[The Centaurian Gate of Knowledge!] Greece’s possible defaulting process is m...

[Panos Kleitsinaris]

Greece's possible defaulting process is making some European officials losing their sleep. Someone would ask the real reason behind this. Is EU so sensitive on Greece's public economics? Could it be that the real reasons are deeper than a random accumulation of economic facts leading to international speculation on a nation's ability to finance the economy?

Let me be a little more specific and present you some facts, easy, plain and simple. Greece as one of the historic members of EU entered the EU (old EEC) in 1981 under the presidency of Mr. K. Karamanlis (the greatest politician of modern Greece after the unprecedented E. Venizelos of the late 18^th century). Greece has been a close observer of the developments of the oldest version of EU, the European Community of Steel & Coal and due to Greece's political unstable environment in the 60's and 70's. Although great bonds existed between President Karamanlis and Charles De Gaulle at that time Greece was ruled by a regime of military officers known as "Hounta" (from late 1966 to 1974).

Since that time, Greece has been given generously a huge amount of money to have its economy lifted, assist farmers, built roads and other public stimulus measures in order to bring order to its domestic problems and open issues. Greek politicians of the late 30 years failed to properly utilise EU money for the long term benefit of the Greek economy, state and as a result its citizens.

Greek state has become a dinosaur. Bureaucracy, corruption and complex legislation did not let entrepreneurs to unleash their creativity and vision. As the one of the most historic nations in the world, Greeks tended to believe that they did not have to do anything more than its ancient predecessors rather than sit and "milk" fat EU funds. Believe me when I say that Greeks are not lazy, far from it. Greek people work more than any other European nation but do not rip the fruits of their effort due to a rotten political system.

As a result, wealth produced was gathered in the hands of the few. Young people were raised with a vision: "to become public servants" to be able to secure their monthly wages and live happily ever after. Gross Domestic Product (GDP) has risen to almost 285 Bln € and Public debt to more than 300 Bln €.

Is it too much? Well…………………….

1. 
   
   for a country that does not have serious heavy industry (we do not produce cars, guns, computers, telephones, mobiles, chemicals, drugs, steel or exploit oil and/or natural gas),
2. 
   
   for a country that does not offer incentives to potential domestic and international investors to invest heavily,
3. 
   
   for a country that cost of life, reaches and/or exceeds other developed European countries' cost and in some cases the excess is over 20-30%, while at the same time wages are 50% less that average European wages. For example the basic wage is 500-600€ (1.200 € at EU level). Corporate executives are mocked by public state employees for their wages!
4. 
   
   for a country that its government's budget relies into an average of 600-900 Mio € of taxes coming from smoking and cigarettes 'consumption,
5. 
   
   for a country that its government's budget relies into more than 1 Bln € of taxes from imports of cars and their relevant taxation (customs, special tax on petrol/gas consumption).
6. 
   
   for a country that once used to be the leader (worldwide/European) in specific crops (cotton, grains) and self-sufficient in the majority of the remaining crop (fruits, vegetables, corn etc.) and livestock (cattle, dairy, sheep, swine, poultry) production, having >25% of its active working force in the wider Agricultural Economy (now shrinking to 10% and going down!)
7. 
   
   for a country that was #1 in the world in the shipping industry, now being in a continuous bleeding situation (more and more Greek ship flags are brought down and move to other countries).
8. 
   
   for a country that young couples are getting married over the age of 30 years old, thus adding to the "aging" factor of the Greek nation.
9. 
   
   for a country that treats international immigrants (legal or not) like they are inferior citizens. Remember during the past 15.000 years of Greek history, Greeks are renowned for their international spirit and migration into foreign and unknown territories.
10. 
    
    for a country that pays pensions and state's employees (among other things) with continuous lending from international markets (only for 2010 it is estimated that the Greek government will borrow somewhere between 50-60 Bln €.
11. 
    
    for a country that "produces" young scientists with no future in the job market. Greece still remains UK's "best" supplier in young students who wish to pursue a better future. And one might add why not? It's fine with me!
    
    
    ..................., yes it is too much! It is outrageous!
    
    
    Do you see where I am getting at?
    
    
    If I were an EU official, of course I would be very anxious.
    
    
    Why?
    
    
    Would you have lent such a problematic "customer"? I do not think so! Well on the other hand, do you think that you would lose you money? The answer is clear: NO! There is no way, that you could lose your money. If anything, Greeks (and Nations) always pay their debts. But would you have lent this money, if you knew that in order to collect your reward (capital+ interest) you would have made a whole nation, suffer even more?
    
    
    With some quick calculations, only for 2010, planned lending from the Greek government at the amount of 50 Bln €, would generate a yearly amount, at the current rate (if not worsened) of lending: +7%, of >350 Mio €. In a period of 10 years, that is close to 4 Bln €. So Imagine, in ten years time, other things equal, the Greek government (keeping yearly lending at the same amount of 50 Bln €) would have to issue new lending for the same amount and find additional money to repay interests of prior 10 years loans (those money close to 4 Bln €!).
    
    
    Imagine also that Greek economy is experiencing severe contraction, an issue that no one talks about it, of close to 5% currently and this situation will not considerably improve the next couple of years. This means that GDP is decreasing. Purchasing power is diminishing, consumption is weakening, business activity is deteriorating.
    
    
    In plain words: Greek state takes new loans to repay older loans.
    
    
    To take it a step further, currently around 20% of GPD goes to "payments" of older lending. So imagine adding more lent money to an already suffocating public budget. You do the math….
    
    
    Now that you get a glimpse of Greek economic situation, one might wonder is there any light at the end of this dark tunnel?
    
    
    Yes there is. The future is bright for the Greek economy as long as we start acting now in a very specific manner. Who should act to reverse this bad situation? Of course the Greek state must act and do it now, without taking into account the political cost and measures that will smoothen public feeling.
    
    
    Unless specific measures are taken, Greek people will suffer and struggle for survival, in order for the Greek state to find the money and pay its loans (among other things)!
    
    
    1. 
       
       When we plan to lend money, we do not go into the international markets and say, for example, "we want to borrow between 3-5 Bln €" rather be very specific like "we will borrow 3,653 Bln €!" Lenders must know that they are dealing with a serious counterpart here.
    2. 
       
       When we say that we budget for next year's public revenues, we don't say we will collect somewhere between 500-1000 Bln € from "x" tax. It's a big deviation, don't you think? We need to know exactly, from where, whom and by what means are we planning to do so!
    3. 
       
       When we say that we have an excess of 60%, arithmetically speaking, than the actual public work force necessary for the state to operate, we do not keep them in place. We let them go. How do we plan to keep this "multinational" workforce get paid, when we do that with systematic lending?
    4. 
       
       When we say that we have 17% of unemployment rate, we do not go around asking for money for the unemployment stipend (which is 454 € / month, less than 40% of EU average). We create jobs!
    5. 
       
       When we say that we cannot pay pensions, we first (as government) pay our 5 Bln € debt to the national social agencies. We then sit down and adjust our system for sustainability and justice for all working force.
    6. 
       
       When we say that we want to become a competitive economy we don't
       1. 
          
          leave farmers on their own, without guidance, support and on-site help,
       2. 
          
          hinder investments due to a bureaucratic, heavily corrupted and complex framework,
       3. 
          
          increase taxes for multinational/international corporations and prevent them from investing in a more competitive Greek economic environment,
       4. 
          
          we (as government) pay our debts to the business community and be their preferred customer,
       5. 
          
          let the brightest of our minds leave the country and never come back,
       6. 
          
          let the country without major infrastructure projects (harbours, railway, motorways, electric power plants, modern airports).
    7. 
       
       When we say that we are a nation of social responsibility we don't
       1. 
          
          create "monster cities" where no one wants to live, like the majority of Greek cities,
       2. 
          
          let older people die in their apartments, lonely and without the proper hospitality
       3. 
          
          treat immigrants like "slaves",
       4. 
          
          leave young people with uncertainty about their future and their right to work, create a family and get social recognition,
       5. 
          
          Say to people, you have to work until you are 70 years old in order to get your rightful pension.
    8. 
       
       When we say that we are moving towards a "green economy" we don't
       1. 
          
          let our forests to be destroyed because of private economic interests,
       2. 
          
          let renewable energy investments "freeze" because we are incapable of setting a flexible and easy set-up system,
       3. 
          
          let ourselves continue not to have established recycling technology for cities, private homes, businesses and waste management policy,
       4. 
          
          Stimulate the use of cars, because we also get more taxes from this policy!
    It is time, to act. Enough is enough.
    I reached the age of 32, continuously being under a strict economic environment. I was always being uncertain about tomorrow. The Greek state has done nothing more, than to hurt me and my beloved ones. I am not willing to spare another minute of my life paying others' "incompetency" and "parasitic" behaviour.
    

--
Posted By Panos Kleitsinaris to The Centaurian Gate of Knowledge! on 2/03/2010 04:35:00 AM