Tuesday, 31 August 2010


I'm off on a tour of the bankruptcy duo that started it all - Dubai and then Athens.

During this time updates will be quite limited, but if you bear with me I will return with rich pickings from the lands of LOL.

Standby for photo evidence!

Sunday, 29 August 2010


A fascinating survey has just been published in Greece, ostensibly showing that a vast wave of immigration is about to start, leaving the country completely bare.

This was a survey of 5,500 "young" graduates aged 22 to 35 carried out by one of our major dailies and its sister internet portal. If you are puzzled by the choice of population, you may want to bear in mind that in Greece people are considered young at 35 - living with one's mom can have that effect. In a marked departure from common practice, these guys actually published their full chart deck for the survey, which allows one to find some amazing gems.

The critical finding was that three quarters (74%) of the sample would be OK to leave the country in return for a stable and well-paid job, and that half of these are already looking into this option. This is of course an ominous piece of statporn but the journos forgot to compare it to the intentions of Greeks in previous years. I reckon they would have found exactly the same.

There is one more catch: the monthly salaries my young compatriots expect upon landing in these shores are 50% higher than those they would put up with in Greece - an average of EUR871 to EUR1,650 extra. This is despite the fact that the majority cite quality of life as a reason for emigrating, which would suggest they might be willing to forego some income in order to live abroad.

Which begs the question - do workers abroad get paid 50% more per annum than their Greek counterparts? Respondents were urged by the survey to ignore current trends in the labour market (great advice!) in giving their answer and to focus only on what they believe their skills are worth, so let's take 2007 as a benchmark.I will also use an average of the fairly "decent" EU countries: AUT, BEL, DNK, ESP, FIN, FRA, GER, ITA, NLD & UK. You can find the European data here and the Greek data here.

The result is that European employees can expect about 78% more per annum over a year - but they also have to produce 24% more value added. Allowing for this mismatch in labour quality, our guys can expect 44% more money in Europe than in Greece - about 6% less than they had hoped for.

This is no trivial matter because the math of the Greeks' income expectations works out quite tightly. The majority of this sample probably live with their folks and about a quarter certainly have to because they cite their parents as their main source of income. The extra EUR870 they want as a minimum would just about pay for the rent, food and utilities they are getting free of charge right now. Throw in the fact that most Greeks will ty to use a graduate degree as a stepping stone to their adopted labour market, and the returns are actually not that great as marketable master's degrees cost upwards of EUR10,000.

The end result is that Greece will continue to suffer from brain drain at roughly the same rate as it does now - not a comforting finding but not quite the revelation the DOL group may have hoped for.


Friday, 27 August 2010


Of course you can! Some bozo, presumably a director-by-birth in one of our dodgier small and medium-sized enterprises (judging from the delivery details on his receipt), has managed to get hold of  the first-ever iPhone4 on Greek soil. He (for it must be a he!) managed to hold of it two days ahead of the official launch date through an "acquaintance", which is pointless but an achievement of sorts I guess. But he also took a photo of it with documentary evidence and emailed it to the entire Greek e-news establishment.

Greece never dies my friends. This man IS the country.

But overall, the way in which this ubergadget has been received in Greece is puzzling to casual observers of the Greek economy. Here we are, with the majority of the population experiencing some kind of fall in income and with the near-certainty of worse days to come. Yet there are now websites in Greece that do nothing but monitor the iPhone4 roll-out. One look at the price-tag (the iPhone 4 costs a month's gross entry-level wages in Greece) will tell you that it's overpriced relative to, say, the UK, yet there are an enormous number of prospective buyers.

Which of course makes one wonder - who are all these people? How do they live? Who is paying for all those sodding iPhones?

You just can't blame the Slovaks for not wanting to bail us out.

Thursday, 26 August 2010


Remember my recent post on the findings of the Greek Higher Education Quality agency?

Back then I argued on the basis of academic research that degrees are a substitute for ability in the public sector, and the subsidised "demand" for degrees in whatever from would-be civil servants drives a good deal of our higher education system.

It's just occurred to me that there's a way to test this. Suppose the public sector could not hire more people, causing demand for degrees to collapse, but had to keep up supplying university places in order to disguise unemployment. This is our predicament now. If this were a market, you'd expect prices to collapse.

In the Stalinist sudoku puzzle that is Greek higher education admissions, students' formula-determined aggregate admission scores, (βάσεις) act like prices in the sense that students are admitted into the highest-ranked institution (based on the candidate's preferences) whose minimum requirements they meet.

Right on cue, the results of our first post-troika admissions process have been released and the minimum requirements for most institutions has plummeted, with 28 of the less popular departments admitting students with an average score of 1/20 or less. 1/20 being the score awarded to a student for signing their name on a blank sheet of paper.

Some of the worst culprits were:

Amazingly, some of these departments look fairly decent - I don't doubt that they employ some pretty committed academics.  But that's beside the point. Demand for their degrees is not driven by the huge interest in organic farming, or fisheries or auditing in Greece. It is a government-sponsored bubble that has finally popped.

Good riddance.


More news my friends: it's not just over-hyped tosspots like Stiglitz that misguidedly stick up for Greece.

A letter has arrived at the FT, signed by four London and Athens - based academics, which claims that the case for expecting a Greek default is seriously overstated. This actually came to my attention through one of the many Troktiko clones that have started since the assassination of S. Giolias, one admirably true to its predecessor's ideals of giving a voice to the semi-literate.

This letter is signed among others by one of my best ever professors, Dimitri Vayanos of LSE. This man is a real hero and a real gem, which is why despite his own best efforts he is still not teaching in Greece. He is such a fantastic lecturer he managed to make the Greek/Cypriot contingent of my course sit through a pretty robust  lecture on options after this night.

Vayanos et al do not make a Keynesian defence - if anything theirs is a libertarian one. Their argument (developed in detail here) is that Greece is so far damaged by over-regulation and statism that any material departure from this tradition will yield enormous returns if we can just muster the courage to drive reform. I know this argument very well because that was my own argument too, right up to April 2010.

The evidence is in plentiful supply, but I recommend the following:

  • The OECD indicators of product market regulation (source)
  • The World Bank's Doing Business indicators (source)
  • The World Economic Forums' World Competitiveness Report (source

Unfortunately, that window of opportunity is now closed, as I argue here. And even this good man is wrong. Sorry Prof!

The gist of my response to Vayanos et al. would be that as formidable as the gains from de-regulation would be, they are simply not large or quick enought to buy back the country's independence. For a taste, consider this paper, which demonstrates that even if one of the 25% most regulated countries in the world were to become one of the 25% least regulated countries in the world, it would on average only gain 2.3 percentage points of annual growth. Given a bit of time, of course, this is an amazing thing and I do wish we could achieve this. If we could do this within 3 years the benefits would vindicate Vayanos et al.

But of course, we cannot. The benefits of regulatory reform are, like most supply-side things, not quite as strong during depressions. And besides, we burn people alive for lesser reasons, remember?


Apologies for the long interval, dear readers. Even LOLGreeks must work for a living.

However, I have come across a real gem on Alphaville today which I thought I must share with you. A report by Morgan Stanley entitled "Ask not whether sovereigns will default but how".

Remember how the IMF proved to us the other day that we are not Hungary (but would really, really like to be)? I'm sure I got some cheers from the Troktiko-readers back home by pointing out that Ireland and the UK and in worse shape, from an intertemporal budgets perspective, than we are.

Oh, dear. Well it turns out they are not.

You see, unlike the UK and Ireland, Greece is an old, old country. By 2050 over one third of our population will be over 65.

And we're very bad at being old because we believe people over 55 shouldn't work. The British and the Irish may be insolvent but they just might be able to dig themselves out through changes in policy if they can just buy some time. We on the other hand, cannot because we have very little discretion.Our population is ageing and they will need their hospitals, their pensions, their bus concessions and whatever have you.

Unsurprisingly, the Morgan Stanley report finds that we carry a bigger demographic burden than almost any Western country. The IMF can't fix this. The Government can't fix this. They can only work on the two first bands of the graph above, which incidentally only represent about a quarter of our problems.

Good luck Yorgo.

Readers can browse the full MS report below:

MS Default

Monday, 16 August 2010


Welcome, dear friends, to the 100th post on LOLGreece. We’ve come quite a way and I’m grateful for your support. As a token of my gratitude I'm not going to do very much but I do promise to tag all of these posts and maybe add some kind of cool tag graphic. Yay!

The big news this weekend were the latest figures from the Greek statistics agency, which reveal that the Greek economy stands on the brink of a death spiral, clocking in at -3.5% growth. Why anyone is surprised, I don’t know. I won’t even bother to say “I told you so” even though I kind of did, because it should have been obvious to anyone paying attention.

Now, for the facts. First, the 3.5% fall is a year-on-year statistic. GDP actually grew by -1.5% in Q2.

Annualise this and you get a much more dramatic number: -6.1%. Or if you’re feeling more generous, annualise the figures from Q1 and Q2 and we’re on track for -4.6% growth this year. Both of these figures are well in excess of the 4% GDP fall anticipated by the EU and the IMF. Which of the three “annual” figures is the more accurate depends on what you think of the momentum of the Greek economic cycle.

My guess from the data so far (see below) is that we’re not halfway there yet and therefore I’m holding out for the worst-case scenario of a -6% growth figure for 2010.

Where does this leave debt to GDP and the deficit? It’s not too hard to approximate. You can get the latest external debt stats here and can approximate the incremental nominal debt in Q2 2010 based on the Q2 2010 change in our budget shortfall, which can be found here.

The result is a lovely linear upward trend, which has brought our debt to GDP ratio to a wonderful 120%, up from 115% in 2009. We're still some way off the forecast 133.2%, but there's always hope.

The verdict is that we're still way behind. 


The Hellenic Observatory at LSE, with which I am not affiliated but whose scholars I cite regularly, is organising a one-day conference on fiscal management and sustainability in Greece and the EU.

The event, to be held on 22 October, is supported by FONDAFIP, the association for the international foundation [sic] of public finance and sponsored by the National Bank of Greece. I myself am not in any way involved but certainly plan to attend.

Pre-registration isn't open until September, but, judging from its Facebook page, the event seems set to be well-attended and should receive good media coverage. You can find a preliminary schedule here.

Join us in October. I predict many a LOL will be had by all.

Monday, 9 August 2010


The Hellenic Quality Assurance Agency for Higher Education has just released its report into Quality in Higher Education (surprise!). It is both a window into the crooked timber of Greek education and a glaring example of quis custodiet ipsos custodes?

Going only by the reception the report has received, one would imagine that the Agency is some kind of austere “expert group”, issuing tomes of doomed tough-love precepts that drip with lofty disdain for the world of mortals and their follies. How I would have welcomed that.

Instead, the Agency spends more than one third of its report listing all the rubbish presentations it’s given about its own work to “stakeholders” and whingeing about how the last two governments have not allocated enough money to itself and its contractors/consultants, or how audacious Treasury auditors have kicked back many of its requests for more taxpayer dough, thus getting in the way of the “absorption” of funds. In fact it spends more pages on this than on its findings, and the whole thing reeks of a sickening mixture of officiousness and advocacy. It runs something like this (pg. 11):

[...] it is very difficult to absorb National Strategic Reference Framework funds without the necessary administrative infrastructure and the right institutional framework. Thus, the operation of the Agency essentially relies on the selflessness of its members (many of whom, it ought to be noted, must also travel outside Athens in order to meet their obligations to the Higher Education Institutions in which they teach) as well as that of its small but committed number of secondee officials and staff.”  
How these people have the nerve to publish this in an official document I don’t know – perhaps they are secure in the knowledge that no Greek taxpayer will EVER bother to read the actual report. Anyway, they have found room among all of this drivel to publish a few nuggets of gold – nothing original mind you, but at least it is finally in print for all in government to read:

  • Vague human resource development goals at the national level 
  • Geographic dispersion of Universities that is unjustifiable on quality grounds, with some small rural towns and islands hosting singular departments within a University, and others hosting “twin” departments duplicated at the University’s nominal seat.
  • A proliferation of departments and degree programmes whose subjects are often vague and overlapping
  • A disproportionately high number of departments, programmes and students compared to the country’s population.
  • “Rubber-stamp” departments admitting students without having any permanent staff or infrastructure
  • Arbitrary development of specialisms and cross-disciplinary departments at the undergraduate level which ought to have been pursued at the graduate level
  • A large number of graduate programmes without clear admissions policies and no clear career paths, as well as poorly structured Ph.D. programmes., and insufficient specification of pre-requisite courses in either case.

The agency forgot of course to put their finger on the billion Euro question: are we spending taxpayers' money correctly? We know, for instance, that the basic reason for the pointless dispersion of universities is our conflicted and pointless regional investment policy. Universities = students = consumption and rented accommodation = natives of rural areas stay put instead of moving to cities and property prices go up. Want proof? Check out the latest stats. The only Universities in which enrollment fell lat year were in Athens and Thessaloniki.

As for the value of education itself, luckily some academics are earning their keep and looking into this subject - too bad they work and publish abroad. I am particularly indebted in this case to a certain Ilias Livanos (no acquaintance unfortunately), who has crunched reams of LFS data to estimate the returns to education by subject and type of institution. The report on this research, available here, includes the findings summarised in the table above. It also features the following amazing quote: 

“for most of the fields, besides those of Medicine, Law, Economics and Business and Social Sciences, the impact of a degree on the earnings of public sector graduates is strong at the bottom quantiles, yet declines as one moves up the ability/wage distribution. As the reverse seems to hold true in the case of the private sector, this indicates that an educational degree acts as a substitute for ability in the public sector, as opposed to the private sector. Such a result is consistent with the fact that market forces are less likely to affect the remuneration of individuals who are employed at lower-level state jobs, given that the latter offer automatic wage premiums to job candidates who possess certain academic qualifications.”

Are you getting a sense of déjà vu yet? You may remember one of my earlier posts on union membership:
" ... we’re the only EU country in which people with lower education levels are, ceteris paribus, less likely to be union members. So Union membership in Greece is not about protecting oneself from ruthless competition in a rapidly upskilling world where one’s place in the labour market is increasingly precarious. In fact, according to the same study, we are also the only country, along with Finland, in which people whose parents were educated to a lower level are more likely to be union members. Simply put, union membership in Greece is a means for those who invested in education in a bid to secure an advantage in the labour market to hold on to their status in the face of competition." 
The amazing thing is that, according to another one of Livanos' papers, the ridiculous wage premium secured by unions for graduates in the public sector are matched (not surprisingly) by substantial wage penalties in the private sector. The union-driven public sector wage premium sends more poor souls into degree subjects and specialisms that are useless to private sector employers, thus forcing the public sector to find positions for them.