Friday, 20 February 2015

Who Are The Real Revolutionaries?

Buried beneath the mountain of verbiage and breathless news reports about the Greek debt negotiations lies a little-noticed role reversal. While the new Greek government Syriza adopts the dramatic plumage, media savvy and rhetoric of ‘revolutionaries’ they are, in fact, staunchly defending the Greek status quo – the very status quo that brought Greece to its knees. The usually media-shy, grey and drab Eurocrats in Brussels would shiver at the comparison, but they have become the real revolutionaries who want to change Greece and bring it kicking and screaming into the 21st century.

            The Greek state, with its bountiful patronage and rigid control, has dominated the Greek economy and protected politically loyal interests for generations. Every party in power has used the state coffers to reward voters with jobs in government or in state-owned enterprises regardless of aptitude or knowledge of the job at hand. The combination of hapless, inefficient state economic enterprises and bloated bureaucracy whose main goal was to strangle at birth any innovation that might reduce its numbers has slowly but surely deprived the Greek economy of the vitality and oxygen needed for real growth. Who in his right mind was going to spend the energy required to fight through the swamp of bureaucracy and closed professions to start something new that just might offer a lower priced, better service or product to all consumers? Far better to stuff your idiot cousin into well-protected state job.

Is he the revolutionary ...
            This is what Syriza wants to defend at all costs. It is, after all, the source of the party’s political power. And this condition is exactly what the bureaucrats in Brussels want to change. Syriza loves to play on the image of the hard-hearted Germans insisting that impoverished Greeks tighten their already tightened belts a few more notches. Greeks respond ‘What belt? I sold that long ago.’ 

Even brilliant economists like Paul Krugman weigh in against the follies of relying on austerity to bring a country out of depression. It is not every day that I take issue with a Nobel Prize-winning economist, but Krugman may be only half right in this case. I agree completely that austerity by itself accomplishes nothing but misery. How can any country, or company, for that matter prosper on a diet of nothing more than the economic equivalent of kale and tofu?

It is the flip side of the austerity coin that has been obscured in all the concern for the long-suffering Greek people. So far, Syriza and its vocal supporters have said very little about the vital structural reforms required to get Greece off the welfare rolls. What about opening up the economy to newcomers and, God forbid, foreigners? What about amending the bureaucracy to encourage instead of discouraging enterprise? We know that Syriza is firmly against selling or even leasing state assets to raise funds that could be used in much-needed social welfare programs. But why, precisely? Do the party leaders really believe that the state can run things like the railroad, ports or power corporations more efficiently than private owners? The real tragedy is that without these long-overdue structural reforms the pain of reduced spending over the last few years will be wasted. Greece will remain mired in a welfare trap, unable to claw itself out of debt and unable to grow.

Or is he the real revolutionary?
The revolutionaries in Brussels want to change the story line. They are well aware of the desperate state of many Greeks, but they would like to help Greece grow out of the welfare trap rather than remain on the EU’s life-support system. An obvious deal is on the table. Greece’s debt conditions are eased in return for real movement on the economic reforms. Will Syriza pick up this deal? Or will it continue to play the role of the defiant revolutionary defending the barricades with cries of ‘national sovereignty over all else’? One wonders if Greece’s rulers have ever explained that the price of joining the EU and then the Euro was a loss of total sovereignty. The club has rules that one is supposed to obey. One didn’t hear much about a ‘loss of sovereignty’ when EU funds were flowing in to improve the country’s antiquated physical infrastructure. But now when the club secretary reminds members that the club is joint enterprise with certain obligations we hear cries of anguish from many Greek politicians.

If there is no agreement in Brussels in the next couple of days Syriza could possibly elect to hold a referendum on the Euro. It could ask the Greek people to decide if they want to stay in the Euro even with the ‘odious’ conditions imposed by heartless Germans -  or do they want to return to the ‘proud and sovereign’ drachma regardless of the economic pain that might cause. Such a step could give Syriza political cover regardless of the outcome. In any case, we won’t have long to wait for the end of this melodrama.

Thursday, 5 February 2015

Rigid Ideology Trumps Welfare Of The People

Nothing better illustrates the ‘profoundly unserious’ nature of Syriza’s plan to revive the Greek economy than its position on the sale of state assets. Syriza’s new ministers have gone out of their way to condemn the practice and say they have absolutely no intention of pursuing any more privatizations. So much for the claim of helping the long-suffering people of Greece. If the party was genuinely interested in easing this suffering it would relax its rigid ideology and use these state assets to generate the necessary funds.

           The Wall Street Journal ran an interesting analysis of the Greek debt situation in the 20 February edition. Stephen Fidler points out clearly that Greece has the resources to tackle its debt, but the government chooses not to. This analysis would seem to be supported by comments from two leading government officials regarding the controversial privatization program.

            Finance Minister Yanis Varoufakis opined in one of his carefully-calculated sound-bites that “it is not very clever to sell off the family jewels in the middle of deflationary crisis. It is wiser to develop state property and increase its value using smart financial resources to strengthen our economy.

            Panayiotis Lafazanis, leader of the hard-left faction of Syriza, added that the Public Power Corporation “will return to the state as a state-run company which will operate as a driver of economic growth.” Are they kidding??!!

           These comments demonstrate clearly that neither of these people has ever been involved in selling or running anything, and has absolutely no idea what they are talking about. First, when is a better time to sell assets than when you need money? The government can set the minimum price it will accept and work to attract bids. Because assets like the Public Power Corporation, the Port of Piraeus, and the railway are potentially valuable for the right buyer the bids could easily exceed the state’s minimum price. The cash received by the state would come in very handy to meet some of the legitimate social needs in the country. This much is elementary, not even Economics 101. 

Fashion statement or finance minister?
            Second, the idea of the Greek state ‘developing’ these assets or having state-run companies becoming “a driver of the economy” is ludicrous. Over the past several decades the Greek state, regardless of the party in power, has demonstrated convincingly that it cannot run a car wash let alone something as sophisticated as a major port or energy company. Just look at the sorry record. Olympic was a decent airline until it was nationalized, starved of investment, over-staffed with political patronage, and ultimately went bust. The airline was well known for people getting paid and never bothering to show up for work. The railroad could be a very valuable asset by connecting with a potentially efficient Port of Piraeus and offering a much quicker way to the heart of Europe than taking a ship all the way through the Straights of Gibraltar and up to Rotterdam or Hamburg. But, under state ownership the railroad never even began to reach its potential. All you have to do now is contrast the part of Piraeus Port owned by the Chinese company Cosco with the state-owned section to see the difference. One bustles with activity and productivity while the other stagnates

Furthermore, all these state assets require millions of Euros of investment to make them productive and efficient. Under state ownership where is that money going to come from? The Treasury is already empty, and there will be intense pressure to spend what little money there is on re-hiring people or boosting pensions rather than buying things like a new crane for the Port of Piraeus.

            One would hope that Syriza would at least be honest with the Greek people. One reality they do not touch upon is that the party is beholden to powerful unions. And these unions have always been opposed to privatization. Such a move away from state-ownership could seriously weaken the unions’ influence. In addition, continuing state ownership guarantees Syriza’s grip on the levers of economic power in Greece. Friends can easily be rewarded while enemies can be left outside the charmed circle. One gets the distinct impression that the last thing Syriza wants is strong economic growth led by a private sector that it cannot control.

            Another way to generate some cash for much needed social programs would be to cut the bloated defence budget which is still one of the highest in NATO as a percent of GDP. Surely, if Syriza were seriously interested in helping the people of Greece it could divert some this money into much needed social spending.

             But what do we get instead of serious proposals? Grandstanding helicopter flights by the new minister of defence over disputed islets close to Turkey where he dramatically drops a wreath for all the cameras to witness. Why? What on earth was he trying to do other than provoke another problem that Greece does not need? Despite deeply entrenched Greeks fears to the contrary, Turkey is not about to lunge across the border and grab some territory

            Greece does indeed have the ability to help itself.  But the government has to get serious about generating sustainable income rather than simply bleating about Europe’s ‘obligation’ to reduce the country’s debt. If Syriza really wants to prove its 'anti-establishment'  tendencies it could actually do something to help the people of Greece rather than rely on trivialities of costume design and grand, theatrical -- but ultimately empty -- gestures

Monday, 26 January 2015

Will Greece Become Venezuela -- But Without The Oil

One can only say ‘Well Done’ to Syriza after running an energetic campaign promising the long-suffering Greek people a return to the good old days and an end to the struggle, however muted, of dragging the country into the 21st century with much-needed structural reforms. He successfully kept voter attention focused on the hated word ‘austerity’ instead of ‘reform’.  Something no one seems to want. By comparison, the former leading party New Democracy was effectively absent-without-leave during the campaign and ceded all the high, self-righteously indignant ground to the insurgent Syriza. As one observer noted New Democracy seemed tired, worn out, and basically conceded the election before the campaign even began.

            Winning the election is one thing. Transforming the rhetoric into reality is quite another. The Greek treasury is essentially empty. It is not altogether clear just how Syriza’s bold election promises will be met. The glow of victory could quickly fade once the next prime minister, Alexis Tsipras, has to deal with the twin problems of intractable creditors and an extremely fractious party whose more radical elements view the election as revenge for losing the civil war almost 70 years ago. Memories die hard in Greece. Will he be able to tame the parts of his own party that want to replicate Argentina and rip up the debt agreements and repudiate all of Greece’s debt? It’s much too early to tell.

Syriza leader Alexis Tsipras
            His campaign was filled with promises to renegotiate Greece’s debt burden, restore pensions, roll back structural reforms, and essentially remove the influence of the creditors on Greece’s internal policies. By the way, all of this is supposed to happen with Greece remaining in the Euro. Crowd pleasing stuff. Exactly what the Greek people wanted to hear. Unfortunately it has the real impact of one hand clapping.

The creditors wisely remained largely silent during the campaign. It will be interesting to see how they react when presented with Syriza’s ‘demands’. Probably not all that well. There may be room to adjust terms at the margins – possibly extend maturities, be flexible on interest rates, etc. But I expect the creditors to remain firm, initially at least, on demands for continued structural reforms to free up protected professions and reduce the highly politicized over-stuffed bureaucracy that stifles any economic initiative.

The creditors, led by the Troika of the  IMF,  European Central Bank and the European Commission, should be careful, however, because Tspiras is very skillful at changing the nature of the debate and winning the critical public relations battle. The debate will no longer be about the serial failures of Greek policy makers over the last several decades. Their inability or unwillingness to create an economic system that relies on more than state hand-outs to favoured clients will be pushed aside.

Tsipras will no doubt attempt to turn the debt negotiations into grand statements about ‘Greek sovereignty’, the ‘will of the people’ vs. narrow-minded accountants. He will attempt to broaden the argument far beyond Greece and become the spokesman for all the ‘beleaguered, debt-ridden, down-trodden’ people of Europe. Nowhere will there be any acknowledgement that the ultimate responsibility for this current Greek tragedy lies squarely with the Greek political class, or that perhaps billions of Euros of loans just might come with a few conditions. All these unpleasant facts will be buried under tons of ‘anti-bailout’ rhetoric.

This strategy just might work. He knows his opponents’ weakness very well. The bureaucrats of the so-called Troika are not very good at public communications. They act like small woodland creatures caught in the glare of head lights when confronted with media attacks. They either become road kill or retreat rapidly behind bland, bureaucratic statements that Tsipras will tear apart as he backs them into a public relations corner. He will turn them into heartless accountants intent on stripping the hapless people of Greece of their last shreds of dignity and welfare. Hedge fund managers could possibly stand up to this onslaught. But European bureaucrats and political leaders are made of less stern stuff. They will be looking for a way out. They would undoubtedly cover their retreat by saying they acted to preserve the Euro and the concept of European unity. The Germans hate the idea of bailing out what they consider the ‘feckless Greeks’, but even they may wind up bending rather than be painted as the bad guys of Europe once again.

Unfortunately, the actual welfare of the Greek people could be lost in all this upcoming theatre where high-pitched melodrama replaces real substance. Tsipras has a real opportunity to lead Greece out of its quagmire and demonstrate just how he intends to kick-start the Greek economy to provide the jobs and income the people deserve. Can he change the mind set of his countrymen from relying on state hand outs that have a short shelf life? Will be do something like this? Or will he be content with the colourful theatrics of opposition? This is by no means clear.

Saturday, 10 January 2015

Enough Is Enough. No More Excuses. No More 'Buts'.

Finally, in the wake of the attacks in Paris, there is a significant change in response from some quarters of the Moslem community in Europe and in the Islamic world in general. Too often the extremist outrages have been greeted with a ‘Yes, but . . .’ response that usually winds up indirectly blaming the victims. Now, important voices in the Moslem world have said enough is enough, and we must look to answers within our own community. Yes, the West has not always been welcoming or kind in its response to Moslem immigration. But that type of moral equivalence to justify the jihadi violence is beginning to break down

            Whatever one may think of Egyptian President Abdel Fattah el-Sisi, he  recently delivered some important home truths in a speech to Islamic scholars and clerics at the heart of Islamic learning, Al Azhar, in Cairo. He called for nothing less than a revolution in the teaching of Islam.

Egyptian President Abdel Fattah el-Sisi offers a few home truths
          “I am referring here to the religious clerics. We have to think hard about what we are facing . . . It’s inconceivable that the thinking that we hold most sacred should cause the umma (Islamic world) to be a source of anxiety, danger, killing and destruction for the rest of the world. Impossible!”

            He added that Moslem clerics needed to approach Islam "from a more enlightened perspective" -- and that this necessitates a "religious revolution." These are dangerous words for a Moslem leader, and he was quickly condemned by more radical Moslem groups. It is worth noting that el-Sisi is the first Egyptian leader, ever, to attend a Coptic Christian service in Cairo.

                      Former Turkish President Abdullah Gul  issued a strong statement condemning the Paris attacks.

Former Turkish President Abdullah Gul condemns 'barbaric acts'
“It is clear that this kind of violence is totally immoral and against the fundamental precepts of any religion, and indeed of  Islam.
“The perpetrators of this barbaric act not only betrayed and tainted Islamic values and principles, but also targeted millions of European Muslims who have nowhere to live other than Europe.”

Gül also called on the Islamic world and all Muslims to denounce “the inhuman attack and demonstrate solidarity with the people of France against religious extremism.

             This was a refreshing contrast to the current Turkish president, Tayyip Erdoğan whose default position to such attacks is to remind everyone that what he calls Islamaphobia is really responsible for such outrages.

                      Turkish journalist Ahmet Hakan wrote a powerful column saying “No More Excuses Left For Massacres.”
Ahmet Hakan: Beware the 'buts'
We are going through days when sentences containing ‘but’ have peaked.
‘I condemn this, but . . .’
‘Of course killing is horrendous, but . . .’
‘One would not support a massacre, but . . .’
‘I would never tolerate what has been done, but . . .’

Here’s how to understand these types of sentences. Disregard all of the words before the ‘but.’ Concentrate on what comes after the ‘but’, because the actual ideas are hidden there.

The benchmark is this

When our religion and our prophet are mocked, it is legitimate and acceptable to turn your face away. To protest and to show discomfort is acceptable. To oppose is acceptable. Even to say ‘This can not happen; this is unacceptable’ is quite fine.

However, to kill, attack, behead, strafe with a machine gun, massacre, bomb, or blow up . . .Such reactions are never legitimate and never acceptable.

Having to remind (people) of the very basic humane and Islamic benchmarks to such an extent, however, is simply humiliating, shameful.”

While it is refreshing to hear calls for a serious re-think in the Moslem community, it is also important to rebut the ridiculous claims about the “Islamization of Europe.” From a demographic point of view this fear is sheer fantasy. Take Germany with about four million Turkish Moslems. This is less than 5% of the German population. And the vast majority of Turks I have encountered in Germany identify themselves as Germans. They are widely represented across all professions and businesses. I make it a point of asking young German-Turks if they ever think of going ‘home.’ The vast majority look at me quizzically and say firmly that their home is Germany. They were born there, their German is better than their Turkish, they went to school there, they work there, and they are delighted to be German citizens.

Mouhanad Khorchide: A voice of reason
            If the short-term answer to this Moslem-extremist violence is better security, the long term answer is education. Too much of Islamic education is based on rote-memory of the Quran or listening to hate-filled sermons from semi-educated self-styled imams. Non-Moslems need to understand that Islam is more than the distortions of the jihadis. The New York Times did an interesting story about Mouhanad Khorchide, a professor of Islamic pedagogy at the University of Münster in Germany. His courses are intended to groom teachers who will teach Islam in primary schools and then secondary schools, putting it on a par with Christianity and Judaism. This effort to take real Islamic instruction out of the hands of the fanatics will take time, but it is the only way to reduce the attraction of the violent jihadi groups like Al Qaeda or ISIS who prey on the ignorant and the vulnerable.

Monday, 5 January 2015

The Greek People Deserve Much Better

The ancient Athenian dramatists would find plenty of subject matter in modern Greek politics. The only question would be whether Aristophanes or Euripides should write the play. There’s enough material for the comedies of the former or the tragedies of the latter.

            There is absolutely no question that the Greek people have been put through the economic and emotional wringer ever since the crisis began more than five years ago. The economy has almost ground to a halt, unemployment has soared, incomes have been slashed, the best and brightest young people are fleeing the country for greater opportunities elsewhere, and popular anger has reached a thundering crescendo. People are in the mood to roll a few heads.
            But whose? Therein lies the question. Unlike other troubled European economies such as Spain or Ireland, the problem, and any solution, go far beyond mere economics. Should they go after the entire Greek political class whose deceit, mismanagement and self-interest over the decades did so much to bring the country to its knees? Should they lash out at the current government that has very reluctantly started a half-hearted reform program? Better yet, should they vent their anger on the usual suspects – the perfidious outsiders who have the nerve to put strict conditions on the billions of Euros they have given Greece?

                That certainly is the position of the main opposition party, the left-tilting Syriza. This is where Aristophanes would have a field day. The main thrust of Syriza’s election campaign is promises to re-negotiate the bail-out agreement, force the creditors to take a bigger hair-cut, give free electricity to certain people, increase pensions, increase spending, do away with the real estate tax, raise the minimum wage, and, by the way, reinstate the €12,000 tax-free threshold. One would love to be in the room when these masters of Greek melodrama meet with the decidedly un-melodramatic German Finance Minister Wolfgang Schäuble to ‘renegotiate’ the terms of the bailout agreement. Good luck to them.

            While Syriza’s mishmash of proposals may sound contradictory and implausible to anyone with minimal financial knowledge they are consistent with the general anti-Western and anti-capitalist dogma of the Greek left that holds everyone except themselves responsible for the country’s problems. Rather than see the State with its old patronage system of politics as the author of many of Greece’s serial catastrophes many of the Greek left see the State – which they want to control – as the country’s salvation. There is not much room for private initiative in this resurrection of a failed system.

            So far the party has been relatively silent on its foreign policy objectives. This is understandable. Generally it has favoured anyone who has loudly resisted ‘Western imperialism’. But where do they turn now? The traditional international icons of the Greek left are fading past. Che Guevara and Hugo Chavez are dead. And the Castro brothers are competing to see who opens the first McDonald’s franchise in Havana. Even Iran is in serious negotiations with the Great Satan. Maybe they can turn to Kim Jong Un of North Korea. Or there’s always Hamas.

            Syriza maintains that it wants to remain in the European Union and the Euro. But it’s difficult to see how this goal is compatible with its demands of restructuring the bail-out package and back-peddling rapidly on even the small reforms that have been taken. What will Syriza do if the so-called Troika (European Commission, European Central Bank, and the IMF) refuse to budge? Will it stamp its feet and threaten to pull Greece out of the Euro? While the destabilizing effects of such a move are less than they were three years ago the thought of a member country leaving the Euro still makes people nervous. The idea of Greece back in the drachma may thrill the zealots. Others view it as collective suicide.
Syriza leader Alexis Tsipras: Backwards to the future?
            One hardened cynic in Athens says maybe it would be a good thing if Syriza wins. “Then,” he adds, “the Greek people will finally see that the Left has absolutely no answers. There is no money, no room for them to manoeuvre. There may be a fig of leaf of some debt rescheduling, but there won’t be any fundamental change in the conditions for further financial aid. Once the Greek people grasp the reality that there is no return to the old days they might just accept some serious reform.”

            Right now the election campaign seems locked in what The Wall Street Journal calls ResponsibleStagnation or Reckless Collapse. If Syriza represents the Collapse part of the headline, the government of Prime Minister Antonis Samaras represents the Responsible Stagnation. Indeed, the prime minister has never really pushed the reform agenda demanded by Greece’s creditors. He seems to present a picture of a weak person forced by unreasonable people into something he personally would rather not do. The result is that his opponents have been able to focus on the dreaded austerity instead of the much needed reform.  I haven’t heard anyone make a virtue out of the demands for reforms, and loudly proclaim that Greece has no choice. That the only hope for its young people is to break with the destructive old ways and build a new political and economic system.

Prime Minister Antonis Samaras: How much reform does he really want?

            Polls say the election will be very close. Syriza holds a small lead over New Democracy of Prime Minister Samaras, but many voters say they are undecided. The most likely outcome is a narrow victory with the winner forced to form an unstable coalition. There could well be another election this year before a stable government can be formed.

The stakes are huge, especially for the young generation of Greeks who would much prefer to remain in their native country rather than be forced to take their talents all over the world. There is no shortage of brilliant people in Greece. The real tragedy, suitable for Euripides, is that the existing political system does its best to reduce that brilliance to a weak candle glow. Time for things to change