Is the Greek debt media wave over?

Bloomberg’s Breaking News starts this morning with yet another article on the Goldman interest rate swap, dating back to 2002. I can’t help thinking this is a bit overdone. Is historical forensic accounting now a service offered by the financial media? If so, why don’t they examine the major current issues in Greek debt, such as:

· The massive financial liabilities incurred by semi-governmental organisations such as Hellenic Railways (OSE), or the estimated EUR 700 mln early retirement package rejected by the government for Olympic Airways, and OA’s state aid issue? None of these are on the Central Government's balance sheet, and all are more important financially than this interest rate swap.

· The fact that the government’s numbers in the Stability and Growth Agreement do not add up, even before the recent GDP growth downgrade to -2% in 2009?

· The fact that the freeze in public sector incomes is a limited measure, not a permanent measure, and that no redundancies or productivity improvements are foreseen?

This is not to discount the importance of the Goldman deal. But there have been many other similar deals done, including ones which were more recent.

It seems to me that, judging from market reaction to the Eurogroup/Eurofin’s meetings Monday and Tuesday, and by the quality of the reporting in Bloomberg, Reuters and other sources, that the international media is moving on to other news. On the one hand, this is good, since the quality of their reporting is often very superficial and sensationalist. On the other hand, without the spotlight of international media coverage, and whatever limited investigative journalism it can deploy, will the Greek government take any substantive steps to solve the problem? Can we really rely on European Union monitoring to solve the myriad issues of Greek debt and their underlying causes?

My feeling is that we cannot. The EU has issued plenty of warnings to Greece before: it seems that George Papandreou only really got his act in gear after the WEF meeting in Davos.

Yet the danger in the proposed measures of the government is their temporary nature. The freeze, or reduction on public payroll, is a temporary measure. There are no provisions for an essential reform of the public sector, investments in productivity (including pay), or streamlining the bureaucracy. Indirect taxes have been marginally increased, but it remains to be seen if they can be collected. Some taxes, such as the revised ETAK (which goes by the marvelous acronym of FMAP), remain generous: properties with an “objective value” of EUR 400,000 or under are entirely tax-free.

The total spending impact of the freeze/reduction on public sector payroll has been variously estimated by different sources. According to my own estimate, it will not yield savings of more than EUR 1-1.5 bln, which as a temporary measure is hardly sufficient. Let’s not forget that, however much we dislike the public sector, most official salaries are not that high, and barely constitute a living wage. And what reaction will these worthies take to supplement their income? Probably the same actions they are taking now.

Besides spending cuts, the government needs to improve tax collection. Here, despite initiatives such as audits of doctors and lawyers, the forecast does not appear very positive. What are the taxable results of these audits? How will the government audit over 1 million “freelancers” or independent workers? How will it audit the hundreds of thousands of small shops, hotels and restaurants which depend on tax evasion to round out a fundamentally uncompetitive business model?

These are unanswered questions, and ones of generational importance, and for which real solutions have yet to be found.

Debt reporting: the snowball effect

Reuters just reported that Eurostat has asked Greece for explanations on its derivatives contracts and how this is accounted for in its debt figures. (EU asks Greece to explain derivatives reports).

Doesn’t Eurostat read the Greek press? This news is nearly a month old. Does the information have to be published in Bloomberg or the NY Times for it to become “news”?

I suppose that, after agreeing to Greek economic statistics for the past 8 years, we can assume that Eurostat does not read Greek news.

How long will it take for the full story to break? And what consequences will this have on the Ecofin and Eurogroup meetings this week, and on Greek bonds? Unless there is a specific commitment to Eurozone purchases of Greek debt (probably on a government-to-government basis), then the Athens Stock Exchange will fall still further.

I don’t expect the meetings today to go very well, however. This is death by a thousands cuts: the government has clearly lost control of the information cycle, and is trying to convince its partners that its' debt is really what it has recorded. Unless there is a major financial commitment this afternoon or Wednesday at the latest, this could be "Black Monday" all over again.

The next Greek debt discovery

Bloomberg started running a ticker this morning entitled “Greek Probe Uncovers ‘Long-Term Damage’ From Swaps Agreements”, which details how the government signed up to a series of long-term interest rate swaps. According to this article, Goldman Sachs was one alleged beneficiary of the swaps, which generated $ 1 bln in 2002.

For me, this article is more interesting because it is the first time I see reference in any serious international press of the findings of the Commission formed by the Ministry of Finance in October 2009 to investigate the true magnitude of Greek public debt. At least, I believe this report (and its follow-up) is what is referred to in the Bloomberg article

Greece used the swaps to defer interest repayments by several years, according to a Feb. 1 report commissioned by the Finance Ministry in Athens.

It’s interesting that Bloomberg mentioned Goldman Sachs, but not Ethniki, which has apparently played a much greater role in exchange rate swaps (over EUR 5 bln).

It’s also interesting that until now, none of the implications of this Commission report, which have been widely reported in the Greek press, have been taken up by the major sources of international economic and financial information. The implications are, after all, severe:

· Interest rate swaps generate an additional EUR 5.5 bln in debt to Ethniki;

· It is estimate that there are at least a further EUR 6 bln in debt to public healthcare organisations beyond the EUR 6.3 bln already added to the debt in the debt revision of October 2009 (which lead to Greece’s deficit rising to over 12%);

· The Central Government has guaranteed a further EUR 26.2 bln in debt from various semi-government organisations and local authorities which should be stated on the government balance sheet, but is not.

The Commission also points out that it is impossible to estimate current debt due to two additional points:

a. Most social security funds have not yet published accounts for 2008 and 2009. Many other semi-governmental organisations are equally in arrears.

b. The precise level of government expenditure obligations under the raft of public-private partnerships signed during the Karamanlis years cannot be established.

All this means that there is at least EUR 37.7 bln in “known” debt which is not currently recorded. I suspect that there is far more. For instance, the Hellenic Railway Organisation (OSE) has recently been recording annual loses in excess of EUR 500 mln in recent years. The state aid that was to be repaid by Olympic Airways was estimated at EUR 650 mln, while the Karamanlis government also agreed to absorb a further EUR 700 mln in early retirement costs for Olympic staff (which the Papandreou government has recently repudiated).

I would say that a conservative estimate of “off-the-books” debt is at least EUR 40 bln, and quite possibly EUR 50-55 bln, as has been stated in a number of press reports in Greece.

Today the Eurogroup meets to decide what specific steps to take for supporting Greece. My bet is for a government-to-government purchase of Greek sovereign debt at the next debt issue in April (or earlier, if possible). After all, if the rate is 6%, it’s an excellent deal for European governments (some of whom, like France, made good money bailing out their national banks).

But in line with my previous posts, it seems to me that we are only treating the symptoms, not the root cause. The Papandreou government’s proposals on freezing and reducing salaries is good, but it is a temporary measure that will become all the more difficult to maintain as we approach the next general election. The government needs to take urgent measures to streamline and reform the public sector, which include staff reduction, permanently closing some organisations, real privatisation, and stopping the hire of new staff. It also needs to start collecting taxes. All this is known: it remains to be seen whether the government can put together and implement a coherent, integrated framework for achieving it.

Asking the right questions about Greek debt

The barrage of conflicting media reports, government announcements, parliamentary debates, European resolutions and other findings has convinced me quite firmly that the right questions on Greek debt are not being asked.

Instead, government sources and the European Union, whether through collusion or simple coincidence, are focusing on symptoms of at least two major root causes, and thus risk delaying their actual solution.

Let’s start with Greece’s Stability and Growth Plan (SGP), which outlines how Greece will reduce its annual deficit to below the 3% limit specified by the Treaty of Maastricht and the European Exchange-Rate Mechanism (ERM). The SGP provides a 3-year scenario for reducing the annual deficit to 2.7% in 2012. The EU’s Economic and Financial Council has formally accepted this plan, but they have not asked the difficult questions, which are:

1. What plan does the Greek government have to reduce the total debt, which is forecast to reach 130% of GDP by 2012-2013, and is twice the limit set under the Maastricht criteria?

2. What provisions has the government made in the SGP for a scenario where the costs of borrowing rise by at least 1.5-2% to the 6.1-6.2% seen in the latest sovereign debt issue?

3. A national commission, with government approval, analysed national finances and found a number of public debt or debt commitments that are presently not included, nor not quantified, in the central government balance sheet. Some estimates have placed the value of this debt at a further EUR 20-55 bln. Does the government accept the validity of the findings of this commission, and what provisions has it made for these liabilities?

4. What short- and medium-term provisions has the government made for addressing rising pensions and healthcare costs and their associated recurring deficits?

5. What are the assumptions and key sensitivities of the SGP in terms of (a) existing and net additions to government staff positions in the period 2010-2012, (b) total wage and compensation benefits as a share of total government expenditure, and (c) debt incurred by semi-governmental organisations such as the former Olympic Airlines or the Hellenic Railways Organisation (OSE)?

6. The next national election will be in 2012 or 2013. What guarantees are there that the government will not depart from the SGP and engaged in the typical process of pre-election electoral give-aways?

These are my questions as related to the SGP. My questions relating to the root causes of the Greek economic situation are the following:

Root Cause 1: Inefficient Public Sector

The public sector and the wider government approach to managing expenditure is the cause of Greece’s massive debt. Government expenditure has ballooned; most expenditure goes to the wages and benefits of an over-staffed and bloated public bureaucracy which provides very little in terms of value-added services, and utilises an archaic system of forms and certificates to extract personal benefits in the form of bribes.

My questions:

a. What is the government doing to streamline the total public sector and deliver better services to citizens at a lower cost?

b. If public sector institutional restructuring, e.g. “Kallikrates”, is to take place, what benefits will this deliver in terms of a smaller and leaner public sector? Besides reducing the number of organisational units, how else can we measure organisational efficiency and productivity?

c. What is the government doing to raise productivity in the public sector, which ranks among the lowest in the European Union?

d. What is the government doing to use e-government as a means for reducing the long hours lost in queues and government organisations?

Root Cause 2: Declining Economic Competitiveness

Over the past 8 years, Greece’s fundamental economic competitiveness has declined according to all international rankings. My questions are:

a. Greece’s credit expansion in the public, private and corporate sectors grew at a higher rate than its GDP growth between 2004-2009. Together with EU funding and government expenditure, the rate of financial expansion has been unprecedented. What have these financial resources been used for, and why don’t we see many positive results today from this spending?

b. By what moral authority does the government violate European Union law by refusing to recognise the validity of private tertiary education, while recognising private secondary and primary education?

c. Greece’s economy is driven largely by three sectors: tourism, shipping and construction (and their ancillary sectors, e.g. catering, building materials, etc.) What plan does the government have to improve the productivity, inward investment and exports in these sectors? What plan does the government have for supporting additional economic sectors? By plan, I mean a coherent vision, objectives, strategy, resources and set of linked activities and policies intended to deliver this vision.

My understanding is that the political leadership has not understood these root causes, and is not in a position to reveal the true extent of Greece’s debt situation. To do the latter, of course, would be to prompt immediate bankruptcy. I would be reassured if, in exchange for accepting the charade of the Stability and Growth Agreement budget, which is incoherent and opaque, the government showed that at least it grasped the fundamental issues at stake. It does not. Instead, it has embarked on a crusade against “speculators”, is providing conflicting messages to different audiences, and shows few signs of taking advantage of this crisis to implement a generational change, or paradigm shift in governance.

According to Goldman Sachs, Greece faces EUR 20 bln in maturing debt in April-May 2010, out of EUR 54 bln in total in 2010. I am sure the government is hoping that by then, the market turmoil will have quieted down. If anything, I believe it will have accelerated, for the reasons already known: central banks have announced the end of quantitative easing; other countries are planning massive debt issue; China’s government regulations on bank lending may have slowed or punctured their economic bubble; Europe may be heading for a double-dip recession.

If Greece passes the April-May 2010 hurdle, then it is still on track for a minimum debt of 130% of GDP by 2012-2013, according to the government’s own budget estimates. This means that it will be facing similar investor skepticism on its public finances every 3-4 months.

Greece does not have the luxury of PASOK’s familiar siren song of international financial speculators, or ND’s vapid posturings about being a responsible party of opposition. It needs real solutions to reduce the public debt which is, as stated, merely a symptom of a generational problem of Greek political governance.

Development, Planning and Reality

We tend to think of development, in its wider sense, as being a straight line, a linear process. A group of decision-makers gets together and sets long-term strategic objectives. The present situation is assessed and compared to these objectives. A set of specific interventions or investments is defined to achieve these strategic objectives, together with budgets, timelines, performance indicators, etc.

The same process which applies to companies applies to a similar extent to governments. The notorious Soviet 10-year plans, or Mao’s “Great Leap Forward,” were examples of long-term plans. The UK’s Labour government has developed and published any number of 5-year Plans. The European Union’s Lisbon Agenda was an example of a 10-year plan.

Yet reality often presents major challenges to the realisation of such plans, particularly when we find ourselves in an era of disruptive political, economic, and technological change, as we find ourselves now. The bipolar system which characterised the Cold War and emerging end of the short-lived unipolar system, in which American provided an economic and security guarantee, are upon us.

Jacques Chirac’s multi-polar world, for which he was reviled by American neocons infuriated at France’s opposition to the invasion of Iraq, has arrived. This is an era in which military dominance will play a declining role (although conflict will continue), and one in which multi-spectrum economic competitiveness will prevail.

What is multi-spectrum competitiveness? This is the ability of government, economic and civil society actors to successfully and coherently implement a specific vision of development. The Chinese model of export-led technological development with political authoritarianism is one such example. The Russian model of state domination over energy and mineral resources is another.

If we take the American model of development, the election of Scott Brown in Massachusetts, the continuing failure of banking reform, or the recent Supreme Court ruling on campaign finance lead us to believe that its priority is a socio-political system where the benefits of development accrete to the wealthy, or to those who can afford to pay for them.

The disparate (though in some ways similar) examples of China, Russia and America provide us with several interesting examples of the failure of planning. When the GATT’s Multi-Fibre Agreement ended and Chinese exports received full access to WTO markets, the consequences of US and European textiles and garments manufacturers were disastrous. Chinese exports to Europe and the US sky-rocketed; US and European factories closed (or were subsidised to remain open, with disastrous longer-term effects); sectoral unemployment rose. It was clear both during and after the event that both companies and governments had failed to take this very simple and long-announced event into account.

So competition is clearly one element which affects long-term plans. If you are not able to predict and rapidly adjust to competition, yet you accept the rules of the competitive game, then clearly you risk failure. What are some others?

A second major disruptor is that of innovation and broader technological change. It’s clear that the traditional social relationships our parents’ society was based on are no longer very relevant to the world our children inhabit. With 24/7 high-speed internet connections, Facebook, multi-player role-playing games, Twitter and instant messaging have become the latest model of socio-cultural organisation for most of the population, at least in the developed world. Technology and its impacts on productivity and workforce organisation have been major factors addressed by corporate and political leaders as well.

A third major disruptor has been the demographic change, both in terms of incoming immigrant populations, as well as the ageing and eventual retirement of the baby-boomer generation. This disruption will affect everything, from the languages you hear in the workforce, to training curricula employed, to different sets of priorities and incentives, to compensation levels and social security contributions.

Here, we tend to recognise the symptoms of the problem, but we appear very unwilling to do anything about their root causes and longer-term consequences. Let’s take the simple definition of the nation-state, which in Europe is usually linked to a revolutionary moment, a nation-founding myth, and a subsequent accretion of decades of cultural and social assumptions of a single ethnic identity. How this issue will be “solved” (and I make no moral judgements or predictions here) is an issue which should concern us all.

There are myriad other sources of change, or disruption. These include environmental and energy change to changing consumer preferences. They include rapid, containerised transport and its impact on the supply chain. They include violent acts of religious or political protest one the one hand, or government failure on the other.

The point is that we live in an era where change is perhaps the one constant we should be planning our lives, companies and societies to accept and to integrate. But at the same time, in Greece at least we are making policies which are firmly rooted in the past, and which bear almost no real connection to the present or the future.

Policies—laws—are made dealing with symptoms of problems, not their root causes. The interpretation of laws usually favours a small well-connected elite, who are granted subsidies, lucrative public sector contracts, or tax incentives, at the expense of the government, and therefore the nation.

Policy-making is usually riven by fundamental conflict: the Minister of Finance is trying to reduce Greece’s deficit; the Minister of Economics is trying to give yet more subsidies, or to placate various special interests (such as striking dockworkers) by protecting their privileged status.

Greece’s foreign policy is a picture of failure, embedded in the past. It’s main political priorities are

a. The protection of its airspace and territory from Turkish incursion or immigrants crossing over from Turkey;

b. The reunification of Cyprus, a product of Greek and Turkish nationalism which has resulted in thousands of deaths on both sides;

c. The protection of its perceived history and heritage in face of a pathetic reinterpretation of history by a small Balkan state, the Former Yugoslav Republic of Macedonia (FYROM).

Regrettably, none of these priorities help Greece master the transition from its previous economic model, one driven by oligarchic, paternal private and state companies which monopolised their specific segments, and one in which the Greek economy is fundamentally open and unprepared for the onslaught of foreign-manufactured goods and services, and in which the Greek society, economy and workforce cannot compete.

I do not, of course blame Greece at all for insisting on its territorial integrity, on a peaceful solution for the reunification of Cyprus, or on historical truth. Far from it. What I object to is the fact that apart from these three topics, we are doing almost nothing else to prepare for the realities of today, of the next 10 years, or the next generation.

I see this failure repeated within the companies I advise on a regular basis. In most cases, the only necessity to develop a 5-year plan comes from a bank, which insists on a long-term forecast and risk analysis as a condition for releasing a loan. Most companies have barely adapted to the process of making next-year budget predictions, and these are usually a percentage increment up or down over the past year. Most companies appear unwilling or unable to envision major or minor disruptive change, and the impact this will have on their business. Some sectors which are mainstays of the Greek economy, such as travel agencies or hotels, are an unfortunate case in point.

So, it appears that we are confronted with a double paradox:

a. On the one hand, our government and companies are not able to develop coherent plans for the future, which model both a successful development track, but also the risks it might involve;

b. On the other hand, our government and companies are so locked into a single mindset, so that even when they receive a clear, unambiguous signal of a major competitive change or threat, they are unable to respond.

Over the past five years, we have received multiple such signals on the horizon: a rising and unsustainable debt; an incompetent and stagnant public sector; a deteriorating environment; a dangerous reliance on a few economic sectors; an unhealthy dependence on a subsidy culture; pervasive corruption; declining educational standards; declining public health, for instance child obesity and diabetes; and many others. And yet, it would appear we have done next to nothing about them.

If a government, a company, an economy or a society can no longer take sufficient active steps to prevent or mitigate current problems while preparing for the challenges of the future, then a fundamental question is raised: does this entity have the right to survive? Nature and human history is full of examples of organisms, populations, civilisations, or societies that have not adapted, and which have failed and disappeared. This need not be a catastrophe: the theory of natural selection is based on it.

Yet I can’t help wondering, as I watch the news every evening. Why do we expect that our pathologies will allow us to continue making the same mistakes indefinitely?

It’s the Economy, Stupid!

In what may seem a surprising comparison, I’m going to briefly compare the track records of US President Barack Obama and Greek Prime Minister George Papandreou, and hypothesise why, in both practical and electoral terms, both are failing in terms of public policy. Bear with me before closing this blog in disbelief!

In the United States, headlines today start with Republican candidate Scott Brown’s upset victory in the special election to fill Ted Kennedy’s Massachussetts Senate seat. The final vote tally is a 52%-47% victory over Democratic candidate Martha Coakley. The New York Times (GOP Senate Victory Stuns Democrats) explains that this was due to a mix of factors, including unusually heavy turnout in the suburbs and among independent voters, which favoured Brown.

The immediate implication raised in most coverage is that health care reform is dead. Although the bill passed in the Senate, it has still not passed in the House, and most commentators are suggesting that either there has to be a very rapid passage if the bill has any chance to survive.

There is a striking quote in the NY Times article:

“I’m hoping that it gives a message to the country,” said Marlene Connolly, 73, of North Andover, a lifelong Democrat who said she cast her first vote for a Republican on Tuesday. “I think if Massachusetts puts Brown in, it’s a message of ‘that’s enough.’ Let’s stop the giveaways and let’s get jobs going.”

In Greece, headlines are dominated by its latest thrashing about in the Economics and Finance Council meeting in Brussels, where Minister of Finance George Papaconstantinou presented its Stability and Growth Plan to reduce the budget deficit. Greece is dying the death of a thousand cuts, as every day a new investment bank or ratings agency casts doubt on the government’s ability to implement its plan. George Papandreou’s strategy of leaving any serious measures until 2010 and inflating the deficit in 2009 (as well as his heart-wringing exposé of corruption in Greece and fake national statistics during the EU Council of Ministers) has seriously backfired.

Greece’s headlines are also dominated by events of a different sort. On Monday and Tuesday, the central council of Municipalities had its annual meeting, which was used by the government to reveal its “Kallikrates” plan for restructuring the public administration of municipalities, prefectures and regions. This forum was used by all parties to denounce a range of other policy initiatives, such as PASOK’s plan on citizenship reform. At the same time, farmers are blocking roads across Greece, preventing the passage of goods or people.

This post does not seek to equalise Barak Obama’s policy initiatives with those of George Papandreou’s. But I am struck by one simple fact: both political leaders give the appearance of ignoring or being totally insensitive to the core concerns of most voters today.

As I stated in my blog post on November 5th 2009 (Campaigning versus Governing),

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.

Perhaps it is a political tactic, or perhaps politicians think they are payed by the number of laws they pass, but government policy in the United States and Greece appears to be dealing with everything except what counts right now. And that is, quite simply, the economy. Remember Bill Clinton’s zinger in the 1992 election? “It’s the economy, stupid.”

Voters are fed up. They are fed up with political elites taking months to pass what may be very necessary legislation, but which does nothing to solve the pressing issues of unemployment, public and personal debt, and the pervasive fear that the future will be worse. They are fed up with “caviar socialism” deputies packing public sector jobs or extending public subsidies to a few favoured supporters. And most of all, they are fed up with the hypocrisy and platitudes that politicians and the national news media pass off as wisdom.

I’ve given the examples of climate change, Iraq/Afghanistan, unemployment, and the deficit for the United States. Let’s look at a few examples in Greece:

• The country is being terrorised on a daily basis by the steady news of Greece’s impending bankruptcy and some vague foreign conspiracy to downgrade Greek debt. Unfortunately, the average voter here has no idea what this means, but he instinctively trusts his politicians to do the wrong thing. So, while a voter understands “higher taxes”, he cannot understand what this money will be spent on, or how the situation will improve, and he resents having to pay for the mistakes of the political elite.

• Greece’s official unemployment rate has nearly hit 10%, and underemployment probably brings that level to 17-20%. Most Greek employers are low-productivity, labour-intensive organisations with a significant share of employment compensation paid off the books. Unemployment among the young is astronomic, at rates of up to 25%. Women have among the lowest employment rates in the European Union: only 55% of all women of working age are classified as employable, i.e. of good health and interested in participating in the workforce.

• The employment and revenue-generating mainstays of the Greek economy—tourism, construction, catering and food processing—are in extended declines due to the shortfall of foreign demand (due to the economic crisis). By all indications, 2010 will be as bad as 2009 in this regard.

• Although the government has given a EUR 28 bln support package to banks, and although banks have benefited from ECB credit window loans of at least EUR 40 bln, it’s still impossible to get a personal bank loan at below 7%, and it’s usually 10%. So banks are getting capital at about 1%, and lending onward at 10%.

• Petty and serious crime is growing. A friend of mine had her nephew trapped in a Jumbo outlet (a childrens’ toy store) while two gunmen fired Kalashnikovs at a money transfer truck outside, killing one of the guards. News headlines are dominated by rapes, stabbings, shooting, drug use, etc. The climate of economic uncertainty increases and aggravates the feeling of personal insecurity.

• Terrorist attacks are increasing. In addition to the regular, accustomed bombings of foreign car dealerships and banks, the inanely-named “Cells of Fire” and other Che Guevara wannabes have bombed the monument of the tomb of the unknown soldier outside Parliament, the offices of Minister of Economics Louka Katseli, and a number of other targets.

In the midst of this very real crisis, it seems that our elected government is fiddling. It is inconceivable, for instance, how George Papandreou can launch the reform of public administration (Kallikrates), which is estimated to cost EUR 4.2 bln to implement, and which will not result in any reduction of public sector employment, in this time of economic crisis. It is rank foolishness to begin debating a law on citizenship (which can have only one conclusion in a Parliament where PASOK has 160 deputies), given the tremendous and visible increase in illegal immigration which we see at every traffic light in Greece.

We have a government which, rather than taking the obvious measures to combat the economic crisis—a real reduction in public expenditure and a real crack-down in tax evasion and illegal economic activity—is thrashing this way and that, spending its energy (and our money) on non-essential distractions.

What is doubly ironic is that the large majority of Greek citizens want to see the government crack down on tax evasion, and on the petty illegality which defines public life in this country. We are tired of paying EUR 50 for a 20-minute consultation with a doctor or orthodontist, who we know damned well isn’t paying a cent in taxes. We are tired of hearing about grand government initiatives, when at every traffic light there are usually three desperate people of SE Asian descent, offering to wash your windshield, sell you an pack of hankerchiefs, or begging for your money. We are tired of Nigerians selling fake Louis Vuitton bags on Ermou Street or in Kifissia. We are tired of grand infrastructure initiatives being blocked by rather stupid farmers with a vast sense of entitlement.

I’m going to conclude by repeating the words from my November 5th post:

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 prioritised 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.