Sunday, 30 May 2010


It is time, dear readers, for Greece’s creditors to take a haircut. They’ve had a good run but it’s just not going to work anymore. They made a bad bet on us as on many other risks and now it’s time to take the consequences.

In late 2009, Greece had a small window of opportunity in which to signal in a credible manner that there was more political capital to be made from reducing our liabilities than from increasing them. Similarly we needed to demonstrate that there was more political capital to be made from paying our creditors than from defaulting. I am convinced that this window of opportunity started to close in December and then slammed shut in January, when Joseph MUPPET Stiglitz supposedly came to our aid and our political elite gave up trying to convince the people that we are going to have to change voluntarily.

One after another, our politicians, our journos, and of course our people, came out in favour of a mild adjustment, or none at all. They cried “speculator” until they were hoarse. Our state banks even shamelessly played the CDS market ourselves, making money out of our own profligacy. Commentators threw tantrums, made absurd demands and blamed everyone except themselves (and their respective main constituents) for the state of our country.

Well it’s all over now – for a simple reason. We’ve left things to escalate for so long, let confidence sink so far and borrowing costs rise by so much that the math doesn’t work anymore.

Greece’s real GDP has never in the past 10 years grown faster than 4.8% per annum (see here).

Government revenues have never been more than 43% of GDP and Government spending has never been less than 43.2% of GDP. Expenditures excluding interest on public sector debt have never been lower than 38.8% of GDP (see here).

 The above suggests that we could not, over the past 10 years, ever have run a deficit of less than 0.2% of GDP, let alone a surplus. In actual fact, however, we’ve never run a budget deficit smaller than -2.9% of GDP (see here).

Finally, the informal economy has never been less than 22.6% of GDP (see here) in the past 10 years.

Now, I will assume that everything works out for us within the three years from 2010-03. We bring expenditure and the informal economy to their 10-year minima, and revenues to their 10-year maximum. I am using the IMF’s projections for real GDP growth the GDP deflator (basically the price segment of value added). I assume that the GDP deflator will tail off after 2015, while GDP growth will work out to the IMF’s projections and then gradually converge to our GDP growth maximum of 4.8%.

Under my rather rosy but at least realistic projections, debt servicing costs of anything over 9.25% would mean that our mountain of debt would never fall below current levels and eventually rise to infinity. If the market handed us that kind of interest rate, they would be handing us a death sentence. Unfortunately this came to pass as our 2-yr yields climbed above 20% in early May, courtesy of our army of subsidy-junkies, extortionists and murderers and the idiots who shelter them; hence the EU/IMF bailout. 

So far, so rubbish.

But now we have a different problem – the one at the heart of the Credit Crunch, the Great Recession, and in fact every episode of such in the past half century. In a world of fiat money, all money is debt and no monetary value is truly real. It exists only as long as it’s backed up by a web of implicit guarantees – in practice right up to the people with the biggest and best balance sheet. Hence the pressure on Germany, and potentially on the US, to guarantee everyone’s debt.  

So while have established our guarantors as the markets have demanded, the markets are still unsure they are good for the money. Why? Because if we go under, European sovereigns will have to bail out their own banks, to whom we owed north of EUR70bn last time I checked. They will also automatically become more likely to have to bail out our fellow PIIGS, with which we also have a web of liabilities. The IMF itself doesn’t have enough money by any stretch of the imagination to bail out the PIIGS – Greece is a bit of a stretch actually. So the guarantee is weak and our debt is looking decidedly blurry.

Now we can drag this sorry mess out forever, give up sovereignty over our own country and feed the delusions of Eurocrats for another couple of years before everything comes crashing down. Or we could bite the bullet, prepare for a seriously no-frills existence, and renegotiate our debt.

Is debt restructuring or indeed default a new thing? Historically it most certainly isn’t. Nor is it outside the realms of our recent experience. We have already tried restructuring our hospitals’ debts to suppliers in the past and done so again in May. Many state employees, even some that foreigners are likely to meet, are left unpaid for some time as a matter of course. The state also owes money to its pension funds. In the private sector, any of these things would be called “defaulting”. It is only out of respect for the sensibilities of a sovereign state that people do not call us bankrupt.

Perhaps more importantly, debt markets are pricing a 75% probability of Greek default by July 2015 into the price of insuring our bonds. Our creditors are already taking the damage to their share prices and those who are forced to mark-to-market will eventually take actual losses. The damage is already done.

Finally, it is fair to say our people want a default, as long as it doesn't hit pensions and benefits. That can be arranged.

What we need is an orderly wind-down; a cloak-and-daggers summit of creditors like the one held for Hungary should map our liabilities and the effects of different levels of default on them. Each creditor should come clean on the full extent of their individual exposure and write down an agreed percentage of the debt. Instead of financing us, the IMF will agree support for those banks over-exposed to our debt.

Now let’s see if anyone will bite the bullet and say it.

UPDATE: People have finally cought on to the fact that the restructuring of Greek hospital debt is tantamount to default. H/T To Nick Shay for pointing out this story. 

Wednesday, 26 May 2010


I'm currently watching Junior Apprentice, where Alan Sugar (better known among people my age and older for founding Amstrad) terrorises a small group of school-age entrepreneurs. It got me thinking.

Does anyone remember the Greek version of the Apprentice? Few do, and they despised it. It was hosted by the utterly un-groundbreaking Petros Kostopoulos, and exemplifies everything that is wrong with Greece.

The host was no Lord Sugar; his achievements did not start a new market, merely translated several tried and tested magazine formats (most of them directly by licencing) into the Greek market, giving us Greek men slightly glossier-looking women to wank to and endless lists of things we needed to do before we turned 30, all of which seemed to involve spending money but none of which ever seemed to include work.

Kostopoulos kick-started his media career in the press rooms of the Socialist Youth in the Greek 70s (he is apparently famous for an article denouncing the plight of our undersubsidised farmers - LOL). He worked under the notorious Kostas Laliotis (UK readers, think Lord Mandelson in the 80s), with whom he retained strong bonds while the latter worked as a minister for successive Socialist governments and Central Committe Secretary for our Socialist party. Kostopoulos' rise and rise in the 90s is said to be not unrelated to this  little bit of political connection - even if one considers only the less libellous rumours.

Nowadays Kostopoulos is all too eager to denounce the system that hand-reared him like a pet vulture chick. He rails about the superiority of people in "real business" to, presumably, those in subsidised business, in a tear-jerking deathbed conversion. And to think of all the times the centre-left's chief rag, to Vima, has kissed his meticulously waxed backside. Converted, and presumably with a copy of Atlas Shrugged in hand, he is now pursuing yet another brand-new, completely groundbreaking and utterly entrepreneurial dream: that of the reality talent show judge.

Back to our story: uniquely in the history of the Apprentice franchise, the Greek Apprentice only managed a solitary season in 2004 (available to view here) after bombing with less than 10% ratings. Simply put, people couldn't give a sh*t. The winner of this entrepreneurial challenge, this titanic clash for would-be masters of the universe, became a -wait for it- marketing consultant at IMAKO, Kostopoulos' publishing house. He does not appear to work there now and googling him, whether in Greek or Latin characters, returns absolutely zilch.

In a nutshell, the Greek Apprentice epitomised the decline of Greek enterprise: poisoned by politics and dodgy money, incapable of producing anything new or of real use to anyone, unbearably arrogant, as sticky as dogshit, and of course completely irrelevant to the majority of the Greek population, who don't see the point of bumming people in exchange for a permanent subsidy when one can take a shortcut and just become a civil servant.

Which brings me to the Turkish version of the Apprentice franchise: Çırak, a perfectly innocent word for "apprentice", which, as it happens, we Greeks have borrowed and now use to denote a lackey. Now that's a show that would have worked in Greece: "the lackey" (Το Τσιράκι), where hardened student politicians fight tooth and nail for the job of temporary assistant/researcher to an MP - or better yet, an MEP, who will not be labouring under austerity constraints.


IMAKO has now formally sought protection from its creditors, under what is now known as Chapter 99 in Greece. Kostopoulos himself claims to have put all of his personal wealth into the company - and lost it. Either way, some have pointed out that he, unlike a number of editors of supposedly socially sensitive defunct publications, at least propped up his ailing mags with his own money for some time before going under. That may be the case. At any rate, entrepreneurship is as much about failure as it is about success, I do not intend to cite this latest episode as a slight against the man's character. The stuff he used to publish has done that for me.

Thursday, 20 May 2010


Our private sector Union, GSEE, recently released the findings of its survey of the Greek labour force. I will comment on this very soon but I think you'll find it speaks for itself.

My favourites so far:

  • ca. 173,000 employees in Greece claim to have a second job in which they are paid under the table. 
  • ca. 60,000 public sector workers have a second job - which they are not actually allowed to have.
  • Employees generally think their personal finances have not yet deteriorated as much as those of the country as a whole. 
  • Only about 50% of employees are willing to strike over the austerity measures. 
Strike anyone?

Wednesday, 19 May 2010


The pompously-named Supreme Council for Personnel Selection (ΑΣΕΠ) has just released its 2009 annual report, of which the statistical annex can be found here (Greek speakers only, I'm afraid).

This is important because ΑΣΕΠ is the centralised agency (and process) whereby every legitimate public sector employee is hired in Greece. Even some publicly quoted companies, including the Greek water utility, ΕΥΔΑΠ, are obliged to run some of their hires past the Council.

Predictably, the annual report's annex reads like Stalin's own book of Sudoku puzzles. It is also highly resistant to the simple question of "how many people did you hire, who for and in what occupations". Thankfully we have data on that from our trusty National Statistics Agency. Er.

Anyway, the ΑΣΕΠ annual report does reveal a number of FAILZ:

  • ΑΣΕΠ ran 3,324 selection processes in 2009, at an average of 11.8 vacancies per process, and 9.4 candidates per position.
  • In case you're too lazy to do the math, this means that 369,709 Greeks applied for public sector jobs in 2009. That's 7.4% of the entire Greek labour force, applying to the public sector in ONE YEAR.
  • 69% of all vacancies both announced and filled in 2009 were classed as "seasonal". There must be orange growers in California with a lower share of seasonal staff than our government. 
  • Of these, 69% (that number again) were hired on 8 month contracts. This rather defeats the person of calling anything seasonal - 8 months must surely qualify as "most of the year". 

This is not the end of the story. I was amazed to see that the statistical annex to the annual report begins with an org chart of the Council, as if anyone cares.

However, I do care as it happens because it looks like this. That's right, zoom in.

The amount of duplication is monumental. The Directorate-General that actually does the hiring is split up into three nearly identical Directorates that run application processes. Each comes with its own process control function, presumably because pinning up two process control flowcharts on one desk goes against years of struggles for the labour movement, during which people invariably died.

The simplest of these Directorates by the way is, you guessed it, the one that deals with the 69% of seasonal vacancies.

Tuesday, 11 May 2010


I just came across this study by IMF staff on the patterns of the European debt crisis; I urge everyone to read it if possible.

The key graph, however, is pretty easy to read just below. Just remember that the Y axis is bond yields, thus plus = bad news. Enjoy.

Sunday, 9 May 2010


Apparently our government turned down a rather conveniently-termed loan in February, from an evil specuLOLtor US PE fund no less. I wonder how the Orthodox Axis nutcases back home will try to spin this.

ZH reports here that our insistence on any creditors promising not to hedge against our debt appears to have forced our hand on this and other deals. This I find very easy to believe in light of our threat to keep all specuLOLtors out of our future debt offerings. As I said at the time, this was a case of cutting off our hairy noses to spite our hairy faces.

Anyway, this sounds a lot more plausible than the idiotic Russian bailout rumours mooted by Troktiko and repeated by ZH but, given their rather poor due diligence on these stories, I think we ought to let matters come to light by themselves.

If true, this will really plunge everyone back home into some very hot water.

Friday, 7 May 2010


A little aside from the drama of the past week.

Eurostat has just reported on agricultural employment and incomes across the EU. Its figures are a damning indictment of the subsidy-junkies that run Greek agricultural policy, and indeed much of the industry itself.

Europe lost one quarter (25%) of its workforce in agriculture between 2000-9. This is neither a good nor a bad thing. It simply reflects Europe's plummeting competitiveness in this sector. By way of (some) compensation, Europe's agriculture workers made 5% more in real terms, as less productive units were replaced with more productive ones. Overall, income was down by 21.25% in real terms

Not in Greece though. Our agricultural sector held on to almost all of its workforce, with a net reduction of only 2.6%, the lowest in Europe. The tradeoff is that income per employee (before benefits and subsidies) fell by 17% in real terms. Overall income fell by 19.2% in real terms.

This 2% difference over ten years is what we get for having the 121st cheapest agricultural policy in the world. It would be the worst return on investment in the world if not for everything else we spend money on.

To understand why, see my earlier roundup of facts and figures here.

Wednesday, 5 May 2010


Three people were burnt alive by our "protesters" today.

Is anybody surprised?

For years we have tolerated, or celebrated or even subsidised these murderers as embodiments of our liberal, revolutionary conscience. We were a cooler, edgier people because these people existed.

Last year I spent hours arguing with those of my compatriots who sympathised with or even advocated the November 09 violence.

Will they now turn themselves in as accomplices? Their words are immortal. I hope their shame will be too.

Even now people make up excuses. They just don't get it.