DOG ATE MY HOMEWORK, PART 2

Another day, another little bit of vindication. Our government's latest Letter of Intent to the IMF is so hilarious they have taken a bit of extra time to respond compared to the last time. Half of the IMF staff are in tears, the other half are ROFLing; it will amount to the same thing in the end.

After denying the obvious for as long as they could, both our Government and the IMF have managed to admit that their growth projections for Greece were bullshit all along. The new target for 2010 is -4.2%, which is still over-confident. The IMF points out all past projections have been off by 0.5%, so my money is still on -4.6%, after two or three years' worth of inevitable reviews. Amazingly, although growth figures are disappointing, we don't seem to expect any corresponding disappointment on the Government revenue side. Hint: there will be. The IMF can always turn to its own report and look at where retail sentiment and spending are heading - ah, screw it. Here are the tables. The retail indicators spell out A-P-O-C-A-L-Y-P-S-E. If our exports can continue to grow in the fact of a renewed global recession, maybe something will be salvaged. What's the chance of that though?

We're also using our newly-disclosed debt and deficit figures to make more politically palatable the inevitable cuts to our wider public sector.  Eurostat's cynical decision to sit on these figures in order to maintain our delicate political balances ahead of the municipal elections of 2010 has turned out to be utterly pointless as everyone and their dog had by now realised the cuts were coming.



I will draw the readers' attention to one major WIN before I go on to my catalogue of FAILZ:

"Government reforms the mechanism for collective bargaining at the firm level in close cooperation with social partners. The new law establishes that firm-level agreements prevail over those under sector and occupational agreements without undue restrictions (for this purpose, Law 1876/1990, Article 10 is amended). The conclusion of firm-level collective agreements should not be restricted by law, notably by requirements regarding the minimum size of firms entitled to engage in collective bargaining." 

"Government amends Law 1876/1990 (Articles 11.2 and 11.3) to eliminate the extension of sector and occupational agreements to parties not represented in negotiations." 

This was honestly well done. If you don't know why, you can catch up with the facts here.

What is amazing is that our tertiary union for the private sector, GSEE, headed by my distant relative, Giannis 'punchbag' Panagopoulos, has responded anaemically  (what is a strike these days anyway?) to this development, which is essentially like turkeys failing to show up to the vote on whether or not to celebrate Christmas. As a result, GSEE's socialist-aligned faction is about to go rogue and either topple Panagopoulos or split in two. The result will not be fewer strikes, by the way. It will be wildcat strikes and of course the Union falling into the hands of the opposition, who have not to date shown any signs of being a responsible stakeholder.

And now for those gems:

Gem #1:

"Anti evasion plan. Based on the work of the task forces, the government will launch the anti-evasion plan by January 2011, including with a public communications campaign. The plan will include quantitative performance indicators to hold the revenue administration accountable. Information about the achievements of the plan will be regularly published."

You mean - we don't have a plan yet? Did we peak with that Google Earth business? And is this really the type of accountability we need? For background, consider this.

Gem #2:

"The Bank of Greece will continue to safeguard banking system liquidity. The legislation enabling a new tranche of government guaranteed bank bonds in the amount of EUR 25 billion was voted at the end of August, and Greek banks are now able to issue, if needed, those additional securities. The Bank of Greece, in close cooperation with the ECB will continue close monitoring of the liquidity situation of the banking system and stands ready to take the appropriate measures to maintain sufficient system liquidity."

The BoG is safeguarding banking system liquidity? I thought that was the ECB, which is 'safeguarding' liquidity by being its sole provider. Do people even care whether the BoG exists anymore?

Gem #3

"ATE Bank will be thoroughly restructured as a stand-alone institution. [The] management will announce a rights issue by end November 2010. [...] [A]n updated assessment of the capital needs of the bank will take place by the end of January 2011. This will be based on an additional review of the loan portfolio by an audit firm. [...] The government intends to keep this capital increase fiscally neutral, potentially by drawing from the resources available from the surplus of reserves within the Hellenic Loan and Consignment Fund (HLCF)." 

Fittingly, the Treasury-run HLCF's symbol is a Chimaera. [ed: it isn't. It's a Gryphon. That's why you should never blog when sleep-deprived.] The Fund, which we're turning into a slush fund for propping up our financial institutions, only has about EUR7bn of assets and less than EUR700m of reserves and was built with the explicit purpose of lending to civil servants and quango employees. Hence its assets are strong only because its debtors' income is essentially guaranteed by the state, and its creditworthiness will decline as we take the knife to the wider public sector and its pensioners. That would be a good time to call in its reserves but obviously we will have poured them down the black hole that is the Agricultural Bank of Greece by then. As the IMF notes:

"[The HLCF's] banking activities are unregulated, it does not have access to established facilities to help manage its liquidity risk, it is exposed to significant interest rate risk, and both its internal and external control procedures are deficient. While small, it can amplify liquidity shocks through the system by competing aggressively with banks for deposits. It was agreed that the HLCF should be unbundled through legislation, with the banking activities transferred to an institution able to properly manage them. Its sizeable surplus of reserves could be extracted to fund the capital increase in ATE." 

There's nothing fiscally neutral about using the HLCF as a slush fund; it's cash neutral but the taxpayer is essentially offering an implicit guarantee. As plans to spin off its profitable financial arm have surfaced, it was recently occupied by its own staff. Good luck guys.

Gem #4:

"The National Actuarial Authority provides by 15 December 2010 interim long-term projections of pension expenditure up to 2060 under the July 2010 legislation covering the main pension schemes (IKA, OGA, OAEE and OPAD)." 

This is massive. The interim report was already overdue months ago and there is no way the actuaries will come back with good news. Remember, Greek pensioners are more powerful than employees, but employees are on the ropes. Things are going to get ugly over pension reform.

Btw, where is that interim report? In case no one has noticed, the Letter of Intent was published on the 17th. Ironically, our mass media are so dependent on the Government for a steer on this as a news item they are happy to  repeat the whole 'by the 15th' point without even putting it in the past tense.

Gem #5:

"Government presents a report analysing the potential contribution of the tourism sector to growth and jobs. It should identify legislative, administrative and other obstacles hindering competition and market entry to the realisation of sector potential.

Government presents a report analysing the potential contribution of the retail sector to price flexibility, growth and jobs. It should identify legislative, administrative and other obstacles hindering competition and market entry to the realisation of sector potential." 

The former report has the advantage of not being another ludicrous tourism strategy, but in zeroing in on regulation it's missing the point. As the World Economic Forum has demonstrated. the point is quite simple - Greece is no longer price-competitive (see pg. 206), partly because of the Euro and, I suspect, because our public spending on tourism is opaque and inefficient (see pg. 72). Only employment law is a real hurdle, mostly with regards to the use of seasonal foreign labour.

The latter report is being pushed as some kind of bizarre industrial policy piece when in fact it's a review of the potential for price controls. Or perhaps a bargaining chip that, it is hoped, which will force retailers to exercise restraint. Par-tay!

Gem #6:  

"Services directive"

Which LOLmonger thought to include this in the Memorandum? Implementing EU Directives is our Treaty obligation. We'd have to do it if we didn't owe a penny to anyone. Although perhaps we'd get away with dragging our feet. We are, as it happens, one year behind already.