, and with it a bit of optimism. The day the Greek government or the European Union set up a ministry for weather is the day I will seriously start to worry.