Sunday, 25 April 2010


Two of my media heroes, the Greek news blog Troktiko and the american financial blog Zero Hedge, appear to have joined forces in propagating bullshit this week. I seriously did not see that coming.

In brief, Troktiko published a rather hastily written "letter" from an anonymous reader claiming to be a senior Greek government official. ZH reported this as a possible political risk in Greece, alleging that if this stuff were to be proven right it would destabilise the Greek government.

The author of the Troktiko letter alleged that the accelerated involvement of the IMF in our bailout talks was due to our Prime Minister's ultimate allegiance to the US of A.

The author goes on to explain that the Russians were about to offer us a EUR50bn overdraft at 4% fixed, no strings attached, and the Chinese were about to offer to buy our ailing public transport operator, OSE, a joint offer we could not refuse.

The author added that he was about to resign next week over this, to a great gnashing of teeth.

Now, it may well be that such a person exists and is about to resign, and does believe all this crap. But it may also be that somebody is about to be kicked out of the government for failing to get with the programme and accept austerity (a good reason if you ask me) and wants to lay the groundwork for his/her subsequent good name as an uncompromising defender of the little man or some such bullshit.

Or someone unrelated to politics is taking the mick.

I say this because Russia,whose economy shrank by 7.9% in 2009, is not itself rolling in money - it has returned to the bond markets for the first time in years and now appears to be borrowing at 3.8% for 5-yr bonds and 5% for 10-yr bonds. And that's for amounts much smaller than 50bn. Remember, deficit financing is selling, not buying: you don't get a better price if you do it in superbulk.

Of course, Russia also has a Sovereign Wealth Fund of some note. Based on their latest figures, the Russians can tap into EUR67bn of reserves from that - and the Fund is allowed to purchase Government debt, including Euro-denominated debt.

However, as astute readers will note, the list of acceptable countries does not include Greece. It also more generally excludes our bonds because they are junk:
"foreign issuer of debt securities shall have a long-term credit rating AA- or higher according to scale of rating agencies Fitch Ratings and Standard and Poor’s, or Aa3 or higher according to classification of rating agency Moody's Investors Service. In case the issuer has different ratings by mentioned agencies then the lowest of them shall be applied." [Emphasis ours]

Cross-reference with our current ratings from Fitch, S&P and Moody's . No? Didn't think so. Note that the S&P rating is now officially Junk.

That rules out the Russian SWF, although it could have worked if they were in the business of losing Putin's money. I hear it's not a healthy business to be in.

Which means one of two things, if we accept the odd rumours here - either Russia is happy to lend to us at a 1% loss, or they are happy to expose themselves to massive interest rate risk by funding our long-term obligations with their short-term ones, and all of this no strings attached.

Once again, our "Orthodox Axis" zealots are stirring things up and bigging up Putin. I don't like the IMF's involvement either but convincing ourselves that a silver bullet existed all along but was somehow not only hushed up by the Greek government but also ignored by capital markets desperate to rope in a guarantor is a leap too far - into stupidity.

Thursday, 22 April 2010


So here is it my friends, Eurostat's laconic report on EU Government spending and debt.

You can read it here.

Our deficit for 2009 is apparently 13.6% of GDP, give or take 0.3 to 0.5 percentage points. So if we're quite liberal our deficit could be between 13.1% and 14.1% of GDP.

Our debt is 115.1% of GDP, give or take 5 to 7 percentage points. So the range (as above) is 108.1% to 122.1% of GDP.

Eurostat notes:

Reservations on reported data

Greece: Eurostat is expressing a reservation on the quality of the data reported by Greece, due to uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps. Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with the Greek Statistical Authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt.

Wednesday, 21 April 2010


Of course not.

For tomorrow Eurostat will announce our deficit figures past and present as determined by themselves.

Details here: http://www.zerohedge.com/article/tomorrow-eurostat-reports-european-government-deficits-expect-more-pain-greece-downside-surp

The damage? TA NEA rather bizarrely cites itself as reporting a 13.7% deficit/GDP (up from 12.7%) and 120% debt/GDP (up from just over 100%).

Which suggests to me that our GDP has been revised downwards, the stock of nominal debt has been revised upwards and the nominal deficit is not actually that far off the mark.

But this is just a guess. We'll just have to wait and see.

BTW. Please Mom and Dad, if you're reading this, grab all the jewellery and get yourselves and your pension pots out of there.


In an extraordinary twist of fate, the start of our negotiations with the EU, ECB and IMF has fallen on the 21st of April, which of course marks the anniversary of the Colonels' Coup which kick-started seven years of dictatorship.

The figures could not be more ominous as I happen to think seven years is about the time it will take for us to get the IMF and Europe out of our faces again. This could have been better planned and I was not, of course, remotely the first or the only person to note this coincidence.

Our three negotiators are listed here. Add to these the Prime Minister and Minister of Finance and you get - PHEW! Only five. For as the infamous rhyme still occasionally danced to by Junta apologists goes,

"On the 21st of April, six friends set out; the guiding lights of our Army and the saviours of our Nation"

Happily, the EU/IMF team is 20-strong. Nothing ominous about that. Still this doesn't mean they'll get a good deal.

Perhaps they should consider this concise guide to negotiating with Greeks. I will populate these quotes with hyperlinks when time allows:

"When negotiating business here, realize that people may expect things to be done ‘their way.’ Greeks tend to be very proud of their country and may strongly reject any critique of its ways."

"‘Saving face’ is very essential in Greece. Causing embarrassment to another person may cause a loss of face for all parties involved and can be disastrous for business negotiations."

"In the Greek business culture, the respect a person enjoys depends primarily on his or her age, rank, and status."

"Early in the business relationship, people may communicate more indirectly, appearing vague and non-committal. If in doubt, watch for subtle messages that may signal issues and concerns. Silence is often a way to communicate a negative message."

"Since Greeks want to know whom they will be meeting, provide details on titles, positions, and responsibilities of attendees ahead of time. They will expect to do business with the most important person in your organization."
"Setting an agenda upfront is usually not necessary. It would likely not be followed anyway."
"The primary purpose of the first meeting is to become acquainted and build relationships. Little else may happen, and you may actually not get to talk about business at all. It is unrealistic to expect initial meetings to lead to straight decisions."
"The level of information sharing depends largely on the strength of the relationship. During initial negotiations, the Greeks oft en play their cards close to the chest."
"Expect negotiations to be slow and protracted, and be prepared to make several trips if necessary to achieve your objectives. Initial exchanges that precede the bargaining stage of the negotiation may be lengthy. Decisions are usually made between meetings rather than at the table. Throughout the negotiation, be patient, control your emotions, and accept that delays occur. Attempts to rush the process are unlikely to produce better results and may be viewed as offensive."
"Greeks generally employ a polychronic work style. They are used to pursuing multiple actions and goals in parallel. When negotiating, they oft en take a holistic approach and may jump back and forth between topics rather than addressing them in sequential order. Negotiators from strongly monochronic cultures, such as Germany, the United Kingdom, or the United States, may find this style confusing, irritating, and even annoying."
"Deceptive techniques are frequently used. This includes tactics such as telling lies and sending fake non-verbal messages, pretending to be disinterested in the whole deal or in single concessions, misrepresenting
an item’s value, or making false demands and concessions."

"Negotiators in the country may use pressure techniques that include making final offers or nibbling. Final offers may come more than once and are rarely final."

"Greeks are often uneasy with change and reluctant to take risks. If you expect them to support a risky decision, you may need to fi nd ways for them to become comfortable with it fi rst, for instance by explaining contingency plans, outlining areas of additional support, or by off ering guarantees and warranties."

"Signed contracts may not always be honored. This depends to no small degree on the strength of the continuing relationship between the contract partners. It is strongly advisable to continue staying in touch and maintaining the trust of your Greek business partner. Business partners usually expect the other side to remain somewhat fl exible if conditions change, which may include agreeing to modify contract terms."

Thursday, 15 April 2010


Yorgo has made a first move towards dropping the towel today and asked the EC to book a meeting room for a little chat about what might happen if we should want to talk about a bailout - which of course we don't want. Full Greek text here.

On the IMF front, Dominique Strass-Kahn said today:

“Following a request by the Greek authorities, I have agreed to send an IMF team to Athens to begin discussions with the Greek authorities this coming Monday on policies that could provide the basis for Fund financial assistance, under a multi-year program, in the case that the authorities decide to ask for such assistance. The Greek decision to initiate Fund program engagement is consistent with the agreement among European leaders last weekend that financial support from members of the euro area should go hand-in-hand with IMF engagement and financial assistance.”
Our little game of Chicken with the markets was always ill-advised. For one, they are slightly more liquid than our national cookie-jar.

But there is a fundamental reason why it could never work. According to our Government, the bailout does not involve any fiscal policy commitments beyond what we've already promised the Eurozone Finance Ministers. So why play for time by insisting we don't need a bailout? Simple - so we can win some leeway to break our promises once markets have started to chill a little. Anyone can see through this gambit, which is why nobody has any time for our pronouncements. There are, of course, some alternatives.

It is said that, from a game-theoretical perspective, the best way to win a a game of chicken is to make sure your opponent sees you ripping out the steering column.  Wikipedia elaborates:

"One tactic in the game is for one party to signal their intentions convincingly before the game begins. For example, if one party were to ostentatiously disable their steering wheel just before the match, the other party would be compelled to swerve. This shows that, in some circumstances, reducing one's own options can be a good strategy.
The equivalent would be for the Greek government to give up its discretion over fiscal policy in a binding way, to an independent third party unaccountable to Brussels, such as our Central Bank. Or to ensure that we have no legitimate means of asking for a bailout by deselecting our own prime minister and president.

OK, so all of this is a bit extreme. But look at the other, more realistic options:

"Players may also make non-binding threats to not swerve. This has been modeled explicitly in the Hawk-Dove game. Such threats work, but must be wastefully costly if the threat is one of two possible signals ("I will not swerve"/"I will swerve"), or they will be costless if there are three or more signals (in which case the signals will function as a game of "Rock, Paper, Scissors")."
This is the scenario we are stuck with. We only have two signals to chose from ("We will ask for a bailout" / "We will not ask for a bailout") so our threat has to be extremely costly to ourselves. An example would be to force Greek civil servants, pension funds, unions and pensioners to accept payment in Greek bond options. By forcing an enormous chunk of our population to take a leveraged bet on the price of Greek bonds, we can create an immensely costly, irreplicable signal that we are serious about the deficit.

Any other ideas welcome. Just make it quick because we have so little credibility left that news that the IMF negotiators are stranded by volcanic ash have made our 10yr bond yield jump to 7.8% I could get that interest rate on a brand new car, or a sofa, I should think.


This piece of news from Britain has got me seething.

A brave (if belatedly so) pharma executive finally decided to stand up to his bosses (Johnson & Johnson, of Baby Shampoo fame) after being made to pay EUR4.5m in bribes to Greek surgeons and other doctors.

He got 12 months in jail for his trouble.

Now I, for one, find this shameful. Surely, In order to be a whistleblower you have to be involved, however remotely, in something dirty. If the UK laws will not give whistleblowers immunity in such cases then what's the point of blowing the whistle? Few people are that morally upright.

Anyway, I've got an alternative which is more humane than getting bummed by rough geezers at Her Majesty's Pleasure and may render a public service: exile.

Send this man to Greece and let us make him Head of Procurement in the Greek National Health Service. [Note that the job probably doesn't exist yet so we'll have to create it in the process]. After a few days of telling suppliers they'll get paid in five years rather than the 10 days that are specified by guidance in his native UK, or that he intends to default on hospital debt, he may well find himself wishing he were locked up with violent sexual deviants. But in the process, he could tell us who all of those greasy-palmed medical men are so we can bury their careers under tons of medical waste.

Give us your whistleblowers, Britain. In time, we might get them to breed with our womenfolk and have many whistleblowing babies.

Wednesday, 14 April 2010


Not too long ago, I blogged about the findings of a research paper, which suggested that the Greek economy was beyond Keynesian salvation because we had reached the limits of the capital markets' tolerance.

Back then, my rather naive thought experiment suggested that borrowing an extra, say, EUR3bn would cost 150m more than expected as a result of rising interest rates on our public debt.

Unfortunately, the reality has replicated my thought experiment almost to the letter. As reported here,

"When the first austerity plan was presented, Greece cut public sector wages by a painful 10% causing angry protest and social unrest, although it saved the government EUR650m. But the same austerity plan assumed Greece’s interest cost would be 4.7% and by late February it was paying 6.25%. According to the WSJ, this has blown a EUR700m hole in its budget, more than offsetting the savage public sector wage cuts already enacted."
Note that this has happened despite our announcements of an extremely harsh austerity package. Back when I first posted on the subject there were still people calling for more moderate cuts, and our unions of course were arguing for a complete reversal of such. By the power of the Internet, their words are now immortal.

Implementing austerity works only if you do it decisively and quickly, like pulling out a band-aid. Which is precisely what our 2008-9 Keynesian cushion was.

Sunday, 11 April 2010

You can haz Insider tip!

I am always proud to see my old friends take their places in the Greek financial establishment - we need all the good people we can get.

Here's a comment I got from a good friend in the custody operations of a major global bank in Athens. He shall, of course, remain anonymous:

"We're working on the assumption that there will be nothing left of the Greek economy come May. I can confirm the billions reportedly being siphoned off abroad. I've already personally approved many millions bound for Switzerland at our clients' request. And that's just cash -
If you count the amounts transfered to foreign banks in bonds by Greek residents the numbers become astronomical"

He goes on to say:

"Rumours of a return to the drachma have died down - but a London-based director with [major investment bank - I really should not disclose this] who is well connected in Greece tells me that one possible scenario is a switch to the drachma for domestic transactions while our debt remains EUR-denominated. He claims that staff at the national mint have worked double shifts for a month preparing for this eventuality."

Thanks man! My other financier friends are welcome to join in.

We can has bailout part 2

Enjoy the music my friends

Full statement here

The damage to our Eurozone partners: a loan of EUR30bn, at 5%, and here's how it breaks down according to the deal:

To put this in perspective, I could get a 90% mortgage from HSBC at this interest rate tomorrow. A young professional with a house for security is apparently a safer bet than a sovereign with the tax bills of an entire nation from now to the end of statehood as we know it as security.

But then again, I'm not borrowing a mindIboggling amount of money against the promise of simply borrowing more to pay the bank back. (In fact, to reassure friends and family, I am not getting a mortgage at all!)

Now back to our story.

Who benefits from this bounty of nowhere-near-free cash?

Not the Greek state - this money will cement our commitment to painful austerity with a contractual arrangement, not to our friendly eurozone partners but to the decidedly unlovely IMF.

Of course, the Greek people may benefit from having to pay less interest on this debt. 2 to 3 per cent less to be precise, which could in years to come cut our interest burden by more than a third.

Our Eurozone partners may benefit from containing contagion - to the extent that it can be contained, and they are getting a pretty good return on their money, but amazingly, some pretty hard-up countries will have to dig deep to bail us out. Germany, of course, will pay some EUR8.4bn, but what about Ireland paying half a billion? And what of the supreme irony of Portugal, who T-PAN said would be next to face the markets, paying the biggest percentage of their GDP in loans to Greece?

Our banks will benefit from being able to borrow from the ECB against government bonds - something they would not be able to do after the inevitable further downgrades of Greek debt without a bailout. Insofar as that increases lending that might be a good idea. But given the fact that our banks' loan to deposit ratio is way lower than 100% (80-something if memory serves), the return on this injection of cash may not stellar. But it will do wonders for capitalisation - for now.

But along with our banks, the big winners are investors in Greek debt in general - especially those that bought recently - as they bought securities one whisker above junk and they'll suddenly find themselves holding securities with an iron-cast implicit guarantee. Ka-ching!

And then there are the REAL winners. The ones that really took a gamble on this one - the Eurocrats of Brussels. The Greek bailout has given them what treaty after European treat has refused to cede to Brussels - explicit control of member states' fiscal policy. This is now a de facto reality - and by the time we are our of recession, no one will remember a time when it was not.
An update on this story: our finance ministry has leaked that we would very much like double the amount of money pledged by our partners, just minutes after the aid package was announced. Oh dear.

Full story here

More on the bailout as details emerge.

Friday, 9 April 2010


Good news everyone! We now have our chance to demonstrate our solidarity with Greece by voluntarily helping the nation pay off its massive public debt.

The National Bank of Greece has set up an account for donations and you can make a deposit quite easily.

I think this is, in principle, a good thing and I urge you all to contribute generously. Putting your money in there means it can only be used to pay down debt - not pay civil servants, or quangocrats, or farm subsidies.

It's also way more cost-effective than raising new tax revenue: with the latter, the state would have to pay one person to draft the law stating how much you should pay, 300 to debate it, thousands to collect it, more thousands to manage them, and some additional hundreds in a futile attempt to make this enormously corrupt system 1% more efficient. Then of course you'd pay a notary or an accountant to make sure you're not liable for the extra tax, etc.

This, on the other hand, is a dead easy way and dirt cheap way for my compatriots to do their bit for the public finances. You don't even have to involve the Ministry of Finance or the State Treasurer. Just buy some of the billions in Government bonds that the NBG has been forced to invested in, then basically tear them up.

You may want to hurry up though. As you can see below, we have a very busy debt repayment schedule this spring:

There is just one catch which sours this plan for me - none of this is tax-deductible (unlike here) which of course it should be as it's effectively a charitable donation to the Government itself! Plus, if it were, I bet we could get tax-dodging superstar Bono - or, failing that, Dalaras - to front a little concert on this. We could even get our own Bono/Dalaras joke:

BONO: Every time I clap my hands, a chain-smoking-in-your-face unionised civil servant gets hired in Greece, with extra ASEP points for having three children, coming from a shit-hole border-town and having spent 3 years making coffee as part of a STEP programme.

DALARAS: Κάθε φορά που χτυπώ τα χέρια μου, ένας 40άρης αιώνιος φοιτητής που χαρτοπαίζει στο υπόγειο της ΑΣΟΕΕ παθαίνει θρόμβωση και σωριάζεται δίπλα στην υπο μόνιμη κατάληψη αθλητική λέσχη της σχολής.

AUDIENCE: Then stop f***ing doing it!

Thursday, 8 April 2010


Very good to see Yorgo making a start, however timid, on savaging our tablescrap-plifering quangocrats.

Apparently, the Educational and Research Foundations named after past prime ministers (including Yorgo's own grandfather) are having their funding cut.

I will write more when I've done my homework.

Tuesday, 6 April 2010


Theodoros MUPPET Pangalos, the alabaster Ganymede of Greek politics, has done it again.

In a recent statement, the monolith of Greek socialism suggested that Portugal would be next to face the wrath of global sovereign debt markets. This may or may not be an accurate assessment, although frankly I doubt Pangalos has the wherewithal or the clarity of mind to make accurate predictions on the future of financial markets.

But this is all particularly rich coming from a man who only a few weeks ago also said:

"By speculating on Greek bonds at the expense of your friend and partner, by allowing credit institutions of the country (Germany) to participate in this deplorable game, some people are making money [...] As long as southern Europe is under fire, the euro is being shaken and falling and the conditions under which they (Germany) can win massive exports to the third world, to the rest of the world, are improving"
How about you STFU about Portugal then, Teddy Bear? Are they not our friend and partner? Or do specuLOLtors only take cues from ze Germans?

Even more disingenuously, T-Pan (as he is now known) suggested that the real reason for Germany's opposition to a Greek bailout is not the fact that they have enough problems as it is without having to throw their sort-of-good money after our definitely-bad money, but the fact that they are racist - and jealous of our good cheer and good weather to boot.

No doubt in T-Pan's doughnut-addled brain this is a matter of "hitting them where it hurts". If so, one wonders whether he has any concept of irony. Is this the man to throw Germany's fascist past in their face when he is himself the grandson of one of the more famous in our long line of dictators - for whose inept reign he has yet to apologise or pay compensation?

And yet, what if it is? What if our repeated jibes do really provoke a reaction? Will this point-scoring mean anything if Greece has to drag itself on its knees into the widely-reviled and often counterproductive IMF straightjacket?

But perhaps the greatest irony of all is Pangalos' eagerness to share his wise words of warning with the Portuguese, telling them they are "next" as if our storm in a yoghurt churn were over. As today's bond offering once again hit a yield rate that I could probably get a mortgage at, perhaps Portuguese readers were less eager to bask in the endless lard-dripping glory of our elder statesman than he'd thought.

The brilliant finale to all of this MUPPETry, meant to provide a distraction from the austerity package being put into place this is the following quote:

"Greece will always exist, as we have existed for 8,000 years, out of the euro and EU".

Yes, T-Pan, it's true, we will exist exactly as we did thousands of years ago. Half-naked, barefoot, half of us in slavery and everyone buggering each other silly.

Well done asshole!