Saturday, 25 September 2010


From Pension Pulse via Zero Hedge. Remember, this is not my material. But it's well worth a read.

Friday morning, I met up with Petros Christodoulou, the man Spiegel International dubbed "Greece's savior" in an article which appeared in late March, The 300 Billion Euro Man:
It is the most thankless job that exists in Greece these days: Petros Christodoulou, the new head of the Public Debt Management Agency, in Athens, has been tasked with guiding his country out of debt. He has already charted his course on the 300 billion euro voyage and says "there's no room for emotion."

When Petros Christodoulou sits at his desk, his gaze inevitably falls on a relic of better days. To him, it must feel like a reminder of a laudable achievement gone wrong -- and a warning. A neatly framed certificate perched on the windowsill across the room reads: "Best Government Borrower." It was an award bestowed upon the Athens government in 2007 by the British financial newspaper EuroWeek.

Back then, taking on debt in Athens was more of a straightforward affair. These days, though, the entire world is looking to Greece and wondering how the country will clean up its budget and avoid a national bankruptcy.
Even if Greece is unable to increase its revenues significantly, it is Christodoulou's job to procure favorable loans in the financial markets so that Athens can at least pay off its old debts with new debt. This, in turn, is meant to placate Greece's creditors, help the country get over its financial crisis and stabilize Europe's common currency, the euro.

Just one month ago, Prime Minister Georgios Papandreou, 57, appointed the former investment banker to serve as Greece's highest-ranking debt manager, as general director of the Public Debt Management Agency (PDMA). It is a dubious honor, given that the country owes €300 billion ($404 billion) and is paying interest rates on government bonds that are up to 3 percent higher than the rates paid by Germany. His predecessor issued an €8 billion bond offering in January, but the price began plunging on the first day of trading. It was a debacle for Greece.

'Admittedly Difficult Situation'

Nevertheless, Christodoulou didn't hesitate for a second. "You don't necessarily wait for an offer like this," says the financial manager, "but there are moments in your career when you just have to clench your teeth and get down to business." Now he intends to use his skills to help lead his country "out of an admittedly difficult situation."

Those skills must be extraordinary, if one is to believe the early praise in the capital. Christodoulou, who studied finance in Athens and at New York's Columbia University, held senior executive positions with several major financial institutions, including Credit Suisse, Goldman Sachs, JP Morgan and, most recently, the National Bank of Greece, before being chosen as his country's financial savior. "I climbed high and was dropped off with a parachute over unknown terrain," he says.

The PDMA's "front office," as Christodoulou calls it, doesn't exactly look like the nerve center of a campaign to prepare for the final battle against looming bankruptcy. The hallway, painted in Greece's national colors of blue and white, is quiet. The desks seem oddly neat and many chairs are empty.

With his staff of 20, Christodoulou, 49, must decide which bonds to place and where they will be placed, the size of the offering and the terms and conditions. "My life is dictated by the financial markets," he says. "I'm here when something new happens, and I'm here when someone has an idea, morning, noon and night. I exchange e-mails with the finance minister at one in the morning."

Not a Time for Weakness

His carefully ironed white shirt belies his busy schedule as he sits at his desk in shirtsleeves. Given all of his newfound responsibility, does he have trouble sleeping? Christodoulou, usually quick to respond, pauses for a few moments. Then he says, absent-mindedly: "I believe it's doable, and that's why I'm here. There is no room for emotion."

His biggest challenge at the moment is to raise about €11 billion by the end of May to pay debts that will mature by then. At the beginning of the week, that number was much higher, but a successful bond issue on Monday brought in a much-needed €5 billion. The offering follows an equally successful bond issue on March 3, which likewise brought in €5 billion. Nevertheless, by the end of the year, he must rustle up over €20 billion more.

In April, he and his team will embark on a "road show" in the United States and Asia. "We have a story to tell," he says. The story is about a Greece that will successfully complete its difficult journey and will then offer good investment opportunities -- opportunities, he says, that international investors cannot afford to ignore. In fact, says Christodoulou, Greece is already paying such attractive yields to offset a higher risk that no international investor can "afford not to be in on the deal." He is targeting the booming financial centers in Southeast Asia and in emerging economies, in particular.

Going for the Jugular

Christodoulou makes decisions quickly and purposefully. He thinks patriotically and acts globally. "We all need luck," he says, and adds: "I also go to church." He pauses and laughs again: "I need all the strength I can get."

The US business magazine Forbes estimates that he earned an annual salary of about €300,000 in his last bank job, but his current pay is likely considerably lower. "I don't remember," he says, smiling thinly -- no comment, in other words.
Instead, he prefers to emphasize the selfless nature of his current task. "One thing is certain," he says. "I'm not a politician, and I'm not planning a political career."
Mr. Christodoulou is definetely not a politician. From the moment I walked into his office, I could tell he's a market guy, fixated on his Bloomberg screen, looking at bond spreads. He reminded me of the many European hedge fund managers I used to meet when I worked at the Caisse allocating money. Smart, very polished, excellent conversationalist (fluent in English), and a bit arrogant, which comes with the territory (in Greece you have to be arrogant when you reach a certain status or else people don't respect you, but I found him very friendly and we chatted for nearly an hour and a half).

I had sent him a few questions from large pension funds, and made it clear that I'm not working for them or representing them, nor are they particularly keen on investing in Greek bonds. They just wanted to know how Greece is coping with austerity measures and how they will service their debt going forward.

Mr. Christodoulou told me, "I don't respond to bloggers, and I don't normally meet them" but he was kind enough to meet me and we exchanged information. The first thing he did was jot down on a piece of paper the rough breakdown Greece's debt: 70 billion euros is held internally, 70 billion by France, 50 billion by Germany, 40 billion by the ECB and 50 billion Other Eurozone nations.

"The bulk of our debt in held within Europe which is why I focus much of my attention here", adding "we have to first service those who invested in our debt." Of course, that's understandable, as Europe stands to lose the most if Greece defaults or restructures its debt.

On the "R" word, Mr. Christodoulou made it clear that restructuring is not an option. "It's not just me saying it, our Prime Minister, Finance Minister, Trichet and others have said it". I told him the ripple effects would be too big. He agreed, stating "You can't just look at Greece on its own. There is too much at stake for European and international capital markets if Greece restructures. The cost of restructuring is unbearable".

On the austerity measures, I told him many market analysts are skeptical that Greece came come out of this mess. He handed me a a WSJ article, Why Sovereign Debt Default Remains on the Table, and told me that Greece just underwent "shock therapy with a capital S". He added: "you know well that Greeks have to be lying on the floor before they accept drastic changes". I know that all too well, remembering the criticism Greece received prior to the 2004 Olympic games, which in the end, turned out to be one of the best Olympics ever (post-Olympics, however, things soured as they didn't have a plan on how to use the buildings they built).

I asked him specific questions on why Greece wasn't paying the VAT tax credit to foreign investors and why they're not going after tax evaders more forcibly. "We are going after tax evaders and accelerating pending court cases. There is no choice. If we don't raise taxes in the next four months, we can't cut more costs as patience is wearing thin among Greeks." On the VAT tax credit, he told me "when you're cash strapped, you have to make difficult decisions, and that is unfortunate, but we're working to rectify this as soon as possible."

We also chatted about his experience. Interestingly, Mr. Christodoulou knew a lot about Canada and lived in Toronto and Montreal. After graduating with an MBA from Columbia, he worked at the treasury department at Fednav Group, and in Toronto, he spent a couple of years trading provincial debt at Goldman Sachs. "But the winters were too cold, so I left Canada and went over to London to work at JP Morgan as a bond trader where I stayed 12 years before moving back to Athens."

(Interestingly, when discussing blogs and bloggers, he became irate over those who accuse him of being a "Goldman puppet", calling them "dumb ", and told me "who would you rather have running this agency some Greek pension manager who doesn't know the first thing of capital markets?" Good point, most of those guys are political hacks who are completely incompetent and totally corrupt.)

Amazingly, he recalled exactly where he lived in Montreal, "on the corner of Guy and Sherbrooke" and when I told him one of my favorite Greek restaurants, Molivos, was there, he said "yes, it's on the south west corner". Pretty good memory.

He also told me his cousin, a social worker, lives in Montreal, and his uncle, John Christodoulou is the Chairman and CEO of Guardian Capital Group in Toronto (I knew the name rang a bell as his uncle is one of the most successful Greek Canadian businessmen). "My uncle has been trying to bring me back to Canada", he joked.

We ended our conversation by talking about Greek "diaspora" bonds which are bonds they are going to issue to Greeks living abroad. He told me they're thinking of issuing 1-year and 3-year paper, and asked me where 10-year bonds were trading in Canada. My brain was fried from my vacation, so I couldn't tell him exactly off the top of my head, but he checked his Bloomberg and told me 3%.

(I am not sure how successful Greek diaspora bonds will be given that many Greeks in Canada and elsewhere got burned in the Greek stock market bubble back in 1999 and are generally weary of Greek investments. But if they can get extra yield on relatively safe government paper, I think many will consider it, and not just out of patriotism to the Motherland).

As I left his office, he told me that he invites my readers to go directly to the Greek Public Debt Management Agency where they can view the latest presentations. He also told me he will be planning a North America roadshow at a later date and is happy to respond to any questions from fund managers directly (just send them to pdma@pdma.gr).

I would like to thank Mr. Christodoulou for taking the time to meet me and share his thoughts on the Greek economy. Along with the Prime Minister and Finance Minister, he's got one of the toughest jobs in Greece, but he's more than qualified to handle the challenges that lie ahead.

Finally, Greece’s Prime Minister George Papandreou recently spoke with Bloomberg's Betty Liu about the country's economy and sovereign debt crisis. Papandreou says Greece ruled out any plans to restructure debt and repeated that the country plans to return international capital markets as soon as possible. 

From Pension Pulse via Zero Hedge. Remember, this is not my material.

Wednesday, 22 September 2010


Still from my folks' TV the other day... a delegation of road transport unionists. 

Greece is one of the few countries where not only workers but also entrepreneurs are allowed to band together into Unions that collectively bargain on things like, say, their own prices. It's called a CARTEL and it should be smashed to pieces.

Here they are, in one of our seedier but powerful fora, the TV show Zougla (Jungle) hosted by Makis Triantafyllopoulos (to whom we also referred here). The caption reads: MPs with haulage licences.

Their quarrel with the government is that it is forced to liberalise road transport in Greece and has therefore decreed that their licences will now be worth a fraction of what they used to be worth. Which is only fair because while they used to confer monopoly power and they will no longer be able to. These people argue however, that they paid good money for their licences which they will now lose. That's EUR50,000 for trucks and EUR200,000 for fuel carriers (source here).

In an industry in which 31.6% of gross output goes into capital compensation (according to EUKLEMS) despite only moderate concentration in Herfindahl terms (according to the EUKLEMS linked dataset), it is pretty clear that anti-competitive strategies are already at play. Even so, surely the cost of the licence could have got amortised over the years? EUKLEMS tells me the average inland transport company is 21.1 yrs old;  a licence worth EUR200,000 amortised over say 20 yrs works out to EUR20,000 per annum, which the average company should have been able to make out of a gross output of EUR65,000 or so. 

Now something tells me this stuff hasn't been amortised and people have been paying themselves inflated directors' salaries all along. THAT'S THEIR PROBLEM. Meanwhile we're stuck with a loss estimated at ca. 0.5% of GDP per annum.

Of course, it's not just the cartel that's to blame. Ponder if you will the record of government intervention in road freight over the last decade, almost calculated to support this market structure. Comparatively, as of 2007, ours was the most price-regulated road freight sector in the OECD.

Now, there are those who fear that the signal might go out that the Greek state doesn't keep its promises to licenceholders. I'm not worried about that. Market participants are not stupid. The signal they will receive is that the State will not keep its promises to prop up cartels, and that a licence to monopolise must never be taken for granted. 

That can only be a good thing.

Sunday, 19 September 2010


Readers will by now be familiar with my libertarian leanings, but will also not be surprised to find that, in the few instances in which I have voted in Greek elections, I have often voted Conservative. As with most libertarians who do so, I have been bitterly disappointed.

Greeks find libertarianism not just unpalatable but actually inconceivable; we don’t even have a word for it, so discussing it with friends feels like being part of a slightly nerdy cult. Moreover, in our highly confrontational politics it is impossible to frame any kind of libertarian argument except in opposition to the prevailing collectivist mindset. The result is that one has to often side with corporatists and rent-seekers rather than truly like-minded people. None of this exonerates me for helping vote in the recent incompetent Conservative Government back in 2004. I was very enthusiastic about their victory at the time. I was wrong and I apologise unreservedly for my lack of judgment.

I take the opportunity now say this because I have written many a sarcastic post mocking the Socialist Government's impotence, incompetence, confusion and general bullshit, but none so far to target the people I have in the past voted for.

No one better illustrates the deeply unpleasant opportunism of the Greek Right than Antonis Samaras, the leader of our main opposition party. The man is, in my estimation, a profoundly inadequate stop-gap, rescued from the political scrapheap by our last Prime Minister, Kostas “PlayStation” Karamanlis in a show of strength against pretenders to the party leadership. In another worrying sign of Greece thinking it is Hungary, Samaras has for some time made headlines for his outspoken opposition to the Greek bailout and the terms on which it was agreed, now summarily known as “The Memorandum”.

His argument for voting against the Memorandum is confusing and thoroughly flawed. It is also cynical and maddeningly patronising of Greek voters. While he has published an alternative to the Memorandum, it is a little bit scant on the costed detail – a major problem when one claims they can restore Greece to growth and a balanced budget within two years. (That’s two years starting in early 2010). The only halfway-solid number is to be found in the statement below:

“It is estimated that EUR50bn in total can be found over the next two years through commercial exploitation of a small part of the State’s real estate portfolio and the bold pursuit of a comprehensive programme of privatization. This would cover the borrowing requirements of the next years and achieve a net reduction of government debt by at least 10% (EUR30bn)”

This is, of course, factually incorrect unless the utterly vague “next years” is taken to mean the last three quarters of 2010. Even, so this would assume that Greece would run a paltry EUR4.2bn deficit (1.8% of GDP!!!) within the first year of adjustment (evidence here).

UPDATE: It now appears that Samaras meant he would be targetting the structural deficit rather than the overall figure. He calculates this at 6.7% but also slyly cites the obvious economist-for-hire, Joseph MUPPET Stiglitz, who calculates it at 4.5%. Later in the same speech he suggests that it is only the ability to tap the bond markets again that he had in mind for 2011, not a zero deficit figure. Perhaps we will soon learn that it is the structural primary deficit (ex interest) that he wanted to target all along. God knows. That in itself tells you that his idea of narrowing the "deficit" would consist at least in part of changing the way it is calculated. How realistic any of these projections are, you may want to consider in light of this. Mind you, I often wonder what business our Conservatives have quoting a "structural" deficit - a deeply Keynesian concept steeped in the voodoo of "potential output".

Blatant lies and idiocy aside, I find it amazing that anyone with the wherewithal to achieve this utterly unprecedented feat of fiscal adjustment would be slaving away in the Conservatives’ rubbish little policy outfits, instead of taking over the world.

UPDATE: Conservative MEP Theodoros Skylakakis has just been struck off the Conservative Party for making the exact same argument as I do above. He is currently refusing to hand over his seat at the EP. I hope he is a reader.

Below is a list of the Conservative views that I find particularly annoying. I will update it as I go along.

1. The present Government caused Greece’s funding crisis by inflating the 2009 deficit figures and spreading alarmist rhetoric.

I appreciate that some of our ministers, especially Andreas MUPPET Loverdos, have not helped matters with their statements from time to time. It is also clear that, in adjusting the deficit figures, the Socialists may have had an incentive to take a big bath and overstate the seriousness of our situation, just like the Conservatives did back in 2004. However, unlike that of the previous government, their timing was appalling as it linked the Greek fiscal situation with the Dubai default.

However, as Samaras himself admits, the crisis was coming regardless. Greece has a fundamental solvency problem and has been financing itself on a fairly short-term basis. Combine the two and a liquidity problem is only a matter of time. Of course, one might argue that, had the Government chosen to lay low for a while during late 2009, no one might have noticed what state we were in.

This is a misguided argument; to begin with, no government should wager its fiscal future on its continued ability to avoid proper scrutiny by its citizens and its creditors. Not that this would have worked in any case; Greece’s debt came up in the analysis of the Nov. 08 riots and bond yields spiked accordingly. The 2009 and 2010 riots had the same effect. So did news of the Dubai restructuring back in 2009.

[In fact, rioting probably has more to do with Greek bond yields than the fundamentals, because it is the fundamental in itself – at once a measure of the Government’s ability to levy taxes in the future (the ultimate government asset) and of the people’s appetite for default. And we have a schedule of riots almost as regular and reliable as national statistics releases, which Greece-watchers would do well to mark on their calendars.’

At any rate, we know for a fact that fundamentals (including the debt and deficit figures) accounted for almost identical changes in bond yields in the first three months of the new Government’s term as they did in the last three months of the Conservatives’ last term. It was global financial contagion which dealt us the fatal blow and somehow I doubt it was all down to one MUPPET putting his foot in it.

Finally, if the Government’s sole intention had been to inflate the deficit figures, surely Eurostat would not have been able to come up with another upward revision within a few months of our announcement of the ‘new’ deficit figures. Once you’ve decided to revise up to 12.6, you might as well go for 13.6%. Or even 14.1%, which is the upper end of the range of Eurostat estimates. At any rate I’ve failed to dig up any statements from our Conservatives endorsing the expert report on the reliability of government statistics. Surely a peep on switching to IFRS for the public sector or some other established methodology is not too much to ask for? Or is it the case that the Conservatives cynically realise that the Big Bath will come in very handy when it’s their turn to take the helm again?

2. Greece would not have defaulted in May had we refused to take the IMF's money.

This is a bizarre argument which I can only relate verbatim (Greek source here).

"We were asked where we would get the EUR110bn that [Greece] borrowed [under the terms of the Memorandum]. The answer is simple. First, [the IMF and the EU] did not lend us EUR110bn. To date, they have only lent us EUR30bn. This is money that the markets were offering earlier this year, and which we didn't take! We were being offered EUR43bn for bonds with maturities above one year - mostly 5 or 10 years - of which the government only took EUR14bn! That's back when spreads were still at 200 to 230 basis points. Not the 500 we saw in May or the 900 we see today. So they ask us to give them the money now that they themselves did not take from the markets, and which they subsequently had to sign the Memorandum to get!"

This is madness. Samaras' argument is that the Government borrowed EUR14bn earlier this year, in bond sales oversubscribed by a factor of roughly three to one. So far, so almost true. His argument is, however, that would could have taken all of the money offered at the same yields had we wanted to. Not true. Had Greece announced we were tapping the market for EUR43bn instead of EUR12bn, and pushed for long maturities, we would have got fantastically high yields. Selling bonds in superbulk (like apples or oranges) makes them cheaper to buy, not dearer.

What would have happened, in the face of an inverted yield curve, is that we would have been unable to borrow anything short-term and would have had to sell long-term bonds against an implied 75% probability of default. All of this before we even begin to contemplate the other EUR80bn, by the way. This man is an economist apparently. He should know better.

Even if one concedes all this MUPPETRY, it does not explain why the Conservatives voted against the terms of the memorandum in May. Maybe we could have done any number of things before the May riots but, at the time of the vote, we hadn't. So what was our other option? Default.

But astute readers will also notice an even darker aspect to Samaras' statement. Read the last bit again:

So they ask us [meaning the taxpayer] to give them [the Government] the money now that they themselves did not take from the markets, and which they subsequently had to sign the Memorandum to get!"

Noticed it yet? The money the Government is asking for is tax - equity in other words. The money Samaras said the Government could have got from the markets, and of course the Memorandum money, are both debt. The fact that the Conservatives have degenerated so much that, even now, they prefer to finance the state via debt rather than equity just makes me want to cry.

Friday, 17 September 2010


In case anyone's failed to notice, Ireland and Portugal are in a good deal of trouble.

Unlike ourselves, they must borrow from real markets - the result is yields easily above 6%. This means both troubled sovereigns are losing money on their loans to Greece (which only yield 5%), even as they struggle to stay afloat.

This is going to strain everyone's goodwill soon enough.

Thursday, 16 September 2010


Note to our non-Greek readers: the writing is a play on a popular football fans' chant welcoming new players to their teams' colours. It normally scans as "X, you're to die for in the [team colour] shirt".

This version reads: "Panagopoulos, you're to die for in a torn up shirt". The reference is to the recent assault by a group of anarchists on the head of Greece's tertiary private sector union, Giannis Panagopoulos (more graphic photos here). Embarassingly this is a distant relative of mine.

Now normally unionistas and anarchists bashing each other senseless would be great news. Unfortunately the two sides are no longer fighting in order to make a point but for actual power, as they have both grown much more influential over the last year.

To illustrate, this was written on the wall of Emporiki Bank (now the toxic property of Credit Agricole and incidentally my father's employer for decades before he retired some twenty years ago). On the other side the same people had written: "Σπάστε, Κάψτε, Τελειώσατε" which translates to "Break, Burn, Done!", a boasting reference to the burning alive of three Marfin Bank employees, one of them pregnant, during the May riots. 

As I never tire of repeating, these people are not the vanguard of the oppressed. They are bored, privately educated nihilists who holiday in Mykonos. I would not be surprised if it emerged that I've gone to school with some of them. And in Greece they are not universally reviled as scum and murderers - some idiots cherish them.

Wednesday, 15 September 2010


The Government has published today its newest Statement of Intent regarding our standby agreement with the IMF, and the IMF has released its latest review of our stabilisation programme.

At first glance, the two documents (which appear to have been written by the same person) reiterate much of what is already known. Read between the lines, however, and it's not so good anymore. My play-by-play is as follows:

  • tax receipts have collapsed because the economy is imploding much faster than we had expected, but we're holding back spending even further so it's all good (hint: it isn't). We still expect growth to match the -4% forecast we've agreed with the IMF (ed: it won't).
  • we're having a bit of trouble controlling anything outside of central government (nothing to do with the upcoming municipal and prefectural elections) and are making up for this by keeping central government expenditures down:
"Through June, the large margin under the targets created in the state budget has offset the overruns to date in subnational entities. "
  • we've been able to hold back central government spending so much partly because we're putting off payments to our own funds or citizens, a state of affairs often called default.
"However, there has been some undesirable buildup in accounts payable/arrears in hospitals and social security funds."
  • Inflation is out of control, partly "because the government frontloaded a number of large indirect tax increases, which have been passed on as a step up in the price level." We couldn't possibly have foreseen that, even though "[t]he high pass through of indirect tax increases to final prices is indicative of a lack of competition and the prevalence of oligopolistic market structures" which we've known about all along. Actually we don't mind because inflation is also eating away at our mountain of debt - so it's definitely all right. This is what the IMF mean when they say: "Staff and authorities agreed that nominal growth will be somewhat higher than originally anticipated." This puts us on track for debt to GDP of 144% in 2013 rather than the 149% originally forecast. YAY.
  •  Thankfully we can always count on the contribution of pimps, drug dealers and tax cheats to consumer demand: "The authorities saw the risks to the growth outlook as being on the upside. They noted that the informal economy and unrevealed pockets of wealth act as a buffer and underpin private consumption data." It won't be the first time that our shadow growth sector comes to the rescue.

  • We're sorting out our budgeting process. Now all levels of government and all government agencies will be handed actual budgets on a top-down basis (WOW), along with contingency margins (ed: which they will use 9 times out of 10). Our budgets will be part of a UK-style Comprehensive Spending Review, which will do almost nothing to keep us from screwing our grandkids over in the same way that it did for the British. Yay.

  • We now have a much better idea of how many people we employ in the public sector: just under one in five persons in employment. We'll commission a review of the function of public administration to see what we're going to do with them. Even though public admin only accounts for half of the public sector payroll.

  • We've implemented price caps on medicines, forced hospital suppliers to give us a massive discount and accept payment in Greek bonds, all to to keep our health sector from folding. Predictably we are now facing dangerous and humiliating shortages of absolutely every sort

  • We've passed a highly controversial law, codenamed 'Kallikrates', to reform local authorities. Its main function to date appears to be to merge insolvent authorities with solvent ones, the intelligent solution to insolvency so successfully pioneered in the banking sector.

  • We've passed a massively controversial (and much needed) law to reform our terminally ill pensions system. We're pretty sure it will work (the IMF forecasts a saving of 8% to 10% of GDP by 2050) even though "The National Actuarial Authority will complete an assessment of the effects of the reform on the main pension funds by end-December 2010, and of the largest auxiliary pension funds by end-March 2011." If it turns out the system still isn't solvent (ed: it will), we'll just pass another law to amend it, even though passing the first one nearly toppled our government.

  • We will continue our trend for selling ever smaller amounts of ever shorter-term bonds ever more frequently, because nobody will buy them otherwise.

  • Our banking system is in good shape - all but one bank passed the incredibly rigged CEBS Stress Tests, which, by omitting any haircuts on assets held to maturity (like most Greek bonds out there), made our banking system look less doomed than it actually is. "Liquidity conditions have remained strained" is a tactful way of saying that our banking system is losing billions of Euros of deposits per month and would not survive one second without funding from the ECB.

  • We've commissioned a strategic review of options for our banking sector by "independent consultants." Money well spent, as our government have clarified that they want a large part of the sector to remain public and that's that. The IMF helpfully point out that the Greek state has a controlling interest in over 11% of the Greek banking system by assets. Someone ought to tell them we don't take hints very well.
    Dear friends. Do not be fooled. There is only one thing that matters in all of this sorry saga. Earlier this week the Basel Committee announced that the implementation of Basel III will be phased in over four years, and parts of it will wait until 2019. 2014-15 now becomes the likeliest date of the Greek default, if nothing else goes wrong in the world. Welcome to the end of the world.


Update from Athens #1:
I got a proper receipt from a taxi driver last night, who stopped me as I was charging out of his car with a considerable amount of drink in my system.
That was on the way back. No receipt on the outbound ride but one out of two ain't bad.
As good old Gordon Brown said, let the work of Change begin.

Tuesday, 7 September 2010


I am now in the middle of my vacations and, having landed in London for a few days, have one interesting anecdote to report. It involves being a bit of a douche but do bear with me.

I spent the last six days in Dubai, at literally the most expensive place I could afford without being self-destructive. The place is an iconic hotel, so international and money-driven that it openly (if discreetly) serves pork for breakfast, in broad daylight, during Ramadan.

I can say, hand-on-heart, that the only languages spoken more often than Greek were English and Russian. Inevitably the Greeks in question were there on family trips rather than blingin' young professional getaways. Now, maybe I was just looking out for them - or maybe there's lots of Greeks out there with serious cash to throw around. None of these were celebrities or even remotely recognisable from the world of business or policies.

While you ponder the significance of this, you may want to devote some time to this fantastic article in which Michael Lewis takes on the Greek crisis for Vanity Fair. Many thanks to S.P. and P.S. for bringing this to my attention. 

Wednesday, 1 September 2010


Readers based in Greece may have noticed a great deal of inane talk recently about the need for a "co-ordinator" at the heart of the Prime Minister's office - essentially a Deputy Prime Minister in name or otherwise, based in some kind of equivalent of the UK's Cabinet Office, or the German Kanzleramt, to enforce joint-up policymaking and basically knock heads together when our ministers aren't getting with the programme. A recent survey was commissioned to ask, among other things, whether citizens feel there is a lack of co-ordination within government. 70% of the population said yes.

Now I wouldn't read too much into this. "Co-ordination" is one of those nothing-words in common Greek parlance (like "analytical", "prospect", "dynamic", "comprehensive" etc) whose purpose regardless of etymology is to convey a general sentiment rather than a judgment of facts. In this case, the call for better co-ordination basically means the government ought to do a better job. Yawn.

The idea originated back in February, when Yorgo put together a Committee (as he does) to consider the modernisation of the functioning of Government. Its members were:

The Committee has now reported and judging from Prof. Featherstone's comments, its recommendations are likely to be accepted whosale. Ironically for an insolvent country, (but predictably for a committee of socialists) they involve hiring way more people into the Prime Minister's Office, which Featherstone says is one of the smallest in Europe, (boo-hoo) so that it can become a fully subsidised Think Tank with all the trimmings and become a serious agent in policymaking.

This will create a new lynchpin position, a right-hand man for the PM, an appointment guaranteed to whip Greek politics into a frenzy. This is already underway. Will successive Greek PMs ever trust anyone with this position? Past practice has been to give ambitious ministers 'electric chair' appointments like the Ministry for Education and Religious Affairs. And at any rate, is the solution to our problems really the Chancellor-ification of Yorgo and the Mandelson-ification of one of his lackeys? Will anyone be reassured by an office that gives the PM even more people to hide behind? Does it not run the risk of directly plugging the PM into tribal politics - a task formerly delegated to more junior politicians?

Sod this, Feathestone; you can keep your philosopher-King model. The machinery of government is secondary. Liberalise the labour market, root out the dead tendrils of the state, tax appropriately and cut red tape, scrap military service, introduce university fees and proper admissions; give the Greek people their drive and dignity back. Then they will be able and motivated to hold you to account accordingly.