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Posts Tagged ‘debt’

Mr. Stournaras’s credentials

In News on July 8, 2012 at 4:15 pm

Yesterday, Greece’s new Finance Minister  Prof. Yannis Stournaras made his first policy speech since taking office. He said that Greece must implement the measures it has agreed upon its international lenders and he announced that he would speed up privatisations. Some key points of his speech include (here, in full, in Greek):

  • speeding up the privatisation programme and including new assets in the existing one
  • concluding the privatisation of the Public Power Corporation (DEI)
  • developing the land from Faliro to Sounion in Attica through privatisations
  • 90% of the privatisation programme will include selling or renting land and infrastructure
  • creating a modern social state through combatting tax evasion and tax avoidance
  • reducing uncertainty in the economy and improving the economic climate
  • greater transparency in the tax system
  • battling corruption
  • creating a social consensus to accept that staying in the eurozone is the only road available

Like any critical reader and thinking citizen, one should always check the sources of his information. Prof. Yannis Stournaras full cv can be found here. The highlights include a strong academic record (Master’s and Ph.D. from Oxford) and a long list of publications.

In addition, he has worked in many respected positions in the Greek public administration. In particular, Stournaras worked as a

  • 1986-1989 Special Advisor to the Ministry of Economy and Finance on Public Enterprises and Incomes Policy issues
  • 1989-1994 Special Advisor to the Bank of Greece on Monetary Policy issues. During that period he represented the Bank of Greece as an alternate member in the Meetings of the Governors of European Union’Αs Central Banks.
  • 1994 – July 2000 Chairman of the Council of Economic Advisors at the Ministry of Economy and Finance. He participated in the design of macroeconomic and structural policies (especially in the design and implementation of the Convergence Programmes) and represented the Ministry of Economy and Finance at the Monetary Committee (now Economic and Financial Committee) of the European Union. In this capacity, he participated in the negotiations for the entry of Greece in the Economic and Monetary Union. He was responsible for the consultations with international organizations, such as the International Monetary Fund, the European Commission and the Organization for Economic Cooperation and Development (OECD).
  • 1994 – 1997 Vice Chairman of the Public Gas Corporation
  • 1998 – July 2000 Member of the Board of Directors of the Public Debt Management Office
  • 2000 – 2004 Chairman and Chief Executive Officer of Emporiki Bank and Vice-Chairman of the Association of Greek Banks

Which side do you think he will be on? The people’s?

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Immigrant stabbed in Athens

In News on June 20, 2012 at 9:04 pm

Dear non-Greek friends, this is a video where you can see (or rather hear, unfortunately in Greek) members of the neo-Nazi party Golden Dawn attacking an immigrant with a knife in Athens metro. The view that they belong to the Golden Dawn comes from their clothes and the mob-style of their attack.

The person whose voice you can hear is pretending to be on the phone to film the incident. This happened on 17 June 2012, one day after the Greek elections.

No Greek tv channel showed this, no politicians mentioned it (they were busy trying to form a coalition government and secure their position in power), no DA started an investigation. This is the state of the Greek democracy today, where human life costs less that repaying a debt created by corrupt politicians.

Who knows, maybe if you share, some foreign journalist may pick it up among everything else and something will change.

Europe’s fiscal compact: A political economic perspective

In News on December 16, 2011 at 9:37 pm

Over the past, there has been a proliferation of analyses, reports, commentaries on the Eurozone sovereign debt crisis, its causes, the economic and political situations in Greece, Italy, Spain, Portugal, on the handling by European leaders, on the structural and other issues of the European Monetary Union (EMU).

Some commentators focus on Greece and its high sovereign debt levels. Some, usually at the more sophisticated end of the spectrum, provide an analytical approach to identify the causes of the Greek debt: 1. the low interest rates available to the Greek government, as a result of EMU, which led to an increase in government borrowing 2. the increase in Greek imports (from Germany and the European north) which led to a current account deficit, translated into debt accumulation and, of course, 3. corruption. Others analysts of course, at the less sophisticated end of the spectrum, indulge in the bashing of the “profligate” Greeks, who did not respect the Maastricht rules, “spend more than their means allow them” (colloquialism for borrowing), work 5 hours a week and have taken the term “tax evasion” to a whole different level. Of course, the Maastricht rules were first broken by none other than France and Germany back in 2005 and the shift towards spending-by-borrowing (rather than by reducing your savings) is a universal one, but these are different issues.

Other analysts look at the Eurozone as a whole and point to its well-known deficiencies and often startle at its problems: For example, that the Eurozone has a currency but not a government (really? Wasn’t this in the Maastricht Treaty of 1992?), or that the European Central Bank (ECB) only focuses on low inflation rather than high employment and growth (again, really? Wasn’t the ECB modelled after Deutchebank, inheriting its anti-inflationary obsession?) Others stress the centrifugal powers within Europe, which will lead to the break-up of the Eurozone, as Brussels interferes more and more in nation-states’ politics,economics and societies. Although an increasing transfer of powers from the national to the European level is taking place with questionable methods (see rule by bankers in Italy and Greece), the break-up of the Eurozone seems to echo less the reality and more Conservative British wishful thinking.

What is often downplayed, is a more political reading of the Eurozone debt crisis. The Eurozone debt crisis debate has been framed in terms of “more or less growth”, or “Europe versus national economies”. However, the developments in the Eurozone over the past two years are more political than ever.So, let’s clarify a few things:

First, to go back a year, the Greek austerity measures, all-too-easily accepted by the Greek political elite, are well-known for their neoliberal character among development economists. Similar IMF-backed Structural Adjustment Policies, as the ones being implemented in Greece at the moment, have taken place in developing countries since the 1980s and failed to create growth and employment. It should not come as a surprise to the Greek media and political elite that increasing taxes and reducing deficits threw the Greek economy into depression, more so as the Greek government could not devaluate its currency.  This is another well-known fact among economists, and even the World Bank allowed for more social spending in the programmes it proposed to developing after the end of the 1990s.

Second, economic growth can be stimulated in a variety of ways. One of those is to reduce deficits and debt, reduce the role of the state, privatize, open the economy to trade and foreign direct investment, and facilitate the private sector domestically. Another way to stimulate growth is by increasing investment made by the public sector. In theory, were the IMF a different institution, it could very well bail-out Greece not on the condition that the role of the state in the economy is reduced through tax increases and public spending reduction, but provided the government invested in the economy, and, for example rebuilt its industrial base.

Third, fiscal stability is a fine and noble goal. The whole idea is that a government’s revenues must more or less match its expenses, because if it borrows excessively, it mortgages the country’s future, as these debts have to be repaid. However, among other things, one of the reasons why a government may borrow in the first place is to stimulate the economy by public spending in the case of a recession. Put differently, the government could (and should) borrow to implement an expansionary policy when the private sector is not confident enough to invest, as is the case presently in Europe and the US.

It is in this light that last week’s “fiscal compact” should be read. The rule (government deficits not to exceed 3%) exists since the Treaty of Maastricht (1992). However, the idea back then was all about making European economies converge ahead of the adoption of the common currency. This time, the rule will be stricter and harder and presumably incorporated in constitutions or legal texts of similar legal force. While this will essentially render counter-cyclical economic policy at the national level illegal, the European Union has yet to provide an equivalent mechanism at the European level. The Brits may have stayed out of  Europe’s deal to protect the interests of their City, but in effect they retained the one of the most powerful government policy tools.

There are many who like to present austerity and fiscal stability as simple economic rules, in the far-far-away land of technocratic, depoliticized issues. This is not about economics. This is about good, old traditional left-right politics. And up to now, the Right is winning.

The politics of blame shifting

In News on June 18, 2011 at 5:42 pm

Governments are known to use tactics in order to circumvent public opposition. It is often the case that politics elites withhold important information from the public or delay the release of information to the media, with the aim of manipulating public opinion and tone down opposition and reactions. This manipulation of public information by elites is sometimes well-intentioned. It is not always the case that the public knows best, and citizens can be emotional about issues, where a rational approach is needed (see foreign policy). However, more often than not, governments exploit their strategic position as agenda-setters and regulators of information, and tamper with it to promote their own political agenda. This is exactly the game which  Deputy Prime Minister of Greece, Theodoros Pangalos had been playing for past eighteen months.

Ever since the magnitude of the Greek debt was revealed in October 2009, Mr. Pangalos has been making increasingly provocative public statements, referring to the Greek citizens’ responsibility for Greece’s debt crisis and current state of the economy. In a very characteristic statement, which has become an anecdote in the Greek media and blogs, he said “We ate it together”, where “it” refers to public money and “ate” is  slang for “spent”. The message which Mr. Pangalos is trying to convey is that Greek citizens have greatly benefited from a corrupt state and have thus contributed to the geometrical increase of Greece’s public debt. As he mentioned in the beginning of this week, if you can “find me a Greek public servant citizen who did not receive undeserved wages, benefits, and pay increases or a Greek who asked for a receipt each time he bought a product or used a service, I will make him a statue”.

What is infuriating about Mr. Pangalos’s public statements is not only his sarcastic tone and the fact that he completely dismisses the public and media outcry his comments provoke. It is that he systematically attempts to place the Greek citizen and the politician on an equal footing, vis-a-vis Greece’s present debt crisis. And as it seems, this motto is now being taken on by others who talk about the need of Greeks to accept some “responsibility for the causes of the crisis”.

Let’s make one thing clear: Greek citizens are not to be blamed for the state of the Greek economy and the magnitude of the debt. Not because they are model citizens. Far from it. Many Greeks have received overblown public wages, by virtue of being a member of the Socialist or the New Democracy party, rather than their merit and their qualifications. And as many, if not more, do ask for receipts and do not offer one when they provide their professional services. However, the Greek civic culture and the behaviour of the Greeks is not at trial here. It is government policy. Citizens do not issue government bonds. Citizens do not decide how many job vacancies will open in the public sector. The Greeks did not decide on the level of defence expenditure and the number of submarines and war planes to be bought from France and Germany. They did not contract companies in the name of the Greek state to build roads five times up the cost of European highways. Politicians did.

Of course, the aim of this blame-shifting, scare campaign is to spread fear and guilt to the majority of the population, so that austerity measures are accepted. However, when a quarter of civil servants have seen their salaries being reduced by 20% and may lose their jobs, when the number of Greeks out of work has increased by 40% from a year earlier (16% in total), while the political elite remains unpunished for well-known cases of corruption, these are dangerous games. Very dangerous indeed.