LOL GREECE

TRADE DEFICIT DATA WIN, PART I: UPDATE WITH XTRA PWNAGE

2012-02-26T19:37:00.009+02:00

Dear readers,

It never rains but it pours. I've got a second post for you in two days, and this one is a data post so brace yourselves.

Some time ago, I looked at Greece's falling importance as a trading partner to Germany and found that, contrary to the rhetoric of the drachma brigade, Germany was increasingly less reliant (not that it ever was) on Greece as a trading partner in the post-Euro era. One commentator called me out on this saying that I should instead examine Greece's dependence on Germany as an import market, which is rather the point.

I couldn't do this for some time because getting such data is not easy. You have to go here and torture your eyeballs for some time. I thoroughly recommend it to statpornographers; it's got data on imports and exports by trading partner AND by product. So you can find out how much Greeks spend on German cars in 2001 and how much Germans spent on Greek olive oil in 2010. It's got limitations but hey, what data source doesn't.

The results are surprising even to a grizzled Euro-cynic such as myself. People generally assume that the introduction of the Euro led to a gradual increase in Greece's dependence on German imports. Greek defaultniks also occasionally claim that it led to a gradual increase in Germany's dependence on exports to Greece. Some even go so far as to claim that the purpose of the austerity-backed bailout is to keep up Greece's purchases of German exports. This despite the obvious fact, that imports in Greece, indeed in most of the world are income-elastic: the fall in Greek consumption of German imports will almost always be steeper than the fall in our total consumption.

Anyway, the actual data show that none of the above claims are true. Don't get me wrong, Greece did become less competitive and our trade deficit grew (see further below). But we lost ground to pretty much the whole world at a greater rate than Germany, and, most importantly, the Germans neither rely on our lack of competitiveness specifically nor have any particular incentive to keep us in the Euro.

Let's start with the Greek side of things:

Amazingly, following Greece's Euro accession, Germany's share of Greek imports fell slowly but steadily, and, apart from a brief jump in 2003, so did Germany's share of the Greek trade deficit.

And now for Germany's side of the story:

Greece accounts for less than 0.7% of Germany's exports, and even in the good days it rarely accounted for more than 0.8%. That's zero-point-eight per cent guys. And that number remained more or less stable, until of course 2010, when it fell of a cliff. If we only look at the German trade surplus, it's clear Euro accession initially had the opposite effect of what people assume: Greece's share of the German trade surplus fell off an even steeper cliff than the one in 2010.

Puzzled? Then you must be very young, or have a short memory. Back in 2002, people used to write endless editorials about how Germany had made a mistake in joining the Euro and killed its own export industry because it had been suckered into accepting an uncompetitive fixed D-Mark to Euro rate. How the times change. Read, for instance, this article from back in 2002 and tell me whether it reminds you of editorials about any country you know. Isn't that funny? Or Lapa-witzig, as the Germans might joke if they followed the Greek defaultnik literature?

The Germans of course sucked it up and pursued a strategy of - you guessed it - internal devaluation. Perhaps the fact that it worked for them, despite the pain, might be the reason they think it just might work for us.

For those of you who are hungry for more detail, check the original source of the data here. Or you can download my selection of the data from here.

By the way there are inconsistencies in the data. Greece's imports from Germany don't seem to add up to Germany's exports to Greece, and vice versa. This could be due to reporting asymmetries (Germany may not report the same in imports as we report in exports due to accounting conventions), or taxation, or maybe I've done something wrong. Check it out for yourselves, thought, the trends are much the same either way:

Now, for the hungrier ones:

The following tables give you a summary of Greece's top import and export markets as well as the sources of our biggest deficits and surpluses over time. I've chosen 2000 and 2008 as milestones to enable comparisons between pre-and post-Euro Greece as well as pre- and post- crisis Greece. Feel free to download.

If, on the other hand, you're not happy with this but would rather play with and plot the data youself, then download the file below instead. It's an Excel file, with data for each year on imports/exports from/to every country imaginable. UPDATE: As a treat for returning readers, I've added two extra tabs to the excel file, essentially performing a regression analysis of Greek imports from Germany. Although the sample is tiny and the method is crude, for now the suggestion is that it was Maastricht, not Euro accession that changed the game when it came to German imports, although some might say it's all the same thing.

Enjoy!

THIS! IS! NOT! ARGENTINA! (UPDATE)

2012-02-26T07:39:00.010+02:00

The other day, I got an email from Dan Beeton, the International Comms Co-ordinator at the CEPR. As veteran readers will recall, Dan and I have occasionally worked together on debunking the Weisbrot hoax. Dan is a colleague of Mark Weisbrot, so he has an interest in this.

Dan shared with me the latest CEPR paper which draws some compelling comparisons between Greece and Argentina and uses these to make the case against further austerity and in favour of Greece defaulting and leaving the Euro. I’ve promised to help disseminate this paper both on Twitter and on this blog. Not because I agree with it, but because I believe that since a Greek default is desired by a great deal of the population and ultimately inevitable, it is important for its advocates of default to become more rigorous in their argument.

For the record, as you will know, I’m all for defaulting once we’re running a primary deficit, though I would caution that this will not in itself make Greece’s finances sustainable.

That said, as much as I respect Weisbrot and his colleagues at the CEPR, I’m sick to the back teeth of comparisons between Greece and Argentina. They are just too simple. Argentina was on a foreign currency peg; Greece is in a monetary union, which is like a foreign currency peg. Argentina had an IMF intervention, Greece had an IMF intervention. Argentina defaulted; Greece is expected to default. Hey presto, Greece is Argentina. What worked for one, must surely work for the other. It’s so easy to predict the future when you already know what you want it to look like. So I thought I’d talk you through some of the main ways in which Argentina in 2002 was not like Greece in 2011. I know it won’t convince the defaultniks but at least I’ll get this stuff off my chest.

First, it’s important to appreciate how big the Argentine budget deficit was when that country defaulted. As I’ve said on this blog ad nauseam, a country with a primary surplus can default anytime – it can still pay its way regardless of what creditors do. A country with a primary deficit has a problem. Argentina’s budget deficit in 2001 was a paltry 3%. At the time, Argentina was paying 3.58% of GDP in interest (same source), so in fact they were running a primary surplus of 0.8%, courtesy of the IMF’s bitter medicine, compared to our projected 2011 primary deficit of 2.3%, which may yet turn out to be much higher, but is only at this non-eye-watering level courtesy of the IMF too. Search the latest CEPR paper for references to Argentina’s primary surplus. Not one. Yeah, I thought so. Even rigorous-minded Keynesians don’t believe deficits matter. You know why? Because cool guys don’t look at explosions.

Similarly, the CEPR paper makes the point that Greece’s exports are much higher as a share of GDP than Argentina’s back when it defaulted, and therefore better placed to drive growth. First, I would point out that Greek exports have grown, by nearly 10% in 2011. Second I need to explain that the share of exports on GDP is not the only thing that determines the sustainability of falling off a currency peg.

In early 2002, Argentina’s current account was nearly balanced, with a deficit of 1.4% of GDP in January. Nearly all gains in competitiveness went into growth. Greece is a different story: we’ve got a current account deficit of over 10% of GDP. Hence, while Argentina was able to grow at the very substantial rate it did using a devaluation of about 65% between 2001 and 2005, it would take a much greater devaluation to replicate this effect in Greece. Remember, even with massive inflation, you can’t devalue by more than 100%, although Keynesians will no doubt find a way (perhaps a tax on holding the national currency?). But even with their ‘modest adjustment’, the Argentines paid dearly for this strategy. You can check here what happened to inflation in the aftermath. It topped 25% in the first year, and was almost 15% the year after that, and has since never recovered to pre-default levels. In fact, Argentina is still blatantly manipulating inflation figures to keep up appearances – so much so that they have to threaten and fine anyone who dares publish more accurate figures (unless they are a union, and then only if they keep their estimates of real inflation for the negotiating table only).

If you are advocating foreign-currency default but don’t know why inflation is bad for a country, I’m tempted to suggest that you deserve to have its massive double-digit slapped across your face. But let me explain nonetheless: inflation means your money is worth less in relative terms and is harder to store, i.e. convert into wealth such as savings or a house. Inflation is a tax on everyone who earns a wage or benefits but has little negotiating power with the government, as well as everyone who saves money in a bank or owns a cash-poor business. It is, on the other hand, a subsidy to anyone whose income comes from investment, anyone who owns gold, anyone who owes money in the national currency, anyone who has the political connections to negotiate higher salaries, and any business able to borrow cheaply.

Think really hard of which of the two sides you’re on and you’ll know whether it’s good for you. Rich people and banks are typically winners from massive inflation. The working poor are typically losers. That’s partly the reason why, despite Argentina’s success in battling income inequality, wealth inequality (as measured by the wealth Gini coefficient) has not only failed to come down, but actually increased since the default, from 74% in 2000 to about 75% in 2010, and is in fact way higher than Greece’s.

That’s one point. On to the second. Whatever the fiscal and current account deficit figures, we need to get one thing clear: the Greek state is much, much bigger than Argentina’s was when it defaulted. More than double in size in fact. Even without paying any interest, the Greek state would still be leeching much more money out of its economy than Argentina’s ever did, either pre- or post- default. Hence the potential for growth post-default would be much smaller without, you guessed it, more austerity! Don’t forget, unlike government investment, government consumption does slow down growth.

I can sense your disbelief at this point. The assumption among most commentators is that anyone who flicks the finger at the IMF must be a socialist who believes in an all-encompassing state. But in fact, by 2001, the last full year before it defaulted, Argentina was spending just 18% of GDP in primary government expenditures. Contrast this to Greece’s projected primary spending of 42.7% of GDP in 2011 (which, again, could turn out to be higher). Remember, I’m using the primary spending figure because clearly in a default(nik) scenario we wouldn’t be paying interest at all.

This comparison, incidentally, tells you a little bit about why Argentina grew so fast post-default.

If Greece were to default and revert to spending, minus interest, what Argentina did as a share of GDP in 2001, just before it defaulted, we’d save 24.7% of GDP and, in my preferred scenario, return it to the taxpayer through tax cuts. And according to the IMF’s calculations, a tax cut of that monumental size would boost the Greek economy’s output by 1.3x24.7%=31.1% within 2 years (or anyway that’s how much an equivalent increase in taxes would shave off our output). Libertarians would of course love this, and provided we could find that extra 2.3% of GDP through some other revenue (such as privatisations) it would actually be possible, but defaultniks would typically hate both small states and privatisations, so I don’t expect them to come out in support of us becoming like Argentina in this regard.

Not that we could do that, either. Too much of our primary spending is locked in. The second major difference, you see, between Greece and Argentina is demographics. Greece has for many years been a much older society than Argentina. In 2002, Argentina’s old-age dependency ratio was a mere 16%, while Greece’s ratio for 2011 is just over 28%. You can check this for yourselves here (select ‘detailed indicators’ on the right).

Now by looking at the correlation of health, survivor, sickness and disability spending with old age spending, it is possible to approximate the total impact of ageing: it adds up to about 17% of GDP per annum (if you don’t like my estimate, try your own using the COFOG government spending data provided by Eurostat). Remember I’m only adding to age-related spending the additional spending on other things attributable to ageing.

Now, if our old-age dependency ratio were the same today as Argentina’s back in 2000, it’s only a matter of simple math (and an assumption of linearity which I admit may be wrong) to deduce that we would be spending 7.1% of GDP less on our aged and see a primary spending figure of 38.1%. Still more than twice what Argentina was spending when it defaulted. Although that would, in theory, put paid to Greece’s primary deficit, cutting that much off pension and health spending would have disastrous effects on Greek society. In fact, let’s go balls-deep in the defaultnik scenario and assume that Greece cut all of its toxic public procurement budget as well – no new roads, no new arms spending, no nothing – that would save us 13% of GDP at most. We’d still only get down to 25% of GDP, which is still way higher than what Argentina used to spend when it defaulted.

Note by the way that Argentina didn’t have to worry about destroying its pension system when it defaulted, because by the time it defaulted it had privatised its pensions system, courtesy of the same hideous reforms that defaultniks hate so much. In an earlier paper, the CEPR credits this with losing Argentina about 1% of GDP in government income annually (presumably, of course that was meant to be the people’s money, not the Government’s, but hey let’s humour them), but they forget to mention that it is precisely this that made it possible for Argentina to default without destroying or confiscating the pensions income of its own citizens.

But in any case, this little exercise suggests that, even if our population was currently as young as Argentina’s when it defaulted, we’d still be in a far worse position to default than they were. But at least we would be able to default.

Remember, ageing is not reversible. Pre-austerity, it used to add a significant 0.46% of GDP to our primary spending per year. At this rate, if we were to balance the 2011 books in one fell swoop, by 2020 we would be running a 4.6% primary deficit once again. Unless we cut pensions and benefits savagely, of course. Which we have, to the towering rage of defaultniks everywhere.

Why is pensions income so important? Well because they are a huge part of the Greek household income. Now there’s no actual calculation available of this, so I’ve had to come up with my own. I can only offer a mix of 2011 and 2010 figures, but that’s a start. Greece’s pensions funds paid out EUR25.6bn on pensions in 2011 (pg. 95 here), against total household consumption of EUR165.8bn in 2010. Household consumption has probably fallen since, so that resulting ratio of 15.4% is definitely an underestimate. So basically, destroying pension funds via default would eat into private consumption in a massive way (it already has). Another big handbrake on growth, I think.

Defaultniks often point out how investment would supposedly soar in a country freed from the burden of debt. but age once again reaches for the handbrake. Without the ability to tap global capital markets, only domestic savings will be left to finance investment and that will not be nearly enough in countries like Greece (discussion here). Savings rates don't typically go up as a country ages; past a certain point they go down: people reach their maximum savings rate at a certain age and then start eating into their savings to pay for the kids' school fees, for healthcare, for whatever have you. Pensioners are, in fact, de facto negative savers. Have a look at the graph below if you don't believe me (source):

If you're feeling really gloomy right now, you've got my gist. The last decade was actually Greece's golden age of age-related saving propensity, if there is such a term. It was the time in our near history when we were most disposed towards saving, and our governments made sure we didn't. Game over.

The difference in household savings rates between 2011 Greece and 2002 Argentina implied by the above graph is about 8% of GDP. That's 8% of GDP less that we Greeks will be able to put into investment, post-default, than Argentina was able to. That's twice our 2010 gross national savings, bottled up for the foreseeable future by the irresistible force of human destiny. It's also more, by the way, than what we're currently paying in interest.

Here’s one final comparator that people often forget, and it’s related to all of the above. 2002 Argentina was way more entrepreneurial than 2010 Greece: the average Argentine adult is almost three times as likely as the average Greek to be in the process of starting a business as the average Greek adult, even though entrepreneurial activity fell by half post-default: as growth returned, the appetite for enterprise fell quickly. Entrepreneurs are important to growth because they help convert all of that free post-default cash into sustainable wealth. One reason why we’ve got so many fewer of them is, once again, age: it’s easier to take a huge gamble with bankruptcy when you’re 28 (the median age in 2002 Argentina) than when you’re 41 going on 42 (the median age in 2011 Greece), and who would blame you?

The result is that even if Greece could somehow pump all of that money we spend on interest into the economy, it’s doubtful whether it would ever turn into growth of the sort the CEPR and our local defaultniks are hoping for without an exogenous boost to entrepreneurship. Don’t be quick to blame the Euro; Argentina had a currency peg too pre-2002, remember? That’s the whole point. In fact, I think the difference here is largely down to demographics and the size of the state, but it’s harder to prove this, so let’s park it for now.

This is not the end of the long list of differences between 2002 Argentina and 2011 Greece. It’s just all the stuff I could come up with at relatively short notice. But I hope it helps clarify how tenuous and wishful the Greece-Argentina analogies are.

UPDATE:

Demetri Kofinas, aka @CoveringDelta, has paid me a tremendous compliment by inserting a reference to this analysis on the very successful show he produces on Russia Today - check it out here. Thank you Demetri!

ABOUT THAT PRIMARY SURPLUS: A NOTE TO @BBCSTEPHANIE

2012-02-13T05:17:00.004+02:00

Dear readers,

I know there are serious things afoot in Greece and I'm not contributing very much, but the truth is that politics is not my thing; I don't have anything particular to add to the newsflow and am privy to no information beyond that. This is the time for insiders, and I'm not one of them, so why add to the torrent of pointless speculation?

That said, I have been hounded for some days now by Tweeps who have read this article and don't know what to make of it. In particular, friends have got very excited by the suggestion that Greece is currently running a whopping EUR1.8bn primary surplus.

While it's usually best not to lock horns with @BBCStephanie, the BBC Economics editor, this is an important issue, so I'll try to explain why, despite the noteworthy progress so far, the 'surplus' is an illusion.

First, it is important not to extrapolate annual figures from semi-annual ones. Second semester deficits have, for the past three years, been consistently smaller than first semester ones, and not because of fiscal adjustment alone. The three graphs below, based on the latest Budget Execution bulletins, show the monthly and semiannual primary deficits we've recorded over the last three years and should help @BBCStephanie reconsider how the primary deficit is evolving:

Second, it is important not to take the Greek government's primary deficit figures at face value because these are subject to VERY substantial revisions, only ever pointing upwards, and also because they omit a number of items that still make it onto our borrowing requirements. The reason for the first limitation is simple: it takes months for all of the government agencies and ministries to turn in their data and for the Finance ministry to quality-check them.

Compare, for instance, the original December 2010 budget execution bulletin, citing a EUR19.4bn deficit, to the December 2010 figures included in the latest budget execution bulletin for December 2011, citing a deficit of EUR21.5bn. The difference is a whopping EUR2bn more spending (about 1.5bn of this in December's monthly revision alone) and in fact, if you consider the total borrowing requirement, it grows to an amazing EUR4.9bn. We won't know the true size of the 2011 deficit, or indeed that of the second semester, until about a year later, and something tells me it will turn out to be higher as well.

Third, as Philip notes in the comments below and as I've also noted in the past, a lot of the tax measures involved in cutting the primary deficit are unsustainable one-offs. When these wear out the result could be a return to the bad old days, but the damage to business and consumer sentiment will be lasting.

For now, the second half of 2011 has indeed been a very good time for the primary deficit and long may this trend continue. It's fair and appropriate to report on this but another thing entirely to deduce policy implications for it, or a change to Greece's negotiating strength. Greece's policy-minded moderates have been looking for a sign of a primary surplus for a long time and to give them one prematurely could force the Greek government's hand in unpredictable ways. Don't forget, the second semester of 2011 was relatively benign in that expectations of the extent of GDP contraction were more or less borne out, unlike the surprisingly bad first half. What's the chance of any further negative surprises in 2012? Yeah, I thought as much.

I too want to see a primary deficit that will restore some level of sovereignty to Greece, and I do believe we're slowly getting there. But if we don't care how far we still have to go then we might as well have defaulted in the spring of 2010.

LOLGREECE ENDORSES @REPRONPAUL #GREEKS4RONPAUL

2012-01-03T00:50:00.002+02:00

I have tweeted about this ad nauseam over the last few days but with Iowa about to yield its secrets to the adoring public I'm ready to shut up. Just not before this little official endorsement, which will come as a surprise to precisely none of my regular readers.

Please Republicans, choose Ron Paul.

What is it to you, Americans might ask, and who asked you?

I would argue that Americans are the second most likely people after Greeks to visit my blog, and I feel it might interest them to hear of what one concerned Greek has to say. Sadly #Greeks4RonPaul is basically just me and the occasional friend, but that does not really negate the point.

Moreover, whoever the GOP chooses might end up becoming president, and in so doing will have some modicum of power over my country too. I have an interest in you choosing someone that, on the issues, I actually agree with and, given that the GOP's other candidates are power-hungry brushed aluminium sleazeballs they may want to consider someone that their fellow Americans do not hate quite so much.

On the issues then, why should you go for Ron Paul?

This is why:

And this is why:

And this is why:

And this is why:

And this amazing omission is why:

And this amazing admission is also why:

And the sheer amount of balls it takes to say this, is also why:

Mind you he needs to seriously reconsider his views or at least his rhetoric on abortion and contraception. If he does, he'll get a wee little donation from me too. Come on.

UPDATE: Since I hear veteran readers object, I should at least respond in passing:

Regarding central banks and the business cycle, I believe RP is not saying that the business cycle is, in principle, a matter of monetary policy. I believe he is referring to this: http://ftalphaville.ft.com/blog/2011/12/16/803431/deutsches-reid-on-shorter-business-cycles/

Regarding the independence of the Fed, while I agree that if Central Banks exist they should be fiercely and impeccably independent, I also believe that Central Banks are responsible, through both monetary policy and capital regulation, for a great deal of the credit bubble and the crisis that followed. My advice to Ron Paul would be to give up on auditing the Fed and focus on ending its role in monetary policy. Lender or last resort? Yes. Setter of interest rates? Nope. Source of QE? No. Etc Etc Etc.

Now hate away, usual crowd, hate away.

BAΒU? THAT THE BEST U CAN DO?

2011-12-31T21:09:00.007+02:00

Πρόσφατα υπέπεσε στην αντίληψή μου, μετά από RT της @_LaScapigliata, ένας καλογραμμένος πολεμικός με τίτλο ‘O νεοφιλελευθερισμός ως αντεστραμμένος εθνικισμός’ του @LeninReloaded στον οποίο νομίζω (μάλλον από ψώνιο) ότι μου επιφυλάσσεται ένας μικρός ρόλος ως συγγραφέα «σε άλλο ιστολόγιο της τάξης των εξ επαγγέλματος «αντιεθνικιστών» νεοφιλελεύθερων» και «ιδεολογικού παιδού της Δυστυχίας του να είσαι Έλληνας [του Ν. Δήμου]» Αυτά με αφορμή το επεξηγηματικό μου κείμενο «Self Hating Greek FTW» όπου απαντώ σε όσους με κατηγορούν για δήθεν έλλειψη πατριωτισμού.

Βέβαια για να μη δημιουργώ ψευδείς εντυπώσεις καλό θα ήταν να τονίσω ότι κύριος στόχος του εν λόγω άρθρου δεν ήμουν εγώ αλλά ο ίδιος ο Δήμου, τον οποίο γνώρισα μόλις φέτος ως αγαπημένο πρωταγωνιστή των Δίλεπτων Μίσους της ιντερνετικής αριστεράς – είναι φαντάζομαι για την εθνική συνείδηση μερικών εξ αυτών ό,τι ο Μίχας ή ο Μανδραβέλης για την οικονομική τους ενημέρωση.

Στο κείμενό μου η δήθεν υπερήφανη οικειοποίηση εκ μέρους μου του όρου Self Hating Greek διαψεύδεται από τις πρώτες κιόλας λέξεις (αυτός εξάλλου είναι ο λόγος που το έγραψα). Αυτό θα μπορούσε εύκολα να το διαπιστώσει ο αναγνώστης, αν ο επικριτής μου (;) είχε την καλοσύνη να παραθέσει ένα σύνδεσμο.

Για να ευχαριστήσω εντούτοις τον @LeninReloaded, ετοίμασα μια παράφραση του άρθρου του με λίγα μόνο επιπλέον σχόλια που ίσως να τον διασκεδάσει. Για τους σκοπούς αυτής της παράφρασης ας επινοήσουμε έναν όρο, ‘τοπικιστικός διεθνισμός’ για να περιγράψουμε την περίεργη φιλοσοφία που αναπτύσσεται στο δεύτερο μισό του άρθρου.

===================================================

Ο αφορισμός #317 του Καρλ Κράους, αυτού του ανυπέρβλητα πικρόχολου αποστάτη της αυστριακής αστικής τάξης, έχει ως εξής: «Το απεχθές με τον σωβινισμό δεν είναι τόσο η αντιπάθεια για τα άλλα έθνη όσο η αγάπη για το δικό μας.» Αν κάποιος φιλελεύθερος τύχαινε να σκοντάψει πάνω σ' αυτή τη διατύπωση θα ένιωθε την ανάγκη να συμπληρώσει το εξής: «Το απεχθές με τον τοπικιστικό διεθνισμό δεν είναι τόσο η αντιπάθεια για τον παγκοσμιοποιημένο καπιταλισμό, όσο η αγάπη (που παραπέμπει ευθέως στο Σύνδρομο της Στοκχόλμης) για το στρεβλό πλην οικείο σύστημα που τον καταδυναστεύει στη χώρα του.»

=============================================

Όπως λέει και ο επικριτής μου (;),

«για μας όμως επίσης, η εργατική τάξη οργανώνεται και διεκδικεί αναγκαστικά τοπικά, στα πλαίσια συνεπώς – και αναπόφευκτα – ενός έθνους-κράτους, απευθυνόμενη σε μια εθνική νομοθεσία, εθνικές συλλογικές συμβάασεις, εθνικό Σύνταγμα, εθνική κυβέρνηση, αναδεικνύοντας φυσικά τον επικαθορισμό τους από τον υπερεθνικό χαρακτήρα των κεφαλαιοκρατικών συμφερόντων και όχι αναζητώντας μια ούτως ή άλλως ανύπαρκτη καθαρότητα.»

Συνεχίζω να παραφράζω:

======================================================

Η αλήθεια αυτής της συμπληρωματικής διατύπωσης, σύμφωνα με την οποία ο τοπικιστικός διεθνισμός ως τέτοιος, ως εδραιωμένο και αυτοτελές πολιτικό πρόταγμα, είναι στην πραγματικότητα μια συντεχνιακή ιδεολογία, πιστοποιείται εύκολα.

Οι προτάσεις των «πατριωτών» διεθνιστών --και εννοώ τόσο τον ισοπεδωτικό αντι-δυτικισμό τους όσο και την εξίσου ισοπεδωτική λατρεία τους για κάθε «κατάκτηση» των εγχώριων νταβατζήδων του συνδικαλισμού, απευθύνονται σε έναν υπόρρητο ή αδήλωτο «μεγάλο Άλλο.» Ο «πατριώτης» διεθνιστής γράφει μεν απευθυνόμενος ως επί το πλείστον σε αστούς και τέκνα αστών που έχουν διεθνή ιδεολογικά αναγνώσματα και ερεθίσματα και τα επικαλούνται με εξαντλητική συχνότητα --όλως παραδόξως-- γράφει όμως ωσάν ο πραγματικός του αναγνώστης να είναι ο μεγάλος Άλλος της εγχώριας εργατιάς, που θα αναγνωρίσει σ' αυτόν το οικείο πλατύ κούτελο και αιχμηρό μούσι του ινστρούχτορα, και θα του εμπιστευθεί τα πνευματικά ηνία της Επανάστασης. Εξάλλου όπως παραδέχεται και ο ίδιος ‘στοχεύει στην ενεργό παρέμβαση στην διαμόρφωση και κατεύθυνση του εργατικού κινήματος.’

=======================================================

Αυτή η εμμονή στην πνευματική ηγεσία της Επανάστασης δεν είναι ίδιον όλων των αριστερών. Δεν θα τη βρει κανείς π.χ. στους αριστερούς που μπορούν να κάνουν κι ένα διάλειμμα στα Starbucks μετά την πορεία ή να κάτσουν να δουν μια μη στρατευμένη ταινία με μη ομοϊδεάτες φίλους τους. Είναι όμως κεντρικό ζητούμενο για τους ζηλωτές της επανάστασης. Εκείνους που έχουν θυσιάσει πολλή από τη ζωή τους προσμένοντας τη στιγμή της εξέγερσης που θα τους δικαιώσει -όπως ο ζηλωτής μοναχός προσμένει την Κρίση και την ανάσταση των νεκρών. Γι’ αυτό και οι τελευταίοι καταβαραθρώνουν με τόσο μίσος τον «ψευδή ρεαλισμό και ανέξοδο διεθνισμό της "ευρω-αριστεράς".» Καλώς ή κακώς η μόνη επανάσταση της οποίας προλαβαίνει να εξελιχθεί σε ηγέτη ο μέσος ζηλωτής Έλλην Επαναστάτης, δικαιολογώντας τις θυσίες του, είναι η Ελληνική –Ελλαδάρα λοιπόν και ξερό ψωμί.

Δεν είναι τυχαίο ότι ερωτηθείς, στα πλαίσια της Ευρωπαϊκής Έρευνας Αξιών του 2008 (στοιχεία από εδώ), πόσο υπερήφανοι είναι που είναι Έλληνες, το 56.5% όσων δήλωναν πρόθεση ψήφου για το ΚΚΕ απήντησε «πολύ υπερήφανος/η» και το 34% «αρκετά υπερήφανος/η» - σχεδόν τα ίδια ποσοστά που δήλωναν πρόθεση ψήφου για τον ΛΑ.Ο.Σ. Αυτό παρά το γεγονός ότι, όσο πιο αριστερός δήλωνε κανείς σε μια απλή μονοδιάστατη κλίμακα δεξιάς-αριστεράς, τόσο λιγότερο υπερήφανος δήλωνε για την ελληνικότητά του. Εννοείται ότι οι πιο «υπερήφανοι» Έλληνες με διαφορά ήταν οι ψηφοφόροι των δύο κομμάτων εξουσίας και ότι ακόμη και μεταξύ όσων θεωρούσαν εαυτούς 'τόσο αριστερούς όσο πάει' οι μισοί ένοιωθαν 'πολύ περήφανοι' που ήταν Έλληνες.'

Η συντεχνιακή αντίληψη του τοπικιστικού διεθνισμού δεν εξαντλείται βέβαια στο ρόλο της πνευματικής ηγεσίας του. Γιατί αυτό που παρέλειψε στη διατριβή του περί babu-wannabees ο συγγραφέας είναι ότι επί δεκαετίες τώρα συνεισφέρουν στην επιλογή νέων συμπολιτών μας να μεταναστεύσουν προς χώρες κατ’ εξοχήν απεχθείς προς τον ίδιο και τους ομοϊδεάτες του. Η μετανάστευση των καλοβαλμένων δυτικολάγνων δεν ενοχλεί προσωπικά τον κάθε ζηλωτή Επαναστάτη (καλά ξεκουμπίδια θα μου έλεγε αν κάναμε αυτήν την κουβέντα πριν ξενιτευτώ το 2005), αλλά εντούτοις βγάζοντας από την αγορά εργασίας ένα πολύ σεβαστό αριθμό υποψήφιων ανέργων αποσυμπιέζει λίγο την Ελληνική κοινωνία και καθυστερεί, έστω και λίγο μόνο, την κοινωνική έκρηξη που φαντασιώνεται ο επίδοξος ινστρούχτορας. Αυτό είναι, εννοείται, ασυγχώρητο.

Κύριοι ζηλωτές και επίδοξοι ινστρούχτορες (γιατί ο L-R είναι ένας μεταξύ πολλών), αν αυτό σας βοηθά να κοιμάστε χωρίς να τρίζετε τα δόντια σας, μπορείτε να λέτε στους εαυτούς σας και στο ποίμνιό σας ότι εμείς η συμμορία των ‘νεοφιλελεύθερων’ διατρανώνουμε συνθηματικά το μίσος μας για τους άλλους Έλληνες μπας και μας ακούσει κανένας αρθρογράφος των FT και πει ‘Να, αυτοί οι Έλληνες μάλιστα! Να’ ταν όλοι έτσι! Ποιος είναι ο καλός μου Έλληνας; Εσύ είσαι ο καλός μου Έλληνας , γούτσου γούτσου γου.’

Μπορείτε να λέτε αυτά και άλλα τόσα για εμάς και τα κίνητρά μας. Αλλά μην απατάσθε προσωπικά, όσο και αν σας πιστεύουν μερικοί, ότι αυτή η ερμηνεία αποτελεί κάτι παραπάνω από έναν ελιγμό στον πόλεμο για την νοηματοδότηση της κρίσης στον οποίο όλοι μας συμμετέχουμε επί 3 χρόνια τώρα.

Μην απατάσθε επίσης ότι αποτελεί απάντηση στις τοποθετήσεις μας. Όσες παραπομπές και να το στολίσει κανείς, ένα ad-hominem παραλήρημα - ‘ο Χ είναι ένα δουλοπρεπές ανθρωπάκι!!!! – ο Χ ισχυρίζεται το Υ!!!! – άρα το Υ δεν ισχύει!!!! και αν το ανέχεσαι είσαι κι εσύ ένα δουλοπρεπές ανθρωπάκι!!!!’ - δεν μετατρέπεται σε επιχείρημα. Το μόνο που κάνετε είναι να επισημαίνετε στους αναγνώστες σας άλλον έναν ‘εχθρό του λαού.’ Με αυτούς τους ρυθμούς θα γεράσετε πρωτού καν ετοιμάσετε τέτοιου είδους αντί-αγιογραφίες για κάθε έλληνα που έχει μιλήσει ποτέ απαξιωτικά για οποιαδήποτε μεγάλη μερίδα του Ελληνικού λαού και για την νοοτροπία της.

Εξάλλου, στην προσπάθειά σας να ανακαλύψετε εχθρούς της εργατιάς για το καθερωμένο Δίλεπτο Μίσους, ξεχνάτε ποιους ανθρώπους πραγματικά αντιμαχόμαστε οι «αντι-εθνικιστές νεοφιλελεύθεροι» και γιατί.

Δεν γνωρίζω τι σκέφτεται ο Δήμου και ο κάθε Δήμου, αλλά προσωπικά ελάχιστα χάνω τον ύπνο μου στη σκέψη του κάθε Ινστρούχτορα και των φίλων του και του τι θα μας κάνουν την επαύριο της Επανάστασης. Για κάθε ένα τακτικό αναγνώστη όμως του Lenin Reloaded υπάρχουν 10,000 τακτικοί αναγνώστες του Τρο(μα)κτικού, άλλοι τόσοι αμετανόητοι ψηφοφόροι της Αλλαγής του 81 και του 85, και άλλοι 1,000 τουλάχιστον οπαδοί /αναγνώστες του Λιακόπουλου, και όλοι αυτοί με τρομοκρατούν μέχρι θανάτου. Ομολογουμένως οι αλληλοεπικαλύψεις είναι σημαντικές, αλλά δεν παύουν οι άνθρωποι αυτοί να είναι αρκετοί σε αριθμούς για να κρίνουν κάθε εκλογικό αποτέλεσμα για τις επόμενες τρεις δεκαετίες. Μπορεί τα κόμματα που κάποτε ψήφιζαν να πεθάνουν (αμήν) αλλά οι νοοτροπίες που υποκινούσαν αυτές τις ψήφους θα επιζήσουν.

PRIMARY DEFICIT XMAS CHEER

2011-12-28T02:36:00.002+02:00

Readers will know that this blog is the one place where you can actually get a monthly play by play of the Greek primary deficit, and when stuck for anything else to write (after my Basel III blogasm the other day) I will dig that out for some light entertainment.

By the looks of it, the Government has started to turn things around near the end of the year, after a disastrous start in which the primary deficit seemed completely out of control. Since June, the primary deficit has flatlined and since September it has stayed below 2010 levels. September and November were particularly good months. That said, three months do not a reverse snafu make and December could well be a different story, as indeed the whole of 2012.

All of my usual caveats apply: a large proportion of savings are unsustainable, either because they are one-off tax revenues or because they are based on deep cuts to public investment. Sooner or later the potholes will need filling and the tax admin IT systems will need mercy-killing; and of course there's only so much you can tax when an increasing number of would-be taxpayers are under the poverty line.

Moreover, I'm still unable to explain why last year's deficit figures have been revised upwards by about 834m as of November. This revision accounts for about half of the gains that the government appears to have made against 2010 figures. Moving the goalposts is a time-honoured tradition but I don't expect it's fooling anyone anymore.

As for next year, much hinges on what kind of measures the government goes for. Remember, the order of preference should be:

Benefit cuts > Public consumption cuts > Direct Tax Hikes> Public Investment Cuts > Indirect Tax Hikes

I can't see how a government with no mandate (three non-mandates do not make a mandate) will manage to pull off further benefits cuts, or indeed how further taxes are going to be viable given their history of missing revenue targets. Public investment is down to virtually zero, so that's not an option. So next year is going to be the year the moist-eyed public consumption puppy really gets it.

For the more visual characters among you, the charts below show the evolution of the primary deficit during the past three years.

So to conclude, I don't know how long this is going to last, but let's cheer this latest batch of figures. Long-term, the solvency of the Greek sovereign is not in question in the same way as the half-life of a snowflake in hell is beyond dispute.

But lest we forget, PRIMARY SURPLUS = SOVEREIGNTY so the closer we get to it the better. Yay.

THE WORST VERY DECENT COUNTRY IN THE WORLD: A LOLGREECE CHRISTMAS CAROL

2011-12-25T05:27:00.014+02:00

UPDATE: A Greek version of this post was published on 5 Jan 2012 by protagon.gr

In my months of relative absence I’ve been reading this blog over and over again, looking for things I ought to have done better or things I used to do well but no longer do. I realised my favourite post by a wide margin was this one, because it told a story that not all commentators are well-placed to tell, and without which any discussion of the Greek debt crisis is doomed to miss the point completely. Today, as a special Xmas treat to my loyal readers, I have got a new historical post, and it’s a good one I promise.

Our story is set in Switzerland, where Greek millionaires (and, one account tells me, Cretan goatherds) keep their money. However, our villains are not the Gnomes of Zurich, but the Grinches of Basel.

Readers will know that I’ve got a special interest in capital regulation in my professional capacity, and I’ve also had the good fortune of being allowed to write a little bit on the impact the new capital regulations (Basel III, implemented in Europe within CRD IV) are likely to have on loans to small and medium sized enterprises. You can find the global discussion paper here and the European policy paper here. However, mine is only a passing amateur interest compared to that of Patrick Slovik at the OECD, who recently sent me his latest work on what capital regulation has actually done to the banking sector globally. It is this paper that inspired our Christmas carol.

If you’re new to the concept of capital regulation, then the story goes a little like this.

Banks are required by law to hold on to a certain amount of money against what they lend so that, if they should make losses or if depositors should rush to get their money back, they will still have enough money to meet their obligations and keep functioning. Banks would, in their own best interests, hold on to some money anyway, but in many cases they don’t appreciate how their lending decisions or other transactions affect the total system and how the troubles of other banks could affect them; so they are likely to hold on to less money than they should. Hence, the reasoning goes, regulators have to make it mandatory for banks to hold on to a certain level of capital that is higher than what banks would set aside on their own.

In 1988, a concentrated effort was made by central bankers around the world to agree on principles of capital regulation that would apply globally. The trigger was the failure of a German bank back in 1974, which today would have been a mere blip on the radar of EPIC FAILZ but was a big deal at the time. Because the Committee that was formed to prepare these standards met for the most part in Basel, this first set of standards was known as the Basel Accord and its two latter incarnations are known as Basel II and Basel III. Collectively they are known as the Basel Accords.

(Lords of Ka-Ching, by William Banzai)

The clever idea behind the Basel Accords (and one that, in principle, it is hard to argue with) is that the amount of capital banks should set aside should depend on how risky their activities are. I could tell you that one myself. If you’re a specialist bank lending to start-ups (hint: there is no such thing) it makes sense to hold on to a lot of capital, because about a quarter of start-ups (in Europe) never make it past their 2^nd birthday. If on the other hand, you are a niche player lending only to large fast-moving consumer goods companies like Unilever or P&G, then you shouldn’t need to worry as much. Basel doesn't quite work like that but the principle of 'more risk, more capital' is the same.

The problem is that there is no single way of assessing credit risk, and, in the case of loans, banks each use their own methods for doing this, the tiny variations of which are essentially industrial secrets. So the only way regulators could create any system of capital requirements that banks would not reject outright was to come up with their own assessment of how risky different types of activity actually were. Each asset (such as a loan, or a bond, or whatever) would receive its own risk ‘weight’ (determined by the regulators) and the banks would have to calculate a risk-weighted version of their balance sheet before deciding how much capital the regulator wanted them to hold. This in turn meant that assets the regulators had decided were ‘riskier’ would become more expensive for the banks to keep on their balance sheets because they would come with a higher capital requirement – and capital is expensive to raise because shareholders and other providers of capital have to be compensated for the risk they take.

Since Basel I was implemented in 1991, the assets of big banks have grown year after year, but the ratio of risk-weighted assets to total assets declined year on year (see below). Between 1991 and 2008, it fell by a full 50%. Now it’s hard to believe that the banks dropped half of the risky business they did from their balance sheets, because plainly the banks of 2008 were toxic and the banks of 1991 were, well, less toxic. So if the banks didn’t drop risky assets, what did they drop from their balance sheets? You guessed it, they dropped whatever the Basel regulations (I and then II; III is still on its way) had decided was ‘riskier’. Any guess what was ‘risky’ according to Basel? You guessed right. It was loans. Loans! You know, the stuff banks are supposed to make. By 2007, Deutsche Bank, for instance, only had 11% of its balance sheet in loans.

Which begs the question, what was the rest of the balance sheet made of? Why, the stuff Basel had decreed was ‘safe’. And what was the safest type of lending conceivable to Basel? You guessed it. Bonds. Yummy government debt. And, occasionally, short-term loans to major banks, preferably with government bonds thrown in as security. So were AAA-rated securities made out of bundles of iffy mortgages. Pretty much everything that's gone wrong in the world since 2006. But let's focus on bonds for now.

Basically, what happened was that banks took one look at their balance sheets and started dropping everything except ‘no-brainers’. So if the answer to the crucial question of ‘are we getting our money back?’ was ‘ooh, that depends, let me see’, the asset was dropped. If the answer was ‘yes unless Hell freezes over’, the asset was kept. OK, this is not exactly the way it happened but if you fast-forward the banks’ balance sheets in time, that’s kind of how it looks.

What do banks mean by ‘unless Hell freezes over?’ Well they mean cases in which their fundamental assumptions about the world turned out to be wrong. Basically, capital regulation gave banks an incentive to swap mundane risks for what is technically known as ‘tail risk’, or more popularly, as ‘Black Swans’. I am not the only one saying this. In fact, the IMF woke up to this fact earlier this year when Perotti et al wrote their future classic on capital regulation. So what were these fundamental assumptions the banks could always count on? In the days leading up to 2007, the banks had come to count on property prices only ever going up (at least country-wide; so even though mortgages might be risky, mortgage securities weren’t. In the days leading up to 2009, they had come to count on Eurozone sovereigns not defaulting. The rest is history.

The banks’ crimes are many and heinous but probably the worst was the fact that, for the sake of a few cents to each dollar or Euro or whatever, they outsourced their risk management to the Basel regulations and anyone recognised as a competent authority by said regulations. By the way, in case people are wondering who gave the rating agencies the right to decide how risky European sovereigns are, or, more precisely, why banks and other institutions feel compelled to listen to the rating agencies, you’ll be interested to know that it was Basel wot did it. For instance, just check out the original text of the European implementation of Basel II (known as CRD III), as it was finally adopted in 2006 (of course it was years in the making so banks started adjusting to it as early as June 2004 when Basel II was agreed). You’re looking for the beginning of Article 81, on page 34 here. Yep. In your face.

Now although Basel I and II gave banks an incentive to dump loans and stock up on bonds, they didn’t tell them what bonds to stock up on. They just gave them a nice hint. Paragraph 64, p. 116 here tells the banks how to do it. Assentially, it says, go to your credit rating agency, look up governments’ credit ratings and derive the default probability from there. Or calculate it yourself, but why bother? In 2006, Greece’s credit rating was A1 according to Moody’s and A according to S&P and Fitch, which meant a 5-year default probability of less than 0.1%. Basically zero, and zero was the actual amount of capital a bank had to set aside when it lent money to Greece. Zero was also the amount of capital a bank had to set aside when it lent money to any other Eurozone country, except Greek debt had a slightly (veeery slightly) higher yield. The difference might have been small but when the banks are leveraged by 31x (as the major banks were in 2006) and they hold tens of billions of debt, even a small difference could make them lots of money.

Banks, in short, had a massive incentive, from 1992 onwards, to buy the debt of the Worst ‘Decent’ Country in the World. A country that would benefit from being in the Magic Circle of sovereigns no one believes will ever default, but is just at the edge of the Magic Circle so that it has to pay a little bit extra interest on its debt. That country was Greece, and our debt soon became irresistible. This pursuit of the ‘Worst Decent Country’ is the reason why, against all reason, European bond yields converged even before the Euro became a reality, starting from (you guessed it) 1992 onwards, until the spread between German and Greek bonds became almost zero. Basically, the banks arbitraged the spreads away because Basel always seemed to be telling them to buy the highest-yielding ‘safe-ish’ bond possible. This would increase the prices of such bonds, making the spreads tighter. If you don’t believe me, look at the chart below (originally from here)

The Euro, which many like to blame all of our woes on, only made us the Worst Very Decent Country in the world, but it did little to fundamentally change the dynamics. These were locked in by Basel.

So there you go, my friends. The moral of this Christmas tale is ‘Never outsource risk management to other people.’ Also I think we’ve contributed a new slogan to the ongoing efforts to rebrand Greece for tourists. I doubt ‘Worst Decent Country in the World’ will catch on but hey, it’s 3am, cut me some slack.

Good night everyone. Merry Christmas to you and your loved ones.

UPDATE: Since people are asking, I believe that capital regulation is horrible at dealing with tail risk and provides perverse incentives. For me the best way of dealing with tail risk is full personal liability for bank management, board members and controlling shareholders, including ca. 5 years after they've moved on. This means their properties are on the line as soon as banks go bust. I don't believe in limited liability anyway. A business is a machine for making shareholders money. It should not have rights or protections (or obligations) other than those reconcileable to the the rights, protections or obligations of its shareholders and physical persons.

If (and only if) this is in place, I believe that we should let banks decide how much capital they should hold on to, and let shareholders decide if they are happy with capitalisation. Both sides have outsourced this task for too long, and with disastrous effects.

SAVE THE DATE A CSFI round-table discussion on Greece. December 14, 2011, 6:30pm-8:15pm.

2011-12-06T19:51:00.003+02:00

"Greece: The musical... " Or not. A round- discussion on what Greece means for the eurozone, and vice-versa. With Emilios Avgouleas (University of Edinburgh), George Handjinicolaou (ISDA) and Richard Segal (Jefferies).

To be held on Wednesday, December 14, 2011, from 6:30-8:15pm.
At Watermen's hall, 16-18 St Mary-at-Hill, London, EC3R 8EF.

*Please note: This is an evening meeting*

Who knows what will have happened to Greece by December 14? Indeed, who knows what will have happened to the euro? To the eurozone? Or even to the EU? There is (I suppose) a faint chance that the problem will have gone away entirely – and a rather better chance that the can will have been kicked a bit further along the road. But the betting must be that the crisis that has been triggered by the profligacy of previous Greek governments (or, if you prefer, by German snake-oil salesmen who unloaded BMWs and Mercedes-Benzs galore on to unsuspecting Greek 'peasants') will be with us still.
Either way, the problem of Greece (and potential solutions) are well worth a look. I am, therefore, delighted that we have been able to put together a distinguished panel to kick off what I am sure will be a lively discussion:
- Emilios Avgouleas has just been elected to the chair of international banking law and finance at the University of Edinburgh. He is currently the professor of international financial markets at the University of Manchester and, before that he worked in the field of financial markets as a senior associate with Clifford Chance and Linklaters, and as a partner with a major Greek law firm. - George Handjinicolaou is deputy CEO of the International Swaps & Derivatives Association, and its regional head for EMEA. He has just returned from a two-year "sabbatical" in Greece, where he was CEO of TBank and Vice-chairman of the Capital Markets Commission. Before joining ISDA (for the first time) in 2007, he ran a hedge fund, and before that, he was a managing director at Merrill Lynch, responsible for the global fixed income emerging markets business. - Richard Segal is a European credit strategist at Jefferies International, which he joined earlier this year. Prior to that, he was a strategist at Knight Libertas and Renaissance Capital. He is one of the leading authorities on the sovereign debt market in London.

I am (literally) a paid-up philhellene – but you don't have to be a member of the Anglo-Hellenic Society to feel some sympathy for the Greeks. If you (or a colleague) would like to show a bit of empathy (and also, perhaps, find out how to make a buck out of the current unpleasantness), please let us know by emailing sophie@csfi.org or by calling the office on 020 7493 0173. As usual, wine and sandwiches will be provided.

Many thanks,
Andrew Hilton
Director
CSFI

For directions to the venue please click here.
To unsubscribe to these emails, click here.

CSFI
5 Derby Street
London W1J 7AB
United Kingdom

TEH COUNTDOWN BEGINS

2011-11-19T13:55:00.000+02:00

Veteran readers will know that I have some personal favourites among the ELSTAT data series - headline figures like GDP and, to a lesser extent, unemployment, are highly political and the temptation to game them must be very high. Other, more humble statistics on the other hand are cleaner and much more meaningful, even if they are a little noisy due to small samples.

My personal favourite is the percentage of unemployed people who had job offers but turned them down. You can check out a much more detailed discussion of this variable here, but basically this is a very rich statistic as it incorporates people's expectations about the future and their attitudes towards work.

This number peaked in mid 2006, the height of the 'good days', when 15.8% of all unemployed people were made a job offer but turned it down for one reason or another. Since then it's been falling steadily, especially since Q3 2009 when the Greek fiscal crisis started in earnest. Well the latest figures from ELSTAT say this number has fallen to a record low of 6.7%.

In itself, this means very little. But as you'll recall, I've modelled this variable as a function of unemployment and future GDP (and the prospect of elections) and this is the first time since 2007 that the 'workshy' are a smaller percentage of the unemployed than unemployment alone would justify. This could mean one of three things:

A permanent shift in in the attitudes of Greek workers (probably a good thing)
There are no workshy any more - everything is friction unemployment. People are actually taking any job can find unless this is physically impossible or absolutely unacceptable.
A strong expectation that economic conditions will deteriorate significantly.

UPDATE COMING SOON

PRIMARY DEFICIT WIN?

2011-10-23T05:58:00.001+03:00

Readers will know I only grudgingly report good news on the Greek deficit, but facts are sacred - as the Guardian says when it's not busy ignoring them. So here's a bucketload of pre-Halloween treats from ~~Jabba the Hutt~~ Deputy Prime Minister and Finance Minister of Greece (for that is how he styles himself these days), Prof. Evangelos Venizelos.

As you can see, Jabba has pulled off a good month. In fact, in terms of year-on-year gains this is the best month ever, with the government managing a small primary surplus.

In the meantime, last year's spending figures are now revised up by EUR350m, so an extra EUR10m of mystery spending was added to the September 2010 figures (more here) which no one feels an urgent need to account for. In fairness, what is EUR10m these days? Our Government figures are now taken straight from that Austin Powers gag.

So what, dear readers, accounted for the improved figures? Bear in mind that the success story is that year on year the primary deficit is now 'only' up by EUR132m. Well, year on year, revenue grew by about EUR1bn, half of which came from the public investment budget (you know, the one the Government keeps cutting and the one defaultniks would happily cut to zero). On the other hand, primary spending fell by EUR855m. All of this, and another EUR1.04bn came from cutting public investment. Yippee!!! Naturally, we can't do this every year. Cutting EUR1.9bn from the investment budget in a year may sound clever but in fact there's only EUR3.5bn left in that budget to cut. What happens when we run out of projects to cut? So enjoy this graph while it lasts:

That's the bad news. The good news is that something did appear to be moving on the revenues front. Apparently income tax receipts were up by 4.5% after accounting for rebates. Or -wait- is that really the good news?

According to this report, EUR650m was paid in September in extraordinary levies originally announced in June, which ranged from 1% to 4% of taxable income depending on one's income bracket (anyone earning less than EUR12K did not have to pay), a fixed EUR300 levy on businesses and the self-employed and a tax on luxury durables, such as boats or large cars (discussed here). There's still a bit of money yet to trickle in but this is the bulk of the revenue from that measure. And the key reason why this money was paid all at once was that Jabba gave taxpayers a 5% discount for paying early. Now I don't know about you but this to me sounds a lot like tapping the taxpayer for financing needs - kind of like the time when Samsung sold me a laptop with a 10% cashback offer. Expect to see more of this.

But let's not forget, this is not regular income. These are one-offs that can only be repeated by further undermining consumer and business confidence. Put it this way. If the extraordinary and artificially front loaded EUR650m from levies had not showed up, the primary deficit for September would have cancelled out every surplus month since January 2011. M'kay.

This tax situation needs sorting. People point to the way the Irish economy is recovering despite austerity, but they forget one thing: the Irish negotiated hard for certainty in their tax regime. They announced their tax policies four years in advance and signalled that their ultra-low corporate tax rate was to be maintained. People in Ireland have - to the extent possible - known all along what to expect, tax-wise. In Greece my folks switch on the news every night wondering whether there's going to be another tweak to the patchwork of incompetence that is Greek tax policy.

Medium-term tax certainty is good for tax revenues, and it's free. Jabba needs to be told this because he's a legal man - the priesthood he belongs to loves churn because it makes them important. Well, nobody else does.

ABOUT THAT "ODIOUS" DEBT ... A FURTHER CRITIQUE OF #DEBTOCRACY

2011-10-12T02:12:00.001+03:00

Veteran readers will remember my epic slugfest with our new wave of defaultniks, a propos of the release of #Debtocracy. A central bone of contention was the defaultniks’ claim that much of the Greek debt was not attributable to the will of the people and was in fact odious. The defaultniks purposefully refused to offer even an approximation of what percentage of the debt they considered to be ‘odious’ in this way but pointed to excesses in public procurement and public investment costs as indirect evidence. When pressed on the matter of how much of the debt is odious, they flitted from ‘all of it’ to ‘some of it, surely we deserve to know how much!’ depending on their audience in any given moment.

I argued, on the other hand, that with nearly two thirds of all spending going directly to the people in the form of direct transfers, pensions and public sector wages, it is very unlikely that most of the public sector’s debt in Greece was odious. Still, I acknowledged that someof it probably is.

The months have rolled past and the defaultniks are by now so convinced of their moral and intellectual superiority (or at least the physical muscle they can command) that they see no point in following up on this argument. If they've managed to put together a self-styled Debt Audit Committee, answerable to no one and selected by buddy-up, it has made no attempt at a figure and will likely not attempt one until after La Revolucion. Yawn.

Government, of course, has no interest in such calculations so I can’t count on them.

So screw everyone. I have to do this myself. Like the defaultniks themselves, I will start with procurement because that's where the bodies are chiefly buried.

First, I need an estimate of the actual procurement spending of the Greek government, going back as far as possible. Eurostat provides this (if you bother to divide % of GDP by % of total contracts) from 1995 to 2009, and you can find a link to this and other interesting datasets here.

The result – about 9 to 13% of GDP (about a fifth to a quarter of all government spending) went on public procurement annually. On a typical year, roughly 60% of this was under the radar spending that was never published in the official procurement journal of the EU because the contracts were (whether really or artificially) too small. The estimated amounts spent on everything, from the Rion-Antirrhion bridge to felt tip pens, are as follows:

Now we need an estimate of the percentage of this that went on bribes. The World Bank generally calculates that 3.7% of all procurement spending globally is spent on bribes, but I prefer to use the percentage admitted to by Siemens, whose executives have had their own run-ins with the greasy outstretched palm of the Greek government official. The typical Siemens bribe is 5-6% of the contract value. Let’s take 6% just to be on the safe side. According to this ratio, the Greek state must have paid between EUR1.5bn and EUR2.2bn per year on bribes.

But of course bribery isn’t just about paying the actual bribe, it’s also about buying inferior services or paying over the odds. The bribe is meant to convince officials to allow this. These additional economic ‘capture’ costs come up to anything from 20% to 188% of the bribe itself. Combining this calculation with the estimates on bribes it is possible to estimate an upper and lower bound for the cost of bribery and corruption in public tenders for Greece.

Now I realise that in applying these rules to all public tenders I am making a heroic assumption – some contracts will have been pimped to death, with contractors making incredible capture rents, and others will have been done by the book. I am also assuming that bribery and capture costs remained constant as a percentage of procurement spend every year, which can’t be true as there have been procurement bonanzas that will have been milked to death during this time, as well as some years when rents from bribery were low.

I can’t help this miscalculation given the tools at my disposal. It’s just the best estimate I have. And it looks as follows. The total costs of capture (bribes and mispricing) ran up to anything from EUR900m to EUR5bn per year.

Now, in determining the extent to which these rents contributed to Greek Government debt, I must make some assumptions about their financing. To ensure I cannot be accused of bias I will make the most defaultnik-friendly assumptions possible, in the understanding that they may be biased in favour of overestimating the odiousness of the stock of Greek debt.

First, I will assume that all of this money came from the Greek public coffers. This is patently not true as EU money flooded into the country from 1995 to 2009 and much of it went towards procurement.

Then I will assume that all of this money came from excess borrowing and thus a) we are still saddled with the interest to this date and b) this debt is indeed odious. This is a very strong assumption and one that is moreover heavily biased towards the defaultnik case.

This means I need to calculate an acceptable interest rate for the excess borrowing. Given that Greece never paid down any debt but simply refinanced existing obligations throughout this period, I feel justified in calculating our effective interest rate by dividing the total stock of debt for each period with the total interest expenditure for each period. Both can be found here. I assume that costs before 2000 (when the Eurostat series begins) were constant at the same level as 2000, i.e. 7.2%. (Note: they were actually higher).

Now all that remains is to calculate compounding coefficients for each year based on the product of the (interest rate+1) for that year and all following years. They look as follows:

Now all that remains is to add up the up-to-date figures. The Grand Total comes up to a range of EUR29.8bn to EUR71.6bn, or alternatively 9.1% to 21.8% of our total stock of debt as of end 2010.

Remember, these are very generous figures, and yet even on these assumptions, the amount of potentially odious debt is almost certainly less than the nominal 21% haircut agreed in July.

With procurement out of the way only straightforward graft and over-compensation of officials remain as possible avenues for the creation of odious debt. However, I believe that the contribution of these two is negligible compared to that of public procurement as indeed it is in almost any country not run by warlords.

UPDATE: I realise in defending these estimates that there's just no pleasing some people. If you're not happy with my figures or my assumptions, let's at least agree on this: That it is possible, in theory if not in practice, to come up with a good estimate of the amount of debt attributable to things other than the will of the people; that carrying out such estimates is desirable; and that the extent to which Greece's debt is odious is a matter of fact, not politics. My assumptions are no doubt flawed but they are transparent, they come with some justification, and they are there for all to evaluate. In fact, you can just plug in your own assumptions and try to get an estimate that works for you.

FEAR NOM NOM MORE TEH HEAT OF TEH SUN (UPDATE)

2011-10-03T03:12:00.008+03:00

Dear readers, I know I am beyond apologies for the latest radio silence. I can only explain myself by saying that it has, for the last two months, felt pointless to discuss the realities at home. I have little to add to my main narrative and the fog of war lies thick over the day-to-day developments. I’m not convinced there’s any shortage of economists talking crap in the world, so why add to their number.

There are some core themes that cannot be denied. As I’ve been saying for over a year and a half now, Greece will default. I have hoped against hope that we would do so in an orderly fashion, in whatever little time the bailout money could buy us, and emerge a reformed country with an outside chance of growth in the future. It is clear now that this is not going to happen.

Why now? Because we have proof now that the bailout can never meet its three original objectives. Bear with me while I add updates; this is going to be a long post.

===============================

TEH FAIL NO.1: PRIMARY SURPLUS

Whether one wants Greece to default or to start paying down its debt, maintaining a primary surplus is a necessary condition. As I have documented, for the first year under austerity the primary deficit did in fact fall. Then its trajectory reversed sharply. There are several reasons for this.

Topmost is the fact that the Government and the IMF ignored the latter’s own research which points out that the various means of reducing the deficit can be ranked as follows in terms of outcomes for employment and GDP:

cutting benefits > cutting public spending > increasing direct tax > cutting public investment > increasing indirect taxes.

Ours was a slightly more novel approach. Compare the original plan (Box 3, pg. 11 here) with the plan as of the fourth review (Table 5, pg. 53 here and budget execution bulletins here). If you can’t be bothered, check out my brief summary below. The figures are contributions to the fiscal adjustment in % of GDP, and the 2011 figures are the IMF’s estimates.

Simply put, in the cause of political expediency, our Government delayed cuts to benefits and instead front-loaded the contribution of indirect taxes (remember, the best and worst way to cut the deficit respectively). It then proceeded to more than double the originally intended contribution of the public investment budget, effectively killing whatever recovery might have been possible in the womb. The result was, predictably, a deeper recession than expected, missing the original forecast by 0.6 percentage points in 2010 and by a lot more, possibly 2.5 percentage points, in 2011. Not that anyone can trust the actual figures. And as a result of that the Government missed its target for direct tax revenue by a whopping 2.5% of GDP and its target for indirect tax revenue by 0.9% of GDP, with 2011 accounting for nearly all of the shortfall.

But more than this, it’s important to realize just how ingrained the Greek primary deficit is. In the past decade, it took about 4.8% real growth per annum for Greece to return a balanced primary budget. You heard right. Successive governments built a state that could only. ever. work. in the best case scenario. And they almost got away with it because the combination of EU money, credit expansion and a benign global economy meant that, for a short while, that was the kind of growth we could look forward to. In fact, the real damage seems to have been done from 2003 onwards – when the level of real GDP growth required to balance the primary budget rose to an impossible 7%.

It is, after all, as they say. Once you give up on black, you can’t go back. In case people haven't noticed, the Government's job is to shift the trendline in the graph above upwards so that it crosses the origin - i.e. so that the trend primary balance without growth is zero.

Realising this at last, the Greek government has given up on taxing income, which has the annoying feature of being dependent on growth. Instead it is now signaling that it going to directly tax wealth. By this I do not mean taxing the wealthy, just taxing people for the privilege of having property.

There is a depraved social aspect to this: as I explain here, the median Greek is relatively income-poor but relatively wealth-rich, and while the income distribution in Greece is very unequal by international standards, the distribution of wealth is not. Our government hopes that with the current set of incentives in place the people will start liquidating wealth in order to pay tax. It’s a very dangerous game to play.

The first instalment of this master plan was the now-notorious property tax, to be collected via one’s electricity bill. It has the advantage of not only taxing wealth but also delegating tax collection to the massively unionised Public Electricity Company, whose union has predictably announced its intention to sabotage the new tax. Cue overture to the national anthem of WTFistan.

In the same vein, the Government unveiled its now postponed and possibly aborted plan (more emotional coverage here and here) to penalise any declared income that cannot be matched to consumption on the basis of receipts, to what looks like a ratio of at least 50%. The Greek state’s willingness to outsource tax administration to Joe Bloggs is of course not surprising considering how badly they themselves do it.

===============================

TEH FAIL NO.2: COMPETITIVENESS

The second reason for the bailout was presumably that Greece could, given time, return to a position of international competitiveness which was lost over many years, and increasingly so since the adoption of the Euro.

I cannot stress enough how important this is. The chasm between Greek per capita income (even post-austerity) and the per capita income that can be justified by our competitiveness rankings is massive. According to my much-maligned naive mean reversion model for Greece, Greek per capita income would fall back to developing-country levels if internal devaluation were to be pursued without any further gains in competitiveness.

Benchmarking against 2007 competitiveness rankings, the most likely compromise would be for Greece to target Czech levels of competitiveness and fall to their level of per capita GDP. This would have meant a 13.1% drop in PPP-adjusted per capita GDP (from 2007 levels) against 5.2% experienced so far. In a worse (but not worst) case scenario we would instead converge to Latvia’s per capita GDP, accepting a fall of 39%.

Incidentally, I feel vindicated in promoting this way of thinking about Greece’s internal devaluation: using the quick test I outlined above and data from the latest Global Competitiveness Report by the WEF, the level of per capita income that can be justified by our competitiveness ranking fell by 5.5% in 2010. Very very close to reality.

So if competitiveness is so important, how well are we doing? In summary we’ve fallen another 7 places in the past year, to 90^th out of 142. Check pg 188 here for details, or quickly scan the tables below:

First, the professions have yet to be liberalized. In fact, the government has buckled completely before the might of the legal and engineering professions and is still fighting pathetic skirmishes with taxi drivers.

Second, despite a chorus of increasingly demented voices lamenting the selling-off of ‘the entire country’, privatisation and asset sales are proceeding at a snail’s pace because a) demand is abysmally low and b) the Government is committed to raising an amount of money that is simply impossible in a fire sale.

Third, while the Government made some headway on labour market reform, the IMF was forced to note in its fourth review:

…firm-level collective agreements, introduced in late 2010, would allow for wage reductions below sectoral minima (to the nationally-agreed floor) within the formal bargaining framework, thus overcoming this rigidity, but had been used little to date. (pg. 23)

Finally, public sector reform is becoming an irredeemable mess. Already, as discussed above, the balance of public consumption to public investment has been allowed to slip further towards the former. Never a good idea, as the eggheads have proven time and time and time and time again. Public investment builds capital which drives growth, while public consumption inevitably turns to shit. Literally.

To date, not a single civil servant has actually been laid off, although, in fairness, many on contracts have not had these renewed and many retirees have not been replaced. I still think our public sector is overweight to the tune of about 300,000 people, but this is not to say that laying off 300,000 people will solve the problem. We may well need to hire more of some kinds of civil servant and fire even more of some others; there’s simply no way of knowing because the actual skills needs of the civil service and the broad public sector are unknown. Because no one knows or cares what services the public sector is meant to deliver, the question of how many and what staff it needs sounds too much like advanced management speak.

To give you an example, here is a recent announcement of 65 Scientific Specialist vacancies with the Bank of Greece processed centrally by the Greek Supreme Council for Personnel Selection (more on this here). This is not a technical background note to a more user-friendly vacancy ad, by the way. This is the ad. Note how it never once quotes what the actual staff are meant to be doing. This is what we’re up against.

Hence the problem when the Government recently called on its agencies to provide a list of ‘surplus’ staff to be put on its controversial labour reserve scheme (essentially phasing them out of the public payroll gradually). Everyone responded that they were up to their gills with work and needed to hold on to every mammal with at least one working orifice.

Then there are those who have little time for competitiveness through reform anyway, and who are of course calling for a return to the Drachma, or a currency union with other Euro rejects. I realize many Greeks and indeed many of my readers are sympathetic. I can only point out two things: the following two questions are not equivalent, even though people treat them as such.

Would Greece be better off now had we not joined the Eurozone in 2001?

Would Greece be better off leaving the Eurozone now?

And here’s an even scarier thought.

Devaluation is actually possible even within the Euro and I suspect that future Greek governments (which, post-default, will still be lumbered with the euralbatross) will pursue this. The most likely alternative to having our own currency is what is called ‘social VAT’ – basically reducing employee and employer pension contributions and making up the difference to pension fund receipts with VAT. I don’t like this option, not least because it obliterates any hope of a pensions system that isn’t a Ponzi, but I’ve rarely got what I liked from governments in the past either. In fact it’s actually a pretty mild suggestion compared to this one, which would eliminate employers’ contribution altogether.

This will be the final roll of the dice – and if we do default, obliterating the capital of Greek pension funds, it may well be, along with a swap of bad bonds for slightly less bad bonds, the only option we have for recapitalising them in the short term.

ΠΟΣΟ ΜΕΓΑΛΟ ΕΙΝΑΙ ΤΕΛΙΚΑ ΤΟ ΕΛΛΗΝΙΚΟ ΚΡΑΤΟΣ;

2011-09-05T00:58:00.000+03:00

Πρόσφατα έπεσεστα χέρια μου ένα άρθροπου δημοσίευσε ο ευπρεπής και ενδιαφέρων συνομιλητής @SalataTV, βασισμένο σε δημοσίευσητου ‘Ιού’ της Ελευθεροτυπίας, με τίτλο ‘Ο μύθος του υπερπληθυσμού των δημοσίωνυπαλλήλων’.

Η κεντρική θέσητου άρθρου είναι ότι τα περί υπεράριθμων δημοσίων υπαλλήλων και υπερτροφικούδημοσίου μπορεί να ακούγονται λογικά βάσει ορισμένων από τα βιώματα του μέσου Έλληνα, αποδεικνύονται όμως ανεδαφικά αν οιπραγματικοί αριθμοί συγκριθούν με τους αντίστοιχους σε άλλες χώρες της Ευρώπηςή του ανεπτυγμένου κόσμου. Επιπλέον, τα δύο άρθρα συμπεραίνουν ότι η φιλολογίαπερί διογκωμένου δημοσίου μεθοδεύεται από κέντρα εξουσίας, που ως σκοπό έχουντον περιορισμό του ρόλου του κράτους και της διαπραγματευτικής δύναμης τωνσυνδικαλισμένων δημοσίων υπαλλήλων.

Όπως φαντάζεστε,διαφωνώ. Γνωρίζοντας όμως ότι η κουβέντα αυτή είναι άλλο τόσο περίπλοκη όσοείναι σημαντική, ζήτησα από τους συνομιλητές μου στο Twitter ένα μικρό περιθώριο χρόνου για να ετοιμάσω ένα σχετικό άρθρο. Τα ευρήματάμου τα παρουσιάζω παρακάτω σε συνέχειες. Ζητώ την κατανόησή σας για τυχόν καθυστερήσεις.

ΜΕΡΟΣ ΠΡΩΤΟ: ΕΙΝΑΙ ΠΟΛΛΟΙ ΟΙ ΔΗΜΟΣΙΟΙ ΥΠΑΛΛΗΛΟΙ;

Η ΕΛΣΤΑΤδημοσιεύει υπολογισμούς για τον πληθυσμό των υπαλλήλων στη δημόσια διοίκηση,άμυνα και υποχρεωτική δημόσια ασφάλιση κάθε τρίμηνο βάσει της Έρευνας Εργατικού Δυναμικού. Μπορείτε να τουςβρείτε εδώ.Για να μπορούμε να συγκρίνουμε αυτούς τους υπολογισμούς με τα αποτελέσματα της πρόσφατηςπρώτης απογραφής των δημοσίων υπαλλήλων,ιδανικά θα χρησίμευε να έχουμε στοιχεία από τον Ιούλιο του 2010. Επειδή ταστοιχεία ανά κλάδο είναι τριμηνιαία, αριθμούς έχουμε μόνο για το τρίμηνο ως τονΙούνιο και έπειτα για το τρίμηνο ως το Σεπτέμβρη, είναι όμως βέβαιο ότι μιλάμεγια ένα νούμερο της τάξης του 370.000.

Ο Διεθνής Οργανισμός Εργασίας, για συντομία ΔΟΕ, (τον οποίοόπως θα δείτε σύντομα επικαλούνται όλες οι πλευρές σε αυτή τη συζήτηση) υπολογίζειότι το 2008 οι δημόσιοι οργανισμοί πέραν της δημόσιας διοίκησης απασχολούσαν630.000 υπαλλήλους (αναζητήστε τα τελευταία στοιχεία εδώ), και υπολογίζει το συνολικό πλήθος τωνΔΥ σε 1.022.000 – ένα νούμερο πολύ κοντινό στους υπολογισμούςτου ΕΒΕΑ τους οποίους δικαίως σχολιάζει απαξιωτικά ο Ιός. Από αυτό το νούμεροθα αφαιρέσω, για να είμαστε δίκαιοι, γύρω στους 27 χιλιάδες ούτως ώστεαναλογικά να αντικατοπτρίζει στο γενικότερο Δημόσιο τη μείωση προσωπικού πουπραγματοποιήθηκε στις δημόσιες υπηρεσίες από το 2008 ως τα μέσα του 2010. Τοσύνολο είναι μόλις κάτω από 1 εκατομμύριο.

Η απογραφή βέβαιατου 2010 βρήκεμόλις 760.000 δημοσίους υπαλλήλους – κυρίως επειδή δεν συμπεριέλαβε ΔΕΚΟ, ΝΠΙΔκαι δημοτικές επιχειρήσεις. Λέτε οι παραπάνω να μην καλύπτουν το κενό των230.000; Εγώ πιστεύω ότι το καλύπτουν με άνεση. Όπως και να ‘χει το πράγμα, ηδεύτερη φάση της απογραφής θα επιδιώξει να συμπεριλάβει και αυτούς τουςκλάδους. Οι συντάκτες του Ιού θα πουν βεβαίως ότι πρόκειται για μαγείρεμα γιανα βγει το επιθυμητό νούμερο, αλλά αυτό δεν εξηγεί γιατί κυβέρνηση, εργοδότεςκαι συνδικάτα ήταν ικανοποιημένοι ήδη από το 2008 με το νούμερο των 1.022.000ΔΥ.

Τώρα σχετικά μετο αν υπήρχαν κάποιοι που φώναζαν για 1,5, 2 και 2,5 εκατομμύρια δημοσίουςυπαλλήλους όπως μας βεβαιώνει ο Ιός (παίρνοντας γραμμή από την ΑΔΕΔΥ),δεν μπορώ να το κρίνω, ούτε ονομάζουν κανέναν τέτοιο προπαγανδιστή οισυντάκτες. Μια απλή αναζήτηση στο Google θα σας δείξει ότι τα ‘παπαγαλάκια’, ανόντως είναι τέτοια, μιλούσαν για 1 εκατομμύριο, άντε και κάτι παραπάνω. Βέβαια πάντα θα υπάρχουν ‘κάποιοι’ αναλφάβητοικαραγκιόζηδες που πιστεύουν ο,τιδήποτε και όλο και κάποιος θα βρέθηκε να πεικάποια μαλακία στα κανάλια. Έχω κάπου έξι χρόνια να δω ειδήσεις από Ελληνικόκανάλι οπότε μπορεί να μου ξέφυγε. Αλλά δεν θεωρώ ότι υπήρχε άτομο σε υπεύθυνηθεσμική θέση ή με σοβαρή επιρροή στην κοινή γνώμη που να υιοθετούσε τέτοιουςυπολογισμούς. Προσωπικά έχω γράψει στο παρελθόν ότι ο αριθμός τους πρέπει να ήτανμικρότερος από 1.024.000 το 2007 (εξηγώγιατί εδώ). Δεν έπεσα έξω.

Όλα τα παραπάνωβέβαια δεν απαντούν το ερώτημα του αν είναι υπεράριθμοι οι δημόσιοι υπάλληλοι. Γιανα αποδείξουν το αντίθετο οι άνθρωποι της ΑΔΕΔΥ και οι συντάκτες του Ιού επικαλούνταιμια έρευνα, τηςοποίας τα στοιχεία σταματούν στο 2002 και η οποία δεν εξηγεί τον ορισμό τωνδημοσίων υπαλλήλων που χρησιμοποιεί. Ηέρευνα με τη σειρά της επικαλείται το Economic Outlook του ΟΟΣΑ από τον Ιούνιοτου 2003, όπου ταστοιχεία αυτά δεν αναφέρονται πουθενά.

Δεν πειράζει.Μπορείτε να δείτε να τελευταία διαθέσιμα στοιχεία του ΟΟΣΑ εδώ, τα οποία λένεπερίπου το ίδιο πράγμα και κατονομάζουν ως πηγή τον ΔΟΕ. Οι δημόσιοι υπάλληλοι,μας λέει ο ΟΟΣΑ, είναι σχεδόν οι μισοί απ’ ό,τι στη μέση ανεπτυγμένη χώρα, αντους μετρήσουμε ως αναλογία επί του εργατικού δυναμικού. Έχουμε αν μη τι άλλο πολύ λίγους δημοσίουςυπαλλήλους. Τα προβλήματα με αυτό το νούμερο όμως είναι πολλαπλά, και έχουν νακάνουν τόσο με τον αριθμητή όσο και με τον παρονομαστή που χρησιμοποιεί ο ΟΟΣΑ.

Εδώ κάποιοι θααρχίσετε να δυσανασχετείτε αλλά σας παρακαλώ να συνεχίσετε να διαβάζετε: δενσκοπεύω να κερδίσω χρόνο βάζοντας αστερίσκους, ούτε να επιμείνω σε λεπτομέρειεςγια να σας αποπροσανατολίσω. Σας υπόσχομαι ότι μια σε βάθος μελέτη των στοιχείων στηρίζειτο υπεράριθμο των δημοσίων υπαλλήλων.

Στον αριθμητή, οΟΟΣΑ χρησιμοποιεί μόνο στοιχεία για την απασχόληση στον κλάδο της ΓενικήςΚυβέρνησης τα οποία παίρνει από τον ΔΟΕ –στην περίπτωση της Ελλάδας, κάπου 390.000. Αυτοί ο ίδιος ο ΔΟΕ μας πληροφορείότι είναι λίγο παραπάνω από το ένα τρίτο (38%) των δημοσίων υπαλλήλων της χώρας,οπότε η πληροφορία που αντλούμε από τα στοιχεία του ΟΟΣΑ είναι πολύπεριορισμένη και ίσως παραπλανητική.

Βασιζόμενος σεαυτόν τον ελαττωματικό ορισμό των δημοσίων υπαλλήλων, ο ΟΟΣΑ δίνει τηνπυκνότητα απασχόλησης στο Δημόσιο για την Ελλάδα το 2008 ως λίγο μικρότερη από8%. Συγκριτικά μπορεί κανείς να υπολογίσει την ίδια αναλογία, π.χ. στη Γερμανία,όπου ανέρχεται στο 12%. Ο Έλλην συνδικαλιστής της ΑΔΕΔΥ κοιτά αυτά ταστατιστικά και αναφωνεί ‘Πάρτα μωρή άρρωστη!’, συμπεραίνοντας ότι οι συνάδελφοίτου όχι μόνο δεν είναι υπεράριθμοι αλλά αντιθέτως παραείναι λίγοι .

Αν όμωςπροσθέσουμε και τους δημοσίους υπαλλήλους που απασχολούνται εκτός της ΓενικήςΚυβέρνησης (και για τις δύο χώρες εννοείται) τότε συμβαίνει κάτι μαγικό. (Αντλώ τα σχετικά στοιχεία από τον ΔΟΕ εδώ). Τα στατιστικά γίνονται 20% για τηνΕλλάδα και 13.6% για τη Γερμανία. Δείτε και το σχετικό γράφημα παρακάτω, για νακαταλάβετε το μέγεθος της πλάνης.

UPDATE: Σχετικά με τους παραπάνω αριθμούς ακούω στα comments κάτι ψελλίσματα και χαχανητά περί δημιουργικής λογιστικής. Να εξηγήσω λοιπόν τίνος είναι τα λογιστικά 'κόλπα' που τόσο σας ενοχλούν. Ο ΔΟΕ, του οποίου τα στοιχεία επικαλούμαι, συνδιοικείται από εργοδότες, κυβερνήσεις και εργατικά σωματεία και τα στοιχεία του συνυπογράφονται από τους συνδικαλιστές μας. Στις επίσημες στατιστικές του τα επιμέρους νούμερα τιτλοφορούνται ως '4. Κλάδος Γενικής Κυβέρνησης' και '5. Δημόσιες Επιχειρήσεις' και το άθροισμα των 1.020.000 τιτλοφορείται ως 'Δημόσιος Τομέας (4+5)'. Δεν είμαστε υποχρεωμένοι ως χώρα να υποβάλουμε στον ΔΟΕ τέτοιο άθροισμα. Όπως θα δείτε παρακάτω, πολλές αξιοπρεπείς χώρες το αποφεύγουν. Αν λοιπόν οι αριθμοί δεν σας αρέσουν, πάρτε ένα τηλέφωνο την ΑΔΕΔΥ και πείτε τους να ανακαλέσουν την υπογραφή τους. Γιατί η 'δημιουργική λογιστική' που χλευάζετε είναι εργόχειρο των κοινωνικών εταίρων, όχι δική μου. Με λένε Κορνάρο και όπως θέλω σας pwnάρω.

Αν μάλιστα θέλουμενα αποφανθούμε περί βιωσιμότητας του αριθμού των δημοσίων υπαλλήλων, είναικαλύτερο να πάρουμε ως παρονομαστή το σύνολοτων εργαζομένων και όχι ολόκληρο το εργατικό δυναμικό, το οποίο περιλαμβάνεικαι τους ανέργους. Με βάση αυτό τον υπολογισμό οι δημόσιοι υπάλληλοι το 2008ήταν το 22.4% των εργαζομένων της χώρας, σε αντίθεση με περίπου 14% στηΓερμανία.

[Βλέπω ότι κάποιοι έχετε ενστάσεις σχετικά με τον υπολογισμό αυτό. Όπως προτιμάτε. Καλύψτε με το χέρι σας το γράφημα στα δεξιά για να μη σας συγχύζει και συνεχίστε να διαβάζετε :)) ]

Γιατί κάνει τέτοιαπράγματα ο ΟΟΣΑ, θα μου πείτε, και εκθέτει τα παληκάρια της ΑΔΕΔΥ; Κυρίως γιανα διατηρήσει τη συγκρισιμότητα των στοιχείων. Μολονότι το έργο της γενικήςκυβέρνησης είναι πάνω κάτω ίδιο σε όλες τις ανεπτυγμένες χώρες, το έργο τωνδημοσίων οργανισμών πέρα από αυτήν δεν είναι καθόλου συγκρίσιμο. Αν για κάποιο λόγο θέλετε επιπλέον αποδείξεις,δείτε τι βρίσκει οΟΟΣΑ όταν προσεγγίζει το θέμα λίγο διαφορετικά: ποιό ποσοστό επί τουσυνολικού κόστους των υπηρεσιών του δημοσίου αναλώνεται σε αμοιβές υπαλλήλων;Στην Ελλάδα, το 59.1%. Στη μέση ανεπτυγμένη χώρα, το 47.8%.

Μπορώ ναεπαναλάβω όλους αυτούς τους υπολογισμούς για άλλες χώρες αλλά δυστυχώς δενπρολαβαίνω. Είναι νομίζω σαφές όμως ότι χωρίς περαιτέρω μελέτη οι αριθμοί τουΟΟΣΑ τους οποίους επικαλείται ο Ιός είναι πολύ παραπλανητικοί και τείνουν να υποτιμούν δραστικά τον αριθμό των δημοσίων υπαλλήλων στην Ελλάδα.

Ορισμένοι εκδεξιών μπορεί, βάσει αυτών των υπολογισμών, να προσπαθήσουν να συμπεράνουνπόσοι υπεράριθμοι δημόσιοι υπάλληλοι υπάρχουν. Για να μην κουράζεστε, μπορώ νασας πω από τώρα ότι για να πιάσουμε τα ίδια ποσοστά με τη Γερμανία θα έπρεπε ναχαθούν περίπου 330.000 με 360.000 θέσεις εργασίας στο δημόσιο, με μια γενναίααύξηση στις κεντρικές κρατικές υπηρεσίες και μεγάλες περικοπές παραέξω. Αλλά αςμη βιαζόμαστε: κι αυτά τα νούμερα είναι εξίσου άχρηστα. Διαφορετικές χώρεςέχουν διαφορετικούς κρατικούς μηχανισμούς και αυτό έχει επιπτώσεις για τοναριθμό των υπαλλήλων που χρειάζονται.

Η σημαντικότερηεπιρροή κατά τη γνώμη μου προέρχεται από την αποκέντρωση του κράτους. Όπωςδείχνουν τα στοιχείατου ΟΟΣΑ, η τοπική και περιφερειακή αυτοδιοίκηση στις ανεπτυγμένες χώρεςδιαχειρίζεται κατά μέσο όρο το 23.2% των δημοσίων δαπανών. Στην Ελλάδαδιαχειρίζεται το 5.7%. Όταν η περιφεριακή και τοπική αυτοδιοίκηση έχει σοβαρέςκαι περίπλοκες αρμοδιότητες, χρειάζεται και πολύ περισσότερους υπαλλήλους, καιορισμένες εργασίες μοιραία επαναλαμβάνονται στο τοπικό και εθνικό επίπεδο. Κάποιαείδη υπαλλήλων που σε μη αποκεντρωμένα κράτη τα χρειάζεται μόνο το υπουργείοοικονομικών (π.χ. ελεγκτές ή στατιστικούς) σε ένα αποκεντρωμένο κράτος τιςχρειάζονται και οι οικονομικές υπηρεσίες σε περιφερειακές και τοπικές αρχές. Σε ομοσπονδιακές χώρες οι περιφερειακές αρχές έχουν δικές τους κυβερνήσεις και κοινοβούλια. Αυτό εξηγεί σε μεγάλο βαθμό τον πολύμεγαλύτερο βαθμό απασχόλησης στις κεντρικές δημόσιες υπηρεσίες που επιδεικνύουνάλλες χώρες. Ο σημαντικότερος όμως παράγοντας είναι η παραγωγικότητα του δημοσίου, και γι' αυτήν έχω να σας πω μερικά πράγματα παρακάτω.

Θα μου πείτεβέβαια, γιατί επέλεξα ως χώρα σύγκρισης τη Γερμανία. Γερμανοί είναι αυτοί,δουλειά τους είναι να μας pwnάρουν όπου μπορούν.Στην πραγματικότητα η μόνη κάπως συγκρίσιμη χώρα είναι η Πορτογαλία (μια μικρήχώρα με μεσογειακές αγκυλώσεις και εξίσου συγκεντρωτικές δομές με τις δικέςμας), αλλά δυστυχώς γι’ αυτήν ο ΔΟΕ δεν μπορεί να παραθέσει συγκρίσιμαστοιχεία.

Αλλά αφού πιάσαμε κι αυτό το τροπάριο γιατί να μη δούμε και τους σημαιοφόρους του pwnage, τους Σκανδιναβούς; Κι εδώ έχουμε πρόβλημα συγκρίσιμων στοιχείων αλλά μία από τις σκανδιναβικές χώρες, η Δανία, παρέχει όντως στο ΔΟΕ συγκρίσιμα στοιχεία με αυτά της Ελλάδας. Το ποσοστό των ΔΥ επί του εργατικού δυναμικού λοιπόν είναι 20.7% έναντι 20.2% για την Ελλάδα. Τόσο υπερτεράστιο είναι το Δανέζικο δημόσιο σε σχέση με το δικό μας παίδες. Μιλάμε για ξύλο. Δεν θα τσαντίσω τους κρατιστές φίλους με το να αναπροσαρμόσω αυτά τα ποσοστά βγάζοντας απέξω τους ανέργους. Δείτε όμως και την κατανομή του, και δείτε πόσο παραπλανητικό είναι (και πάλι!) να κοιτάμε μόνο τους αριθμούς της δημόσιας διοίκησης:

Σε όσους πανηγυρίζουν διαβάζοντας τα παραπάνω ως και καλά απόδειξη της ανωτερότητας του μεγάλου κράτους έχω να πω το εξής: όσο το οριακό όφελος που αποκομίζει ο φορολογούμενος πληρώνοντας δημοσίους υπαλλήλους υπερβαίνει το οριακό όφελος από ό,τι άλλες δαπάνες θα επέλεγε να κάνει από μόνος του, λογικό είναι να επιλέγει να δίνει κι άλλα λεφτά για να πληρώνονται οι δημόσιοι υπάλληλοι αντί να τα βάζει στην τσέπη του. Οι φόροι του Δανού 'αγοράζουν' περισσότερες υπηρεσίες από τους δημοσίους υπαλλήλους του απ' ό,τι αυτοί του Έλληνα ανά μονάδα κόστους. Προφανώς λοιπόν ο Δανός καλά κάνει και δέχεται να πληρώνει. παραπάνω φόρους για να συντηρεί το μεγαλύτερο δημόσιο τομέα του.

Με την ίδια λογική αναρωτηθείτε: έχουμε περίπου το ίδιο αποδοτικούς δημόσιους υπαλλήλους με τη Δανία; Αν όχι, τότε δεν πρέπει να δεχόμαστε να τους δίνουμε περίπου τα ίδια λεφτά, όπως και κάνουμε. Όσο πιο μεγάλο το κενό της παραγωγικότητας, τόσο πιο μεγάλο θα πρέπει να είναι και το κενό στη διάθεσή μας να πληρώνουμε δημοσίους υπαλλήλους. Χε-λόου!!! Η αποδοτικότητα δε των δημοσίων υπαλλήλων δεν αυξάνεται (σημειωτέον) με το να προσλαμβάνουμε περισσότερους. Αυξάνεται με επενδύσεις. Πρώτα να έρθει η αύξηση της παραγωγικότητας και μετά θα βάλω κι εγώ ο Ελληνάρας το χέρι στην τσέπη να πληρώσω δημόσιους υπαλλήλους. Στο μεταξύ ευχαρίστως να πληρώσω για ό,τι αποδεδειγμένα αυξάνει την ικανότητά τους να μου παρέχουν απαραίτητες υπηρεσίες. Κι όμως κανείς δεν διαδηλώνει για καλύτερα πληροφοριακά συστήματα, υψηλότερα standards προσλήψεων ή αυστηρότερη αξιολόγηση. Ούτε που τους περνά από το μυαλό ότι όλα αυτά μπορεί τελικά να δημιουργήσουν θέσεις εργασίας στο Δημόσιο.

Τέλος η σύγκριση με Γερμανία και Δανία μου λέει και κάτι ακόμη. Όσο πιο ποιοτικό δημόσιο τομέα έχει μια χώρα, τόσο λιγότερους υπαλλήλους απασχολεί εκτός των κεντρικών υπηρεσιών του κράτους. Το κράτος κοιτά να κάνει τις δουλειές που μόνο αυτό μπορεί να κάνει και αφήνει τα υπόλοιπα στους ιδιώτες. Ας μην αναζητείτε (όσοι το αναζητείτε) μόνο το μεγάλο κράτος της Αρείας Φυλής: να απαιτείτε πρώτα απ' όλα τις δομές που το καθιστούν βιώσιμο.

Σας αφήνω για την ώρα με μια απλή γραφική απεικόνιση των διαφόρων υπολογισμών για το πλήθος των δημοσίων υπαλλήλων στην Ελλάδα. Το εμβαδό κάθε κύκλου είναι άναλογο του αριθμού των εργαζομένων.

I KNOWZ, A MERGUR WILL FIX IT! PART 2

2011-08-29T06:16:00.004+03:00

The rate at which posts on this blog end up spawning sequels never ceases to amaze me.

Readers will, by now, have read about the planned (and presumably done) deal to merge two of the largest Greek banks, EFG and Alpha. You can also check out my friend @mstevis' take on the deal here. My tongue in cheek suggestion for EFAGA to be the name of the merged bank is not gaining much currency but hey, I can't have it all.

I must first refer you to my original post, back when NBG tried to buy Alpha. Like anyone not entirely bonkers I rained shit on that parade because the proposed merger returned an under-capitalised bank in all respects but this time around it really is different. I still don't like bank mergers but as I've discussed before they are necessary and this one is going ahead.

I've crunched the numbers on the capitalisation of the proposed merged bank based on the Stress Test results for EFG and Alpha, plus details of the announced deal. You can check out the results below:

I believe that the new bank will be seen as secure by the markets, achieving the objective of the merger. My guess is that it will probably turn out to be most beneficial for the Alpha shareholders as, at a time when the market should really only be valuing worst-case Core Tier I, Alpha is way under-priced.

What will it take to elevate the merged bank beyond contagion? I'd say Core Tier 1 at over 7% even if Greek bonds take an 80% haircut. How much will that cost? EUR6bn. Hell they will probably draw that much in deposits, post-merger.

This is probably good news. You don't hear me say that very often, now do you? It's good news because, assuming the new bank tries to keep to a 7% core tier 1 capital ratio, it can in theory lend an extra EUR13bn in risk-adjusted loans. By the same calculation, Alpha could only add a measly EUR3bn and the benighted EFG would have to actually reduce lending by a net EUR15bn. So we go from a net reduction of EU12bn to a net increase of EUR13bn. Now I don't expect all of this will materialise in the current climate but an extra EUR25bn in spare lending capacity out of nowhere is nothing to be sneered at, it's about 10% of the total outstanding loans to domestic non-financial institutions.

Then again I do wonder whether EFAGA won't also start drawing deposits from other Greek banks as opposed to deposits previously moved abroad. It's very likely; after all, most of the country's savings aren't with the super-mobile ultra-rich, whatever defaultniks would have you believe. It could be that this is a winner-take all game in which the first couple of banks to reach good capitalisation take the pot as both depositors and investors flock to them. If I'm right, then the pressure on the rest of the Greek banking sector is about to become unbearable.

PRIMARY DEFICIT ENTERS THE TWILIGHT ZONE

2011-08-28T20:34:00.003+03:00

Readers will remember my little naive model for the primary deficit, the one that kept warning that the public finances are becoming unstable. I called it naive in my last post on the matter in order to indicate that it's fitted to a simple pattern with little basis in the actual economics of the Greek state.

Well as with all naive models it has just been blown to shit by the facts. You see, the model as of June 2011 looked like this:

Now that the figures for July have come in, it looks more like this:

When the data no longer fit one's model, it's the model that has to go. But I think you'll agree with me that we're in uncharted territory here in more ways than my own failed predictions can demonstrate. I will set the model aside for now then and just show you the facts.

July was a surplus month as expected. But whereas July 2010 returned a primary surplus of EUR730m, July 2011 returned a much smaller primary surplus of EUR385m. We've now exceeded the 2010 primary deficit every month since April, as per the graph below:

All in all, we're already EUR1.8bn off last year's primary deficit figures. Mind you, that year's ytd spending figures have been mysteriously revised upwards by EUR340m, and the June figures by EUR240m, so it's hard to know what really happened last year until this year is over. All I know is that at this rate we're on track to achieve a primary deficit of EUR8bn if all following months exactly mirror those of 2010, or EUR9.4bn if the current trend persists.

Is this due to the deeper-than-expected recession, as both the Ministry of Finance and its critics claim? Well, according to the Ministry's figures revenues are down by EUR1.9bn year on year while primary expenditures (including, as I always do, public investment) are down by a mere EUR113m - and that's only because the public investment budget has been slashed by another EUR1.6bn. Otherwise, public expenditure has risen (yes, risen) in 2011 so far. Cutting public investment is the worst way to cut the deficit and the IMF knows this.

So why they are allowing it is beyond me.

MORE MUSINGS ON THE BAILOUT TO END ALL BAILOUTS

2011-08-18T11:57:00.000+03:00

I've promised before to write more about the Grand Bargain for Greece agreed in late July - the latest bailout to end all bailouts. I'm still working on material for a new post but for now, here's one I prepared earlier.

What follows is an article I prepared for ACCA's Financial Services e-newsletter. It is written from a UK perspective but readers may still find it of interest.

Greece – can we look now?

Part I: The Exposure

On 21 July 2011, the leaders of the Eurozone nations announced to what must have felt like the entire world that they had reached a deal on a new rescue package for Greece, one that would reduce the country’s borrowing costs and outstanding debt, ensure its continued liquidity and hopefully set Greece back on the path of fiscal sustainability. They stressed that this is a one-off package, and that other embattled countries could not take it as granted that they would be offered the same.

What does this deal mean for the UK? The place to start answering this question is the exposure of UK banks to Greece. Now people tend to play with words when this question comes up, including in Parliament itself. For a start, it’s important to distinguish between exposure to Greek banks, exposure to Greek sovereign debt and claims on the Greek private sector, and then exposure to the much broader risk of contagion in the case of a Greek default. The good news is that there are definitive figures out there. The bad news is that they are dated and problematic in multiple ways.

Stashed away in the detailed tables of the latest Quarterly Review from the Bank of International Settlements is a detailed, if dated, answer to the question of direct exposure. As of December 2010, the UK banks’ total exposure to Greek public and private debt was $14bn. But less than half of this, around $6bn, was exposure to Greek government debt or Greek banks, where the risk of losses is greatest. Overall, UK banks appear to only carry about 2% of the total Greek exposure of European banks.

In fact, UK banks are nowhere to be seen on the list of top financial institutions by exposure to Greece, and what little they hold in terms of Greek bonds tends to be in shorter maturities. This is important because most bonds maturing after 2020 don’t seem to fall under the financing offer for Greece that was agreed by the banks through the Institute of International Finance (IIF) back in July. For what it’s worth, it appears that RBS is the most exposed UK bank, although it’s officially written down half of its £1.4bn worth of Greek bonds already.

This brings me to an important point. For the purposes of accounting profits and losses, the allocation of Greek bonds between the banks’ banking books and their trading books (which alone must be marked to market, leading to recognised losses when bonds lose their value) is crucial. Non-Greek banks typically hold about 31% of their Greek bonds by value to maturity, so most of their exposure is already marked to market – the banks will have recognised significant losses on them already. This is important because bonds bought at a deep discount may appear to be taking a haircut under a buyback scheme (the much-celebrated 21%) while in fact turning a profit for the banks participating in the swap. Coming back to RBS, for instance, the bank would recognise a profit of ca. £275m on this transaction. As a Greek, I feel a little cheated, but as a UK taxpayer... ka-ching!

By the way, if you’re thinking this impairments business might present a headache for auditors, you’re right. Especially given the wide variety of conflicting practices banks are likely to adopt. Further reading for the intrepid auditor here.

Now for the wider question of contagion and what it might mean for UK banks. To be fair, the contagion is already happening, so this is pretty much a moot point. But it’s easy to dismiss this as mere panic, an irrational response. That’s until one realises just how interconnected the European banking system is, and how exposed the UK is, through various different routes, to the contagion seeping out of Greece.

According to the BIS data I cited above, UK banks have a $22.8bn exposure to Irish banks and the Irish sovereign; another $20bn to banks and sovereign debt in Italy; another $6.8bn in Portugal; and a whopping $30.7bn in Spain. And the $80bn this adds up to are just the obvious risks, the black sheep of the European financial family. Given that the European stress tests earlier this year estimated the Core Tier 1 capital of the major UK banks for 2011 at about $300bn even in an adverse scenario, a substantial impairment of assets in the most troubled Eurozone countries would cause significant problems for them although it wouldn’t wipe out their capital. Still, there is no telling where the contagion would stop and indeed which other sovereigns and banks might follow should the PIIGS go.

This is why we must turn to the bigger picture.

Part II: Is the Eurozone insolvent?

Throughout the various stages of the European debt crisis, the argument has been made that, if only the Eurozone could co-ordinate fiscal policy and issue debt collectively, for instance via Eurobonds, it would put an end to all this drama of speculation and contagion – Europe would become a borrowing superpower and no one would ever dream of doubting its creditworthiness.

The idea that a fiscally unified Europe would be undeniably creditworthy is wrong on many levels. Superpower status, fiscal union, and indeed fully-fledged federalism, didn’t stop S&P from downgrading the US to AA+ earlier this summer. Perhaps more importantly, given who buys US debt nowadays, it didn’t stop the Chinese rating agency, Dagong, from downgrading the

to A with a negative outlook. Some might say that these downgrades reflect the mechanics, not the fundamentals, of

debt, and that’s fair enough. But even if Eurozone members can somehow be coerced into fiscal union (and they may well be in the following months) the delays and horse-trading involved in drawing up a collective Budget for the Eurozone will make the debt ceiling negotiations in the US seem like an elegant costume drama ball.

But it is the fundamentals, not the mechanics, of debt that truly worry the markets. In the Eurozone as in the States, policymakers may not want to countenance the thought that the entire bloc might be collectively insolvent. Yet for over a year this question has been preying on commentators’ minds. The IMF even did the math on this in a fascinating report last year that went largely unnoticed. They found that the Eurozone, mighty Germany included, is not, in fact, solvent in the long term. According to the IMF calculations, the only long-term solvent countries in Europe were Hungary and Denmark. Bulgaria and Estonia were also strong candidates, but that was about it. The news for the UK were particularly grim.

Markets also find it hard to think of sovereign nations as being insolvent; much of the world’s financial architecture rests on the assumption that there is a magic circle of ‘decent’ sovereigns that can never default, and this belief has persisted after the 2008-9 crisis despite ample historical evidence to the contrary. The only difference is the ever-retreating boundary of the magic circle, as each embattled sovereign puts pressure not only on those countries that are financially exposed to it, but also any country seen as equally or less ‘decent’. Right now, the magic circle includes very few countries beyond the small group of AAA-rated sovereigns, and the result is a AAA asset bubble that could pop with disastrous consequences.

European policymakers are increasingly testing the surface tension of this bubble. Consider the European Financial Stability Facility (EFSF). Caught up in their own rhetoric of being under attack by evil speculators, Europe’s politicians hailed it as a shield for the Eurozone. But market participants, still smarting from the experiences of 2007 and 2008, quickly identified it as no more than a massive Collateralised Debt Obligation (CDO) and treated it accordingly. The market tested first the junior, then the mezzanine, and finally the senior tranches (see also here and here) of this construct – the guarantees by France and Germany. The very existence of the EFSF prompts the market to do this, much like the very mention of fiscal integration prompts the question of the Eurozone’s collective solvency. This in turn explains the ever-diminishing half-lives of Eurozone initiatives to calm the markets.

Until the markets are convinced that Europe’s finances are sustainable, this drama will continue to play itself out regardless of what schemes are concocted by its leaders, and will claim ever more, ever more conspicuous victims. Long-term sustainability trends can be reversed more quickly than one would think – relatively small changes can add up to a lot over a 50-year horizon. But they do not reverse themselves.

SEASONAL ADJUSTMENT #FAIL

2011-08-16T02:11:00.009+03:00

A longtime friend of this blog wrote in this morning with some useful commentary on the latest GDP figures coming out of the ELSTAT. Due to a professional interest in statistics that are not completely effing bonkers, said reader is understandably upset:

"It's got to be the worst data set from any european stats agency: they can't even give you a q/q gdp figure!"

So what prompted this exchange, I hear you ask?

Well, as veteran readers will know, ELSTAT has given up trying to provide seasonal adjustments on the GDP series for now because of, oh, only a major series break round about the most critical time in the whole of Greek economic history since World War II. As a result, no one has any reliable figures on Greek GDP when we kind of need them, and all we have to go on is seasonally unadjusted figures on what is easily the most seasonal economy in the Eurozone. Seriously, just check out the figures. They look like a long march of boobs, which, from a statistical point of view is what this whole sorry affair is.

Prompted by my dear reader's outburst, I set to work on a little experiment to simulate a seasonally adjusted series for Greek GDP. I took all of the available data from 2006 onwards and estimated seasonal adjustments for each quarter, controlling for the series break. I did this for the nominal GDP figures plus the GDP deflator series. In order to avoid having my regressions contaminated by the fact that the post-break series is generally full of quarters with negative growth, I also added one dummy for the post-2009-election period and another dummy for the post-Memorandum period. The effects are small but since recessions tend to put deflationary pressure on the economy it's probably a good precaution; without it I would end up with a series that says that essentially the Greek economy has been stagnant, as opposed to sliding off a cliff helplessly like the Jamaican national bobsleigh team. Trust me, I checked.

The result is the following graph, pegged to Q1 of each year. Because I've used Q1 as the reference, the seasonally adjusted figures tend to be much lower than the unadjusted ones. The choice of reference quarter is irrelevant: one is simply choosing which quarter dummy to eliminate from the regression analysis as they can't all be included. The results (such as adjusted quarterly growth rates) should be the same regardless of which quarter is chosen as a reference.

Anyway it's best to caveat this sort of experimental McGuiver stuff so that people won't accuse me of being a complete amateur.

These figures suggest that the slight growth spurt we supposedly experienced in Q1 2011 was actually zero. That I suspected. But the scary part is when we get to Q2, because my series suggests that GDP shrank by 2.2%. Not annualised, mind you - 2.2% q on q. Only Q2 and Q3 2010 have been worse so far, when the economy shrank by 3.4% and 3.1% respectively. Again, according to my calculations. That's twice the fall reported by ELSTAT for those quarters, when the statistics agency still saw fit to publish the same adjusted real GDP figures they now say they cannot publish. Aaaah, savour the sound of banjos and running water everyone.

Alternatively, as is appropriate on the day we Greeks celebrate the Feast of the Assumption,

HOLY MOTHER OF GOD!!!!!

I will stress once again that these figures are neither official nor reliable; just the best I can come up with for now. But they seem very plausible. They even capture, in a way that ELSTAT's figures did not, the drop in GDP ahead of the elections as (reason dictates) all investment decisions were put on hold until the new Government's fiscal policies were announced in Q4 2009. They also make some sense of the exploding unemployment rate reported for May, which one would not expect of an economy performing a dead cat bounce. That and the out-of-control primary deficit figures for Q2.

UPDATE: Three days after this post was first published, the Greek Government revised its range of gdp growth estimates to include up to -4.5%. Then it revised it again to include -5.3 as the minimum growth rate. I had previously gone on the record suggesting 4.2% was plausible.

PS.

Some readers have asked me to share my workings so that others can decide whether they find the 'seasonal series' convincing. Well here you go. I have no secrets.

<p><p>&amp;amp;amp;lt;p&amp;amp;amp;gt;&amp;amp;amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;amp;amp;amp;nbsp;&amp;amp;amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;amp;amp;gt;&amp;amp;amp;lt;/p&amp;amp;amp;gt;</p></p>

YOU CAN HAZ TEH LOOT: A REVIEW OF THE #UKRIOTS

2011-08-15T03:28:00.009+03:00

This post, which I will be updating as new evidence comes along, deals with the UK riots and was conceived in response to the torrent of empirically unfounded commentary in the UK media and, not entirely surprisingly, in the Greek media, which have drawn particularly unfortunate analogies to the Greek riots of 2008.

I will concede that much of this writing is well-though out, but the majority is simply inexcusable drivel. Personally, I am not interested in matching these people word for polemical word but in answering the call of this blog for serious data journalism, for which I agree the riots are a prime opportunity.

PART ONE: FINDING MEANING

Ironically given that said publication has ‘never seen a riot it did not like’, it was in the Guardian that the poverty of the commentariat was most eloquently described, with Aditya Chakrabortty very correctly noting that the riots have become

a kind of grand Rorschach test in which members of right and left would peer into smouldering suburbs and shopping streets – and see precisely what they wanted to see.

By way of introduction, it will do readers good to check out some of the literature on civil unrest as linked to mass looting. A very good theoretical introduction into the looting phenomenon can be found here and a discussion of empirical data can be found here. For further background I would strongly suggest reading this, this and this. You will also need to familiarise yourselves with the two riot maps of London: the map of incidents and the map of suspects.

I also strongly suggest you visit the pure genius that is Photoshop Looter, which to me is the single most cathartic response to the riots so far, managing as it does to at once humanise and ridicule the looters by putting a humourous spin on what would otherwise be frightening footage. Long may it continue.

PART TWO: THE CONTEXT BRIGADE

Now before I go into my argument let's try to understand the argument of what I like to call the Context Brigade:

The Context Brigade argue that the rioting and looting that took place in the UK is not solely the product of individual motivations that just happened to coincide over a couple of days. It's been a long time coming; a distorted echo of civil unrest incidents past and future; the venting of pent-up rage, despair and hopelessness as people - mostly young but old too, mostly poor but middle- and upper- class too - have gradually lost their stake in their own communities and indeed the future of the country. With only a stark future to look forward to, and deprived by the powers that be of any meaningful means of effecting change, they can only lash out in blind rage in acts that question the system of power and property that has disenfranchised them for so long. While the rioters are too disorganised, too confused and too unsophisticated, to articulate any political demands, their actions are political in that they are the long-term outcome of political choices - from Maggie to Tony to Dave, and in that they can only be kept from repeating themselves by different political choices.

I will leave out of the Context Brigade those (like former MAYOR OF LONDON Ken Livingstone or the onetime wannabe Labour leader Harriet Harman) who single out austerity policies as the cause of the riots, as well as those who would have liked to make the same point outright but must instead disguise it as a more learned critique of all that is wrong in the world and deliver the sting near the end.

I am referring more to the kind of discussion Naomi Klein, or even Russel Brand, tried to initiate; although I was not surprised to see that Russel Brand spent much of his admittedly good opinion piece talking about himself, which was a struggle to get through.

I will also include Livingstone-Klein lovechildren like Stafford Scott's critique, as well as those, like Slavoj Žižek, or Matthew Moran, or even my good old friend Matina Stevis, who believe that there's a broader, international perspective the riots need to be seen in, and that lessons need to be learned from the international history of civic disturbances, whatever they may be. I wish them well in their efforts to find meaning in this way, although I would warn that it's always possible to draw a line through two points, or to fit a trendline through ten.

I have no problem with conceding the Context Brigade's argument that there is more to the riots than mere criminality. If there wasn't then the riots would not have happened at all, and the associated 'criminality' would have shown up as run-of-the-mill crime statistics, with perhaps a new upward trend thrown in. That much is obvious. As for whether the causes of the riots are political, this point is either very misguided or an enormous truism, depending on one's definition of politics. The more statist one is, the more one is likely to believe that all options are open to the political will. And the more one believes that, the fewer possible causes of rioting they will accept as non-political.

What I don't accept is the Context Brigade's ability to choose how far they go in seeking context. Generally they stop the moment the facts seem to confirm their prejudices. Let me demonstrate.

PART III: THE FACTS

I crunched the numbers from the latest (and final, as it's being discontinued to save money) edition of the UK Citizenship Survey in order to get a feel for the factors contributing to the loss of connection between people and their communities around England - the core of the Context Brigade's argument. The results, broadly summarised, are as follows. The smaller the p value, the more significant the variable at the top row is in explaining the phonemenon described on the left:

This table explains in a nutshell what the context brigade are describing; but it also shows that their reporting is mixing together things that don’t belong together.

The mistrust of the police that fuelled the original, peaceful action in Tottenham that morphed into something else entirely, is very much a racial issue, rooted in a long history of troubled relations between the police and black, especially Caribbean, communities. But no other dimension of the supposed substratum of the riots actually is.

The sense of powerlessness to change one’s local area is very much a function of age. But the lack of belonging, the disconnect with the community that many are blaming for the riots, is not. Nor is this connected to a dim outlook on the future. And although the general statistics suggest that income has something to do with a disconnect with the local area, if you look closer it’s because people earning over 50k a year, middle class people by all accounts, don’t feel connected, not because poorer people do. These are probably highly mobile professionals, or just people waiting for a chance to get on the property ladder.

In fact, the one variable that is extremely strongly connected to all dimensions of alienation is the sense that not enough is being done at the local level for young people – that the community has no future, or that young people simply have nothing to do. And in many cases, this will be people’s way of rationalising the stuff young people already got up to in their communities.

Not having a job, or even never having had a job (cleared of the influences of age) is not really associated with much.

More specifically, some commentators (e.g. David Lammy, once Labour's hope for a British Obama before Chuka Ummuna came along, here and here) have pointed to a supposed link between unemployment and the riots. But the facts are brutal. There simply is no serious link.

In Lambeth, where things really kicked off with every other corner of Walworth Road hit by rioting, unemployment was actually lower as of the end of 2010 than in late 2007. It fell by 10% in the 2010 alone and is now close to the London average. Yup. That's right.

In Southwark, including Peckham, where things also kicked off massively, the unemployment rate only grew by 6% in the downturn, against 28% for the whole of London.

In Newham, the borough with the highest unemployment in London, the only reported incident was one solitary Argos being looted. Not good, mind you, but not much by the standards of the riots in general.

Mind you, this doesn't say much about deprivation as such. As it happens I believe there's a correlation between deprivation and riots, as well as deprivation and alienation to the local community. But there is a twist here which many commentators have managed to speed past on the way to their predetermined conclusions.

PART IV: THE MAGIC PICTURE.

We come now to the toughest part of the debate about the UK riots: the part about deprivation. As I showed above, deprivation has a role in explaining almost all of the ways in which alienation manifests itself in the UK today. The real question, though, is whether it had anything to do with the riots.

The major Context Brigade argument here is that happy, content people do not riot. Well my argument is that although happy, content people do not riot, anyone can be a looter. If this was any other kind of crime we're talking about, I too would want to know what the context had to do with it, but opportunistic looting is actually the one crime that mankind actually has written in its DNA. Even the macaques of Rio de Janeiro know this.

More to the point, many in the Context Brigade have, perhaps without noticing, made my argument for me. Naomi Klein points to the way the word 'looting' has been used in the past to link the work of opportunistic rioters with the dodgy dealings of those in power and notes how ironic it is that the daytime looters should accuse the night-time looters of thuggery and criminality. John Harris made this point even more explicitly by asking whether it's the MPs or the rioters that are the real looters. And of course, inevitably there are comparisons to the behaviour of bankers up to and following the financial crisis of 2008-9.

But in their effort to score points at their ideological enemies, the Context Brigade have forgotten to follow their argument through. No one seemed to look for context to the excesses of MPs and bankers. That's just how they are. How their world is. One spoof letter to David Cameron's parents actually makes this point more strongly than I ever could, by using a false attribution to Cameron's upbringing to (correctly) highlight the hypocricy involved in his condemnations of the riots. The MPs and bankers were not products of a miserable existence and their options are, compared to those of most rioters, limitless. They've done well out of boom and bust alike. So why do they loot, in the wider sense of the word? The Context Brigade will have to have an answer to that question if they want me to take their views on the riots seriously.

My explanation is simple: the two types of 'looting' are simply expressions of the same human tendency - to grab what we can as soon as we're certain that, for whatever reason, we can get away with it. A bit of privacy will do it, or the presumed anonymity of being part of a crowd will do it.

In fact, I'll throw in some examples of middle-class looting if you like, just to round things out. Middle class people can't extract massive rents like bankers, or write their own rulebooks like MPs, or, most of the time, break into stores and grab Xboxes like the rioters of London. But they can and do take advantage in whatever ways available to them. Consider for instance the sum of money lost to the economy from employee absenteeism and fiddling of expenses. Shall we round it out to £34bn per year? That's more than twice, in a year that the total bonus take of the entire UK financial sector. And don't even get me started on the elasticity of travel expenses. I've seen, with my own eyes, one reputable organisation's expenses policy being stretched to pay for a middle class employee's partner's mid-day lunch of foie gras and champagne in lovely Maastricht - shame there are no estimates of what that's costing UK employes but it's supposed to run in the many billions in the States.

My point here is that the reason there appears to be a correlation between looting (in the narrow sense) and deprivation is not that deprivation causes looting (in the narrow sense), or piles some specific kind of pressure in individuals that is expressed through looting (in the narrow sense), but that opportunistic looting (in the wider sense) is an eternal human impulse and that different classes of people have different types of opportunities available to them to indulge in this natural, if undesirable, behaviour. A good percentage of the London rioters will never set foot in a corporate environment as employees, and hardly any of them will be able to run for public office. The only kind of looting (in the wider sense) available to them is breaking into stores (i.e. looting in the narrow sense), and just this once there were enough people doing it that even the less foolhardy were tempted to join in.

Zoologists will tell you that both primate and human societies alike will sometimes tolerate this within certain social structures - it's called tolerated theft (see here, here here and here).

I'm sure the Context Brigade has brains enough to rebut this argument, but they should ask themselves - why did the riots not happen all through 2010? If they aren't repeated in 2011, or 2012, will they be ready to concede my point? Indeed why aren't the riots happening every single day? It's not like all of the rioters have somewhere else to be, you know?

More analysis to come perhaps, on the false analogies between the UK and Greek riots.

BLAST FROM THE PAST

2011-08-04T13:59:00.000+03:00

In its early days, this blog was supposed to be all about funny debt-themed pictures, demotivational posters and some fun with graphs. Alas, the times caught up with me and the blog's age of innocence ended very soon. However, I stumbled today upon a spoof ad that I did back in the day (pre-bailout!) which made me chuckle.

CONSULTATION ON BETTER REGULATION - ΔΙΑΒΟΥΛΕΥΣΗ ΓΙΑ ΤΗ ΒΕΛΤΙΩΣΗ ΤΗΣ ΡΥΘΜΙΣΤΙΚΗΣ ΔΙΑΚΥΒΕΡΝΗΣΗΣ

2011-08-04T12:14:00.011+03:00

Veteran readers may recall that I have a professional interest in the Better Regulation Agenda - the international policy drive to reduce regulation for businesses and citizens and make regulation better value for money. Readers can check all my writings on the matter here.

Twitter followers might also recall that I was particularly miffed to find that the Memorandum revised our commitment to reduce administrative burdens by lowering the target savings from 25% to 20% - a bizarre change of heart.

If you're a fellow believer in Better Regulation then it may please you to hear that the Greek Government is consulting on the matter as we speak. We're only about 6 years late - the Better Regulation policy boom actually began in 2005 (see here and here). But better late than never.

I know it's very hard to be optimistic about this new measure. As one commentator points out below, the rule of law is a prerequisite to Better Regulation and we're still struggling with that. And the picture of a vast policy circle-jerk painted by another commentator is an accurate portrayal of the state of the art in many parts of the world, including the European Commission.

But this is a once-in-a-lifetime opportunity to get the ball rolling on properly limiting the reach of government. So much of what's wrong with Greece has to do with being able to reach for the false comfort of regulation, as though the lawmakers can will a better world into existence. I enjoy being a cynic but I like fighting back even better.

The consultation is open until 2 September and can be accessed here. Although I note that the Government has already made a Better Regulation boo-boo in only allowing 29 days for consultation responses. The European standard is three times that - 12 weeks.

For the record, here is my thinking on the Better Regulation agenda - the report itself focuses on the UK but the theoretical principles are the same. I will upload an updated version as soon as the book it is now part of is published. That's taking a while.

I will update this post regularly as I respond to the consultation. Unfortunately this is all going to be in Greek. Check below for sections I have responded to.

1. Definitions: Original text and my response
2. Principles of Better Regulation: Original text and my response.
3. Better Regulation Processes: Original text and my response.
4. Obligations of Regulatory Agencies: Original text and my response.

[The consultation wonks are taking their time approving the last two responses; hopefully that means they're reading them.]

I JUST COULD NOT RESIST...

2011-08-03T01:36:00.002+03:00

Following my recent post on Putin's alleged offer of a EUR25bn loan to Greece, I was left with tons of leftover links. I spent some time looking for things to do with the Litvinenko assassination story, before stumbling upon this story, which - to save myself a nasty case of polonium poisoning - I need to stress is unsubstantiated and almost certainly made up - by the late Litvinenko.

Since the Daily Mail is not exactly Leet Central, I thought I should make the compulsory associations:

Дайте, пожалуйста self-aggrandising bullcrap?

2011-08-01T05:58:00.005+03:00

Veteran readers will remember this post from a while back, in which I took issue with people spreading baseless rumours about a proposed EUR40bn Russian bailout of Greece, no strings attached and at a bargain 4% interest rate.

I must admit I spoke too soon. The story was not made up by one of Troktiko’s readers (who only embellished it with his/her own fantasy). Rather, it was made up in Russia itself and its main proponent, Ivan Savvidis, has been making the rounds of the Greek press recently, even making it into the left-most of the ‘mainstream’ dailies, Eleutherotypia.

In this latest instance, the interviewer relating Savvidis’ story is not an Eleutherotypia regular but rather one Thanasis Augerinos, of ellada-russia.gr [Greece-Russia.gr for foreign readers], a Russian-based publication (profile in Greek here) with reasonable ties to the Russian elite. They boast that their Quarterly Review is printed in luxury paper by the Presidential printers, who formerly ran the Pravda print runs. Mmmm. The high life. Their purpose appears to be to help connect Greek interests to influential people in Russia, and they have a commercial interest in propagating such things as a Russian bailout story.

First, it is important to take the measure of the man at the heart of the rumours himself. Savvidis is not, by any means, and certainly not by Russian standards, a fringe element. A member of the Duma, in 2008 he was decorated by Putin for services to “the adoption of legislation, consolidation and development of the Russian state institutions.” Now MPs don’t usually get decorated for helping implement laws (least they can do, y’know?) so this über-vague accolade basically means that Putin personally approves of him.

He is also an active politician rather than a silent partner: he is currently serving as vice-president of the Budget and Tax Committee and head of the Joint Parliamentary Cooperation Committee with the Hellenic Parliament.

Savvidis has made a second career out of being the voice of Greeks in Russia. He is regional co-ordinator of the World Council of Hellenes Abroad, the Greek Diaspora organisation, for the former Soviet republics and was briefly president of the International Confederation of Pontian Greeks before resigning because the whole thing wasn’t going anywhere.

Readers may not be entirely surprised to hear that he made Forbes’ list of the richest men in Russia in 2005 and owns a football club. He even tried to buy into one our major football clubs a few years ago. Oh, and did I mention he is sometimes referred to as ‘The Czar of Rostov’?

We have many names for these people here in London – prime real estate investors; Guy Ritchie movie material; scary Dubai holidaymakers; MUHFXING OLIGARCHS. To be fair to the man, he seems to be cleaner than most, but that’s not a high bar to clear.

Now I don’t know about you, dear reader, but it appears to me that when a Russian Greece-monger and a Greek Russia-monger meet, the result can be a tad oversold.

Now for the facts. Savvidis claimed back in February 2010 that Putin and Papandreou met on 15 February and Yorgo was offered a loan of 25bn at 4.7%, with no austerity programme attached – presumably the Russians trusted us to spend that money in Russia’s best interests. Putin, Savvidis goes on to say, was enraged in the aftermath of the meeting as G-Pap failed to request any such loan and only appeared to want to talk about the environment. The Russian Prime Minister was reportedly so affronted he called for the Russian consul’s head on a platter.

In his second interview this year, Savvidis added that a second loan was proposed, to help execute the stalled deal for Greece to buy Russian armoured vehicles. This would have been backed by state guarantees and clearing exchanges of agricultural products (!). Yup.

You see, originally we were going to buy 1000 BMP-3 armored vehicles, which was revised up from 400, and then cancelled altogether as Greece entered its current state of crisis. The state of Greece’s public finances was cited as a reason and Russia-lovers are convinced that this was a higher order from Yorgo’s American masters, but more to the point there are serious problems with the BMP-3. In the words of the Russian Deputy Defence Minister, Armaments Chief Vladimir Popovkin:

“everyone rides on top of the BMP because no one wants to ride in this ‘coffin.’ We need to make a different vehicle.”

While I don’t doubt the BMP-3 financing story, I am extremely sceptical of Savvidis’ version of events with regards to the 25bn bailout for a number of reasons.

First, in his version of events the Russian Prime Minister never actually made an offer to Yorgo but apparently authorised Savvidis to tell G-Pap that he was ‘open to all requests’, then felt betrayed when such a request failed to materialise. This is strangely coy of Putin. Greece needed a certain amount of money and the entire world knew. Why bother with this bizarre costume drama courtship? Why not make the offer and let Greek public opinion pressure G-PAP into accepting?

Second, this version of events is not corroborated by any source not ultimately citing Savvidis himself. Now I know the Western media have their agenda and their ties to their respective governments but what about the Russian media? Russia Today and RIA Novosti have carried not a peep on the Russian loan. With our current bailout failing badly, the Russian media would at least get a kick out of reminding the world that there were other –better- options, so why keep this a secret?

The closest the Russian press got to this was the Pravda reporting what it acknowledged were rumours that Greece was going to ask for a EUR10bn loan from Russia, or a loan for the purposes of arms purchases – essentially Savvidis’ version with a smaller number.

Then there is a series of bizarre statements from the Kremlin, including the Deputy Finance Minister saying on 15 February (before the meeting Savvidis is referring to) that a loan to Greece was ‘not on the table’. Then you’ve got Savvidis himself saying that Russian President Medvedev had referred Greece to the IMF before the scheduled meeting between Yorgo and Putin. His defence is that ‘First of all, one proposal does not preclude the other. [...] And who said it was not possible for our President and Prime Minister to have different tactical approaches or opinions on a range of issues?”

Well *I* say so, Ivan the Man. Is it possible that Putin would have allowed this statement to come out, or that he would have decided to loan EUR10bn or more to an insolvent country without his own Prime Minister knowing? Was it going to be a birthday surprise, with Yorgo jumping out of cake in a bikini?

Note that, unlike the EU, Russia has negligible exposure to Greece. There is no reason for them to engage in the Ostrich Bluff and pretent no bailout was coming until it was. They could have just come out with it. Back then the EU was only saying ‘we have not yet received a bailout request.’

Then you’ve got Putin saying in May 2010 that the Greek crisis is temporary and will be overcome by the EU, then his Finance Minister telling the press that market trends indicate the Greek crisis is coming to a close as a result of the bailout. Guess they’ve got cool-aid dispensers in Russia too, and no hard feelings either.

Third, Russia itself still ran a substantial deficit even in a year of record oil prices and expected to run an even bigger one at the beginning of the year, so they would be lending us borrowed money and could lose money if they were to lend at a rate lower than the one they were paying. Now, Russia is currently paying 6% on its 10yr bonds, up from ca. 5% when the bailout was allegedly proposed. Either way, they would be losing money on this deal from the get go, even if we did not default on a single penny of it.

Fourth, as I’ve pointed out earlier, Russia’s sovereign wealth fund would not be able to finance this transaction because it a) doesn’t have enough money to cover our actual financing needs b) cannot buy Greek bonds, and c) cannot buy junk debt. Then there is the bailout fund that Russia has going with its Eurasian vassals but that too doesn’t have anywhere near enough money in it.

Finally, is it really possible the bond markets would have missed this? They seem to be very quick in picking up even the most ridiculous uncorroborated rumours.

With no sustainable official way of taking on our debt, I suspect that Russia could only lend any of this money to Greece off-balance-sheet, i.e. by concealing both the gains and losses from the loan from its citizens and taking them beyond any sembleance of democratic control. Essentially, they could load the debt onto state-owned companies and offer them a state guarantee, and Boris is your uncle. This could explain some of the secrecy involved and Savvidis’ claims that the Greek-Russian rapprochement was led by this REALLY savoury character. Still, given the amount of scrutiny Greece was under at the time it is unimaginable that they could have done this unnoticed. Plus it would have gone down like a lead balloon among the population.

GOIN POTTY OVER PUTIN

The core argument made by Putin-lovers a propos of Savvidis’ ‘revelation’ is that Greece had an offer that represented an alternative to the IMF bailout, and that somehow a bilateral Russian bailout that would have come with no strings attached. Now that, dear readers, is the biggest load of bollocks ever to come out a Greek journalist’s mouth, not counting sexual favours to editors.

First, as Savvidis readily admits, Russia is a paid-up member of the IMF and thus on the hock for part of Greece’s debt already. Russia also works with them on bailouts multilaterally, for instance in Georgia (subject to an adjustment programme), the Ukraine (with austerity conditions), or in Belarus (with privatisation conditions, which Russia later took on on its own; more on this later). While Orthodox Axis zealots like to suggest that Russia is hostile to the IMF, as with all things in international relationships Russia’s relationship with the Fund is much more complex than they seem capable of understanding.

Not to mention, Russia is no stranger to conditionalities, as people in Belarus know all too well. The latest bailout from Russia came on the condition that Belarus accept one of its own state-owned banks as manager of a forced $7.5bn privatisation programme, with Russian companies as the foremost bidders. All of this for a $3bn loan, mind you. Remind you of anything? Oh yes, the same tactics the IMF stands accused of employing in Greece. Here, incidentally, is a list of things Belarus would have to sell.

The world is a strange and repetitive place. Only unlike the IMF, Russia, which has no banks full of Greek debt to cater to, would probably deliver on its threats should we fail to meet our end of the bargain. Belarus for instance found out that not being able to pay Russia’s state-owned energy export company on time while waiting for a Russian-led bailout means having one’s electricity supply cut in half. Dobro!

EPILOGUE

I for one find it amazing that those of my fellow Greeks who would not believe a word coming out of the mouth of a Greek MP (probably with good cause) and would like to see them all hang regardless of evidence would nonetheless believe without reservation a Russian-Greek MP who also happens to be an oligarch, as long as he appears to confirm their delusions. The suspension of judgment is astounding.

Even if the EUR25bn loan had in fact been on the table, we now know all too well that it would have been a drop in the ocean, as the IMF and Europe found out for themselves. One could argue that austerity exacerbated our fiscal woes, thus adding to the debt burden, but as Greece is fundamentally insolvent Russia would have had to keep pouring money in. The total (to date) of $154bn in bailout money is equal to more than 10% of Russia’s GDP, or about a third of the Russian Government’s annual total tax revenue. This for a country that is still on track to run a deficit in 2011, even after soaring fuel revenues.

Furthermore, people sometimes seem to forget that Russia is not the best nation to owe wrath-of-god money to. It’s one thing to ask the well-to-do Germans to pay our way – the worst they can do is complain about how long our holidays are. But try telling the Russians to carry us on their broken backs. With nearly half of Greece’s PPP-adjusted per capita income and inflation running at a toasty 8%, the average Russian is much worse off than the average Greek. At 4.6k Roubles, the Russian minimum wage is a quarter of the Greek minimum wage, even after our latest minimum wage cut, while the cost of living is not really any lower. These people would pay taxes to support our citizens in maintaining a standard of living they could only dream of. And at an interest rate of 4.7%, they would be making a loss as well, even if we never defaulted on any of our debt. My guess is that, in a society that is pretty much at home with ethnic violence, Savvidis’ constituents in the Greek diaspora would have much worse that sarcastic headlines to deal with.

And then there’s the small issue of borrowing from a country that is significantly more corrupt than even Greece (ranked 154 to our 78 by Transparency International), where the state actively controls the media (see also here), and which has a Wikipedia page dedicated to the journalists killed there, with only one in four murders leading to a trial. Bloggers don’t fare much better, either. Greek bloggers love to rail at the IMF and its e-bil plots but they’d have to be a little bit more cautious when talking about Russia if they were to provide our next bailout.

Be careful what you wish for folks.

DISCLOSURE: I wrote to both Savvidis' office and that of his interviewer for comment on this story. I have received no response - I didn't expect one but at least they had a chance to have their say.

ALL UR BAILOUTZ ARE BELONG TO GREECE!

2011-07-25T12:59:00.003+03:00

*** IMPORTANT UPDATES COMING UP. PLEASE CHECK BACK FOR MORE LULZ***

Readers will have noted that I have refused to write anything on Thursday's Summit outcomes and the new Greek bailout. The fact of the matter is that the amount of information in the public domain is pitifully inadequate - and that's not just me saying this. I will try to update this post as new information comes out.

Greek readers can, for now, consider the very competent if politically charged discussion by Techie Chan on this matter. The gist of it, with which I completely agree, is that private creditors have taken far smaller losses than the 21% trumpeted by European leaders, and in fact will in some cases make a reasonable profit from this deal, that Greek debt is still unsustainably high, and that a large transfer of risk has taken place from Europe's banks to the European taxpayer. Stay tuned for my own discussion of this.

I am particularly disturbed by the triumphalism with which some news outlets aligned to the Greek government were reporting on the deal late last week, essentially calling doubters and naysayers out on their sour-faced skeptical remarks. They'd be shouting 'IN YOUR FAAAACE! IIIIN YOUR FACE!' if they could get away with it. Cue of course, a chorus of world-weary defaultniks lamenting the continued loss of sovereignty, decrying Shock Doctrine tactics (Naomi Klein's tedious political version of the Philosopher's Stone, which explains everything under the sun), denouncing the new interest rate as usurious and the like. Let them all talk.

I'd rather focus for now on a topic that fewer commentators are talking about back in Greece and for which the facts are actually out. This is the CDS market - remember the evil specuLOLtors that were supposedly betting on Greece going bust (some of whom were in fact Greek banks themselves)? Well they're pretty fxed now.

You see, the most important implication of Thursday's grand bargain was no outcome of the Summit talks themselves, but the earlier announcement by ISDA that such a deal would not constitute a credit event triggering CDS payouts. By confirming that politicians will use this loophole to its fullest extent, Thursday's announcements mean that CDS are now virtually a non-asset-class: they only ever pay out if Greece sticks two fingers up to our creditors a la #Debtocracy, or if some suit at the IMF forgets to put our welfare check in the mail. Neither of which will ever happen. Some back home may be cheering that CDS spreads are down but that's because the actual value of the CDS as a hedge is down, not because Greek debt is any safer. It's like police procurement chiefs cheering the savings created by the falling price of bulletproof vests, following test results that prove they can't stop bullets.

You may think this is something for teh EVIL specuLOLtors to sort out among themselves, but what it actually means is that Greek bonds are now going to become much more illiquid (and that's saying something considering how illiquid they are now), because investors can't hedge against losses. The same goes for Greek bank stocks: in the past, people might use a Greek bank + CDS combo to replicate a European bank portfolio and skim some of the arbitrage out of the market or use Greek CDS to hedge exposures in the Balkans and Eastern Europe. But worse, far worse, the same goes for other PIIG and European bonds, and their banks. The entire Eurozone's financial system has become less liquid overnight. Surely that can't be a good thing?

UPDATE: only a few hours after I wrote the few lines above, this happened. QED.

*** IMPORTANT UPDATES COMING UP. PLEASE CHECK BACK FOR MORE LULZ***

PRIMARY SURPLUS #FAIL WHILE-U-WAIT

2011-07-22T00:34:00.001+03:00

As the details of the latest bailout slowly trickle out, and in case you're wondering why we need another one, ponder this update on the execution of the Greek Budget.

It's shit. You know it's shit because the Ministry of Finance homepage is stuck at the previous announcement. It's also remarkably close to the preliminary estimates, so at least we're getting better at knowing in advance how fhxed we are.

My naive model tells me we're on track for a primary state deficit of EUR8.7bn, which lest we forget is 40% higher than last year's. This is what the forecast looks like:

And the monthly play-by play below. Hollow datapoints are my naive forecasts.

DON'T MISS: KEYNES V. HAYEK AT THE LSE #LSEHVK

2011-07-20T17:24:00.000+03:00

You've seen the rap-off between the two masters. And then the second part.

Now watch their homies slug it out in London.

LSE and BBC Radio 4 public debate

Date: Tuesday 26 July 2011
Time: 6.30-8pm
Venue: Old Theatre, Old Building
Speakers: Professor George Selgin, Professor Lord Skidelsky, Duncan Weldon, Dr Jamie Whyte
Chair: Paul Mason

How do we get out of the financial mess we're in? Two of the great economic thinkers of the 20th century had sharply contrasting views: John Maynard Keynes believed that governments could create sustainable employment and growth. His contemporary and rival Friedrich Hayek believed that investments have to be based on real savings rather than fiscal stimulus or artificially low interest rates. BBC Radio 4 will be recording a debate between modern day followers of Keynes and Hayek.

George Selgin is Professor of Economics at The Terry College of Business, University of Georgia. Selgin is one of the founders of the Modern Free Banking School, which draws its inspiration from the writings of Hayek on the denationalization of money and choice in currency. He has written extensively on free banking, the private supply of money and deflation. George Selgin is the author of The Theory of Free Banking: Money Supply under Competitive Note Issue (1988), Less Than Zero: The Case for a Falling Price Level in a Growing Economy (1997), and Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage (2008).

Robert Skidelsky is Emeritus Professor of Political Economy at the University of Warwick. His three-volume biography of the economist John Maynard Keynes (1983, 1992, 2000) received numerous prizes, including the Lionel Gelber Prize for International Relations and the Council on Foreign Relations Prize for International Relations. He is the author of The World After Communism (1995) (American edition called The Road from Serfdom). He was made a life peer in 1991, and was elected Fellow of the British Academy in 1994. His latest book is Keynes: The Return of the Master.

Duncan Weldon is a former Bank of England economist and currently works as an economics adviser to an international trade union federation. He has a long standing interest in and admiration for Keynes but also a respect for Hayek. He blogs at Duncan's Economic Blog.

Jamie Whyte was born in New Zealand and educated at the University of Auckland and then the University of Cambridge in England, where he gained a Ph.D. in philosophy. Jamie remained at Cambridge for a further three years, as a fellow of Corpus Christi College and a lecturer in the Philosophy Faculty. During this time he published a number of academic articles on the nature of truth, belief and desire, and won the Analysis Essay Competition for the best article by a philosopher under the age of 30.

Jamie then joined Oliver Wyman & Company, a London-based strategy consulting firm specialising in the financial services industry, for which he still works, as the Head of Research and Publications. Jamie has published two books: Crimes Against Logic(McGraw Hill, Chicago, 2004) and A Load of Blair (Corvo, London, 2005). Jamie is a regular contributor of opinion articles to The Times (of London), the Financial Times and Standpoint magazine. In 2006 he won the Bastiat Prize for journalism.

He is on the advisory board of The Cobden Centre.

The debate will be chaired by Paul Mason, economics editor of BBC 2's Newsnight and author of Meltdown: The End of the Age of Greed.

Transmission date of programme: Wednesday 3rd August, 8pm (repeated on Saturday 6th August at 10.15pm) on BBC Radio 4.

Suggested hashtag for this event for Twitter users: #lsehvk

KILL MEEE... KILL MEEEEE... PART 4

2011-07-15T04:37:00.007+03:00

BACKGROUND:

Kill me no. 4 is the sequel to the original 'Kill Me' post available here, which in turn is the sequel the Dog Ate my homework v. 2 post and of course the original 'Dog Ate my Homework' post. All of these posts are reactions to the IMF staff reviews of Greece's standby arrangement and the subsequent letters of intent from the Greek Government.

Together the two sets of documents could explain how the Greek Government is from Venus and the IMF is from Mars, except of course everyone knows where the Greeks are originally from.

Anyway dear readers, I know you've been waiting for this so here goes.

Here are the quickest possible highlights of the Fourth Review by the IMF with only a little play by play from me.

Open discussions of Greece’s financing challenge and euro-zone countries’ insistence on private sector involvement to resolve this have convinced markets that Greece will restructure its debt (pg. 4)

[Translation: The market expects a default.]

The fiscal position has stalled (pg. 6)

[Translation: Current austerity measures aren’t working]

Wholesale funding markets remain closed, and exceptional ECB liquidity support has grown (pg. 5)

Banks’ combined market value of €13 billion falls well-short of their reported Tier I capital of €30 billion (pg. 6).

[Translation: The market says that the stuff regulators say your banks are OK to hold as capital is actually crap. Nice job everyone.]

First quarter 2011 targets were met, with the help of temporary factors (pg. 7)

[Translation: Q1 2011 targets were ONLY met with the help of temporary factors. Your coach is about to turn into a pumpkin]

GDP is now projected to contract by 3¾ instead of 3 percent in 2011 (an outlook broadly in line with that of other forecasters). (pg. 9)

[Translation: Everyone else’s forecasts haven’t changed; we should have listened to them]

Risks remain skewed to the downside in the near term (p.g. 9)

[Translation: You are more likely to miss your targets than meet them for the next few quarters]

The scope for shortfalls in policy implementation or in macroeconomic outcomes is limited […] stress testing shows that full and timely program implementation is absolutely critical: incomplete fiscal adjustment, privatization shortfalls, or delays in structural reform implementation (producing a considerably slower economic recovery and fiscal adjustment) would see debt remain at very high and likely unsustainable levels through 2020 (p.g. 10)

[This point is repeated in various different ways throughout the report. Translation: You mess this up one more time and it’s Good Morning Harare!]

The discussions focused on Greece’s deeper medium-term policy needs and identifying ways to replace the expected market financing that is now likely no longer available (pg. 10)

[Translation: you can’t borrow from the markets anytime soon.]

At the end point, Greece would be targeting a primary surplus in the range of 6½ percent of GDP (pg. 11)

[Translation: The adjustment programme only works if you achieve an impossible primary deficit target]

there is a good motivation to switch the headline program targets to focus on primary balances, namely to insulate the fiscal assessment from the potential variability in interest payments (pg. 11)

[Translation: In addition to the markets we also expect a default, which is why we’re not counting interest payments anymore]

The government has prepared a medium-term fiscal strategy (MTFS), which would […] reduce the size of the Greek state: overall spending would decline from 49.5 in 2010 to 43.1 percent of GDP by 2015 (pg. 12)

[Translation: The nightmarish small state we have in mind for you is the same size as Canada’s.]

All administratively complex programmes are massively back-loaded (this is not verbatim, but see Pg. 13)

[Translation: We’ve given up on administrative reform]

[T]o begin implementing the strategic plan for medium-term reforms, the authorities will begin […] a number of major institutional changes (creating a central directorate for debt collection, a large taxpayers unit, as well closing and merging several uneconomic and inefficient local tax offices). (pg. 14)

[Translation: You don’t have a large taxpayers’ unit or a debt recovery unit? WTF?!]

[T]he system will remain heavily reliant on ECB support […] peak support could top €130 billion. Greek banks cannot by themselves rapidly reduce their existing level of ECB exposure (pg. 16)

The authorities also committed to encourage banks to seek foreign merger partners (pg. 17)

[Translation: Someone has to bail out your banks. We’d rather it was other banks from abroad.]

The BoG […] may appoint a commissioner with managerial powers to run a troubled bank; it may withdraw a bank license and then put the bank into liquidation; and it can impose a moratorium on a bank's claims. However, the Greek legal framework lacks specific bank resolution tools towards lowering the cost of resolving banks. [T]here are no techniques to allow the continuity of banking operations, including sustained depositor access (pg. 18)

Reforms are also needed to ensure that the deposit insurance fund can be used to fund such techniques, and to establish depositor preference over unsecured creditors. (pg. 18)

[Translation: If you default before you fix this shit, your citizens will not be able to get their deposits back.]

[UPDATE: Since people are asking, this doesn't mean people will lose the deposits necessarily, and it could just be a scare tactic. But what it does mean is that in the event of a default, restoring people's access to their deposits will take time and the Greek government will have to negotiate the status of depositors' claims. Unless of course we sort out the legal framework first.]

The supervisor has thus requested that undercapitalized banks meet regulatory requirements or find appropriate merger partners by end-September. (pg. 18)

[Translation: Your banks need to put a fire sale together pronto.]

Still, for the timetable to hold, market demand must exist. This is a significant risk which the authorities can manage by ensuring that foreign investors can participate, and by establishing a track record of even-handed and timely execution of transactions (to demonstrate to bidders they have a real chance to acquire the assets). (pg. 20)

[Translation: Even if you hold a fire sale, who is going to buy this crap? They don’t even trust you to honour your end of the bargain]

firm-level collective agreements, introduced in late 2010, would allow for wage reductions below sectoral minima (to the nationally-agreed floor) within the formal bargaining framework, thus overcoming this rigidity, but had been used little to date. (pg. 23)

[Translation: Businesses aren’t using the one good labour market reform you managed to push through. Someone isn’t playing ball.]

the end-March indicative target on the accumulation of new domestic arrears by the general government was again missed in March. A waiver of applicability is being requested for end-June performance criteria (except concerning external arrears). (pg. 27)

[Translation: you’ve missed your targets but we’ll look the other way.]

A tailored downside scenario exposes additional vulnerabilities. Debt would peak at 186

percent of GDP in 2015 and remain above 178 percent of GDP in 2020, a situation highly unlikely to allow continued market access. (pg. 70)

[Translation: You know how you keep missing targets? Well if you stay on that path you’re on track to owe fuckloads forever.]

TROIKAS ALL ROUND!

2011-07-13T12:34:00.001+03:00

Readers not living under a rock in the past few days will have noticed that financial contagion has spread to Italy's banks, putting strain on the sovereign itself. You can follow the snafu as it unfolds here.

My Greek readers need not worry that this is somehow our fault too - apparently it is the Spaniards' fault - no, really.

I will add more to this story later today but for now I must share with you the following paper, which just landed in my inbox. The timing is perfect.

You see, the IMF have by now realised that one by one all of the PIIGS will fall, that the EU as a whole is insolvent and that the battle lines will be drawn around the UK and France. So instead of obsessing about the next bailout, a clever IMF wonk, one D. Kanda, has tried to estimate what the optimal fiscal adjustment programmes might look like for six European countries -France, Germany, the Netherlands, Italy, Ireland and the UK- given the preferences of policymakers and existing commitments. The results can be seen here, or in the tables below for short:

Coming soon to a negotiating table near you.

ARE WE THERE YET? (UPDATE)

2011-07-10T23:51:00.012+03:00

Apologies for the radio silence, dear readers - it's been a busy week.

Now that I've caught up with my sleep and the in-tray for the day job I feel ready for another post, and predictably it is a new batch of statporn, though I promise you haven't seen this before - not from me anyway.

I have strong but mixed feelings about Debt Clocks - here's one of ours, courtesy of the awkwardly transliterated Xrimanews.gr. In countries where government debt is not the number one issue on the agenda, a good deal of the population tends not to know just how much debt the state has picked up in their name. This is not too dissimilar to what individuals in too much debt do (a more academic treatment here and here) and the behavioural results are similar too. Such tools can give the people a sense of proportion. But while being able to visualise debt in this way tends to make people think, in practice it is not very actionable. By the time a country has a Debt clock built for itself, it is usually in too much debt already.

I was wondering, on the other hand, what kinds of clocks we could build for Greece that would mean something to the Greek people. If we're counting down to anything these days, it is surely D-Day, the day we get to default. And this is not a matter of time but of fiscal dynamics. Converting these into time variables is not straightforward.

As it happens, there are three sets of figures we can use that do sort of suggest timings.

PART 1: JUMPING

The first is the primary deficit, which counts down the distance left to run until we can secure an orderly default. I should point out that, unlike the Greek ministry of finance and some defaultniks, I'm counting public investment against the primary deficit. The reason is simple: public investment is the most productive part of government spending, as we've discussed here, here and in Greek here. In the event of default, it should be among the last budget items to go.

So how is that primary deficit coming along? Below is a graph of our monthly primary deficits, collated by yours truly from the monthly budget execution bulletins available here. Please note this is the Central Government budget as opposed to the General Government budget, where the data take much longer to produce and are much less reliable. Even with these caveats, I can only go as far back as Jan 2009 and can only follow the data up to May 2011 - but I will update as more data come in.

[Correction: The Y axis on this graph previously read 'surplus'. This was of course wrong. Many thanks to @ggementzis for spotting this. The hollow datapoints are my own naive forecasts, read on for details on how these were calculated.]

The bottom line here is that the 2011 budget isn't really working out. While 2010 was an improvement over 2009 in nearly every month, 2011 hasn't been an outright improvement on 2010 so far - only two out of five months have returned a smaller deficit or larger surplus. If the above graph doesn't really speak to you, maybe this one does: it would suggest austerity as currently pursued depends hugely on political timing and is producing diminishing returns.

Actually, this graph is a little scarier than that, because it's actually very easy to describe the trend involved. It's essentially a negative sine with a linear trend thrown in, or at least that's what it behaves like. Crucially, the trend points upwards.

[UPDATE] My longtime reader Chris Voltaire has pointed out over Twitter that running a regression with 15 observations is risky. He is too kind, of course. It is stupid and pointless. However, my purpose is not really to derive a forecast (even though I do). I only want to show what the trend has been so far and because of the seasonal variation involved I can only do this by deriving a forecast of sorts. Apologies.

If you run these figures forward, the forecast is for a primary deficit of EUR5.893bn, against EUR6.231bn last year. So we're only really on track to shave EUR338m off the primary deficit this year and at this rate it will take us 17 years to be able to default. Not good. It is probably this realisation that underlies our latest batch of austerity measures, which I've seen fellow libertarians criticise quite strongly. I will return with more commentary there. For now I should point out that there's more than one way of delivering a primary surplus, and I'm on the record as saying that taxation isn't a very effective one, for reasons to do with administration and equality.

Chris also points out that the Greek state is looking forward to some extraordinary income from property tax arrears in 2011, which readers would do well to take note of. Now in my days of trying to scrape by on £5 a day in London so I could afford my rent and the occasional drink, I used to have a rule: there is no truly extraordinary income and no extraordinary expenses. Better to assume that every month £100 will get spent that you can't plan for, and £20 will come in that you don't expect. It's a similar case here. The Greek state had extraordinary revenue in 2010 from the 2009 business levy, then more extraordinary revenue with the tax amnesty, and probably more that I can't keep track of. My point is that these 'extraordinary' income drives are driven by cyclical revenue figures rather than vice versa, so in one sense it doesn't really matter what income we're looking forward to.

But this is dodging Chris' argument. The real answer is that I can only keep monitoring the data - when that money comes in, I'll check again to see whether it's shifted the trend. That's all anyone can do really. For instance, just today (11 July) the preliminary figures for June came in - indicating a primary deficit of EUR1.356bn for the month. This in turn is consistent with a EUR7.1bn primary deficit for the year, taking us way off course.

Incidentally, the first graph I've presented here also reveals one more useful thing: that the most fiscally positive months for Greece are January, July and October in that order. This will be important to anyone trying to time a Greek default while we're still still running a primary deficit.

PART 2: BEING PUSHED

The second way of timing a default is to look at the exposure of European (in particular French and German) banks to Greece, particularly the Greek sovereign and Greek banks. The only reason we are in this state of suspended animation, from a foreigner's point of view, is in order to prevent massive losses to European banks and the associated contagion. If they could magically remove their exposure to Greece overnight, we would be forced to default at once, whether we liked it or not. This begs the question of how far along they are in dumping Greek assets.

I should note at this point that the markets for most Greek assets are currently very illiquid, so banks are very worried about dumping them as they are unlikely to get a good price. Moreover, when they sell banks have to record losses, whereas a rapidly depreciating bond can be held to maturity without showing a loss. All of this makes it difficult for foreign banks to dump Greek bonds.

You can review the latest data on exposures to Greece with commentary from yours truly here. But what is the trend? Well here we have a problem because the Bank of International Settlements (BIS), the source of all such statistics, has only started providing data with a sector x country breakdown in Q4 2010. Further back, we can only look at aggregates, which are much less useful. But let's see what we can find. The graph below outlines the exposure of banks in Europe, France and Germany to Greece (that's total exposure, including the Greek sovereign, Greek banks and the Greek non-bank private sector:

These data suggest that since the Greek crisis began in late 2009, French and German bank exposure is falling at a rate of 2% every month, or about EUR2bn per month. At this rate, it will take 44 months, or until August 2014, for them to reduce their exposure to zero.

Realistically, French and German banks will never manage this, and even if they could or wanted to, they don't need to wait that long, as they only need to cut their exposure enough so that they can remain capitalised when we default. Also recall that this is total exposure to the country, and although it makes sense to dump Greek banks alongside Greek bonds, it probably doesn't make sense to dump all Greek assets altogether.

But this is the general direction of travel.The query in question can be replicated by trying this link.

More to come, as I've still got data to crunch. For now the verdict is that we're more likely to be pushed than to jump unless we can come up with a real show-stopper. Somehow I doubt we will.

PART 3: GOING APESHIT

There is of course a third clock ticking away. Every quarter I watch the labour market statistics for clues of rising stress. My favourite index is of course the share of the unemployed that turned down job offers in the last quarter; the rationale is that once the fat has gone out of the land and people are forced to take whatever crappy job comes along or drop out of the labour force altogether the result is very angry people in the workplace or on the streets. Regular readers should not need any reminder but the graph as of Q1 2011 is as follows:

A naive extrapolation suggests that we will run out of unemployed people turning down job offers by Q4 2013. This suggests to me that the apeshit scenario is approaching us faster even than the being pushed scenario. Everyone buckle up.

NOT IN MY MUHFXING NAME YORGO!

2011-06-30T02:55:00.005+03:00

Many thanks to @TheStalwart for reposting and taking the abuse from commentators.

Readers will know by now that I have little sympathy for the Greek Indignados and the Syntagma protests.

Today’s events, however, are proof that something is deeply wrong with our Government. While markets cheered our new austerity programme being voted through, this sort of thing was happening:

Don’t get me wrong, I think the Greek Indignados are wrong on so many levels. I resent their politics, their economics and a good deal of their misguided civic values. I don’t believe the majority of the country wish to see an end to parliamentary democracy as some of the Greek Indignados do, nor do I think the majority are opposed to austerity and privatisations. I'll take parliamentary democracy over rule by circle-jerk any day. And I certainly don’t think protesters should be allowed to storm Parliament. But apart from this, the People must have the right to protest peacefully and I’ve seen enough from my safe perch here in London to know they are being denied this right by force. [Too tame or patronising for you? Well I just ate a working class baby, but I've saved room for your sarcasm. Keep it coming.]

Given a choice between disorderly default and a carte blanche to the police to disperse even non-violent protesters I know what I would opt for. I’d rather every last bank in Europe failed and every Greek pensioner, both my parents included, had to beg for food. You see, there has to be something worth saving for any adjustment programme to be legitimate.

I don’t believe the State owes anyone a living but it does owe them freedom. I’m sure they don’t teach you that at Socialist camp but in the better parts of the world it is a given.

The brutal repression of peaceful protest makes a mockery of democracy and equates any rejection of populist policies with a rejection of the people’s constitutional rights. We have crossed a threshold past which all hope of civilised, evidence-based public debate has ceased to exist. We have to somehow regain that space.

It is time to secure the People’s mandate for objectives far greater and more important than this government’s continued rule, or the opposition’s ascent to power. And we must build whatever coalition we can to pursue them. More importantly, we need a line drawn in the sand past which the People take responsibility for their choices. The Indignados claim to stand for the Greek people; I believe they do not. But as long as there is no formal evidence of the people's will, sympathy for the people beaten up by police will tend to relegate this question to irrelevance.

We need a referendum. Now.

The way I see it, there are two questions we need answered by the People, once and for all, and which we cannot deduce from the results of past elections.

First, what should we do with the national debt?

Default now on all Greek government debt
Default now on whatever amount of debt is deemed necessary to make Greece solvent
Achieve a primary surplus as soon as possible and then default [+1 from me]
Achieve a primary surplus as soon as possible and then proceed to pay down the national debt
Proceed with current memorandum commitments

Second, which of the following changes should we make to the current system of representative democracy?

Introduce Proportional Representation [+1 from me]
Devolve a substantial amount of Parliament’s powers, including the power to levy some taxes, to People’s Assemblies at the local level
Drastically reduce the number and compensation of representatives [+1 from me]
Drastically reduce the provisions of immunity for ministers [+1 from me]
Introduce stricter term limits for representatives and ministers [+1 from me]
Introduce constitutional limits on spending and fiscal deficits [+1 from me]
None of the above

In passing, I would urge all Greek readers to sign up to the No More Taxes! Primary Surplus Now! cause. We’re still far short of 1m members but we’ll get there!

Many thanks to the anonymous commentator discussing the Greek Crisis blog. Frankly, you've made me realise I have not read it in more than a year, so for that reason alone it's off the reading list. I cannot check whether what you say about them is accurate, though it's certainly plausible. A request; if you're going to make accusations (except those aimed at myself of course), I would urge you not to do so anonymously. Once again, thanks.

OH I'M SORRY - YOU HAD A THEORY ABOUT GREEK DEBT TOO? (NOW WITH MORE PWNAGE)

2011-06-29T01:42:00.018+03:00

Right. Apparently these days everyone and their dog has to have a narrative about how Greece came to carry the massive debt burden we currently do. Some have done their homework before taking virtual pen to virtual paper, but many have not, so what you usually get is a quick overview of the current situation, and then some abstract bullcrap that could apply to any country, anywhere in the world and basically reiterates whatever political or theoretical prejudices the commentator has brought to the story.

But the common denominator for most is that they all start the story too near to the present day. Euro accession; the last Conservative government; the financial crisis. It's easy to fit a couple of years to the trend one has in mind, and yet miss the point spectacularly.

Take a look at this graph, showing the trajectory of Greek debt/GDP. This is the stuff your narrative has to account for. Where would you start telling the story?

Sources: IMF (database overview and dataset), recent data (2006 onwards) updated from Eurostat.

I do not intend to write an economic history of modern Greece in this post. Only to fill in the gap the majority of commentators won't touch. Hopefully readers will do their own research and beef this up.

You see, as precipitous as the rise in national debt has been over the last couple of years, it is still amateur stuff compared to the way we piled on the debt between 1981, the year of Αλλαγή, the Change, ushered in by a massive 48% majority, (Time coverage here) and 1993, when the Maastricht rules finally started to bite and we were forced to pull the handbreak on our burgeoning government budget.

[Note than in 1993 the massive growth in the stock of debt is due to Greece being forced to recognise a big chunk of previously off-balance sheet debt, most of which was built up in the 80s. The actual deficit was much smaller than the jump in liabilities would imply.]

The years between 1981 and 1993 were, despite the protests of deathbed convertees and defaultniks, the years in which the Greek people were the most politically active. Voter turnout in those years was the highest we've ever had - reaching an eye-watering 84.5% in 1989. The politicians didn't sneak this debt past us and onto the nation's balance sheet; we watched them do it and urged on. Worse, once the gravy train ground to a halt, the Sainted People suddenly lost interest in centrist 'politics' altogether. The first elections after that, in 1996, were a washout, with voter turnout collapsing and only the parties of the non-governing Left gaining any ground at all.

Data source: Institute for Democracy and Electoral Assistance.

And incidentally the years under Big Spender A-Pap just so happened to be the times in which the Greek people were the happiest with the state of Democracy in Greece. Apart from the time when we were hosting the Olympics; you know, the ones Debtocracy claims were a massive scam and somehow made a decisive difference to the dynamics of Greek debt.

If you're still in doubt as to whether 1981 was a popularly endorsed change of course, have a look at the video below. You will find that the crowds gathered in the centre of Athens put our current protests to shame. Yes that is our current Prime Minister's dad. The irony would be delicious if we didn't have to pay a terrible price for it.

The Greek people's dilemma in 1981 was framed in the most polarised of terms, as a battle between the Establishment of the Privileged v. Change for the dispossessed (more reading here). The goal of both sides was to capture the State, the ultimate redistributive mechanism. The Sainted People chose the latter by a landslide.

Within a single year, the Keynesian dreams of the Socialists had descended into disappointment (see a sympathetic but critical review here) and a new consensus began to be forged. As Spourdalakis puts it:

"the long standing problems of productivity and competitiveness of the Greek economy were to be solved through labour's 'responsible participation' in established tripartite corporatist bodies which would guarantee 'social peace' with wage concessions."

The year this Grand Bargain was born was, incidentally, also the year that I was born. One of the most popular ever Greek governments opted not to fix our fundamental competitive problem, but to placate all sides by buying them off. Were the People disappointed? No. In 1985 the socialists won another landslide victory (with a 46% majority) and the saga of the Socialists' οκταετία, the Eight-Year-Rule, was written. The Grand Bargain worked well enough to seduce both parties, Socialists and Conservatives, and an evolved version of it survived up until 2009. This second half was, if anything, even worse, because the Greek banks finally caught on to the game and public sector spending started to seriously crowd out private investment.

In the meantime, save for a short period of fiscal consolidation meant to qualify us for Eurozone membership, which, contrary to the flawed hindsight of some, was in fact wildly popular in Greece (see pg. B 29 here and here), we only changed the way the Bargain was financed, with the EU and debt markets pitching in to pick up the slack from the overtaxed population. Some people will, upon reading about the smoking gun story of Goldman helping us disguise some of our debt in this process tend to decide they have heard all they need to know and that somehow it was Wall Street that spoon-fed us this debt. Well, there's no helping some people.

In fact, it was the Basel Accords, one after another, that spoon-fed European and other banks our debt, but this is such a long story that it deserves its own post.

Back to our story. By 1993, Greek debt had cleared 100% of GDP and the foundations of the current crisis had been laid. Now, sustaining that level of debt is not impossible, but it is very difficult; it takes a great deal of growth and/or inflation, and as inflation is a terrible tax on the poor and essentially uncontrollable, it was mostly growth that we depended on. By that time, the Greek economy was so dependent on high growth that any slowdown at all was going to be a disaster. Then came the biggest global recession in years, and the rest is history.

Sure, the story goes on, but by that time the dynamics of the Greek fiscal crisis were fixed. Did we have the chance to change course? You bet, long ago. But we didn't.

UPDATE: Commentators seem to be getting their knickers all tangled re: the amount of public spending that trickled down to the people.

I can only refer them to my review of Debtocracy for the figures: left graph shows gov't spending as a % of GDP, right graph shows spending on civil servant salaries (blue) and social benefits (red) as % of government spending.

Eurostat's data don't go back to 1981, which would have been amazing. But you can check the timing of corruption vis a vis the Change by looking at how measures of our underground economy grew during that time (source):

UPDATE: Regarding the data unearthed by our friend @epanechnikov: First of all, many thanks. One objection though. Although this is one very cool table (not least because it shows that PPP-adjusted income in Greece was higher, pre-crisis, than that of Germany, which is simply ludicrous), I should point out that, ceteris paribus, the poorer a population the greater the percentage it tends to direct to consumption of necessary goods and services, assuming similar levels of social security provision (lest someone quote China to me). Similarly, the poorer a population, the greater the percentage of consumption directed towards food (Engel's Law). I'm not sure the Turks, Romanians and FYRoMacedonians were overconsuming.

A better way of testing consumption is in terms of consumption spending per adult equivalent adjusted for purchasing power, as follows:

This makes more or less the same point but in much less extreme terms: in 2005 Greece's real consumption level was almost exactly at the Eurozone average. Higher than Denmark's, almost the same as Sweden's, and WAY higher than Spain's or Portugal's. Still, without median consumption data we still can't properly argue this point. Perhaps these figures are skewed by a small number of extremely wealthy people - but then again income inequality is only marginally higher in Greece than in Spain and lower than in Portugal (data here) so I'm not sure that is the whole story.

ALTERNATIVE LABOUR FORCE SURVEY NEWS OUT NOW

2011-06-27T01:27:00.004+03:00

As loyal readers will know, I've got my own take on the employment statistics coming out of ELSTAT. To the cynic, the headline employment and unemployment rates are rife for manipulation and may in fact, in a small country, be more noise than information.

Personally, I follow four sets of indicators that I think are more useful, and because they are not systematically reported anywhere they are likely to be less biased. It's that time of the year again when I look at what the cats from Peiraeus brought in. Here is the latest LFS quarterly release in Greek and in English. [Many thanks Ariadne for pointing out the linking error!] And here's what I'm looking for:

1. The number of unemployed turning down job offers.

Yes, it still happens and indeed it would in any labour market, good bad, improving or deteriorating. As I've discussed elsewhere, this figure incorporates a measure of the fear of unemployment but also some measure of expectation of future economic growth. This figure has come in at its lowest level since reliable records began.

2. and 3. The difference between the unemployment levels of foreigners and natives, postgraduate males and male school leavers.

These numbers are indicative of the returns to higher education and the extent to which migrant workers are welcomed by the labour market. When these figures deteriorate, you get angry young men. That's bad. This quarter, the returns on education part improved slightly, but the native bias deteriorated even further.

4. Unemployment in the worst-performing border region.

This figure tends to make politicians subject to nationalist pressures (not necessarily nationalists themselves) more likely to seek concessions from the party leadership. It could also mean more pressure to increase military spending.

This suggests to me that a surge of nationalist bullcrap is on its way. Brace yourselves, dear readers.

DON'T TAKE THE BAIT, ALEX! THEY ARE MASTER BAITERS!

2011-06-26T16:09:00.011+03:00

Last week I spent some time looking into the argument, first made by Alex Andreou in response to populist stereotypes propagated by foreign journalists and politicians, that Greeks work longer hours than the citizens of almost any other developed country. Alex’s post, Democracy v. Mythology, has travelled around the world and it’s encouraging to see that people are willing to stand up to slander with facts rather than Yo-mama-nomics. However, I was not entirely sure Alex's facts stacked up. So I checked.

I found, as readers will recall, that relying on the OECD figures is actually not very useful, and that once we adjust for self-employment (the unregulated labour market that does not reflect the Greeks’ political choices), prevalence of part-time work (which is rare in Greece and which the OECD just lumps in with full time work) and differences in the methods of data collection (LFS based methods like ours tend to give the highest estimates of hours worked), most of the difference is whittled away until we end up working respectable but not ridiculous hours. The rest is down to lower productivity, which we have to work extra hard to make up for. The point is well made that Greeks are not lazy, although we are frankly uncompetitive.

But I think it’s worth examining another claim made in this riotously popular post as it is highly misleading and could convince some of our fellow citizens that one policy area in terrible need of reform is actually viable – even though this is probably not Alex’s intention. Again, I must stress that Alex’s fact-based argumentation is refreshing and desperately needed: more people should adopt his rejection of sensationalism and racism. But in serving this purpose he keeps taking the bait of populist and sensationalist idiots in Europe and further afield, which means he ends up rebutting arguments that never really mattered and that more serious critics in Europe have never fixated on.

Still, if we examine the figures in detail, their story is fascinating and can sometimes be other than what it appears.

Countermyth: Greeks retire no sooner, if not much later, than other Europeans

The sensational claim against the Greeks making the rounds in some parts of Europe is that we retire at ridiculously early ages. True, some of us do but this is not the case in general. Alex demolishes this claim by demonstrating that the average Greek pensioner left the labour market later than his or her counterpart in most European states. Cudos to Alex for digging up the data and clarifying that point, but there’s a problem in his reasoning and it is inevitable when one is trying to out-stat moron journalists – he’s stepped into their idiotically framed argument and now his shoes are caked in shit.

You see, how late in life people retire is utterly beside the point. What matters is how long their working lives are, which in turn determines how big their retirement pot is (ok, whatever notional retirement pot they have in pay-as-you-go systems). Sensationalist politicians and journalists abroad (and some at home) might care about the retirement age but the real argument (and the question Greeks should be asking first and foremost) is whether or not we Greeks were running a sustainable pension system. You see, Amaryllis, who retired at 70 but joined the labour market at 35, may look on (news)paper like she’s been dealt a shit hand by the pension system compared to Gertha, who retired at 65 but joined at 25, but in fact for the purposes of pension scheme viability Gertha is a more viable ‘client’.

In reality, it is the labour market that dealt Amaryllis a shit hand, and the Greek labour market has been shaped by Greek politics (i.e. the will of the people), giving us the most inflexible labour market in the developed world. But let’s check the pensions numbers first.

***THE EUROSTAT LINKS BELOW WERE NOT WORKING PROPERLY EARLIER. I BELIEVE I'VE FIXED THIS NOW***

In 2006, when Eurostat last collated the numbers on length of working lives across Europe, those Greeks who were still working after they had started receiving retirement benefits had on average worked for 29.9 years – the lowest number in Europe bar none (source). This ranking holds regardless of whether people worked to afford themselves a basic income or for personal reasons unrelated to money. Only one category of working pensioners in Greece had a working life behind them comparable to the EU average: the people that kept working despite having more or less enough to live on, simply because they wanted to top up their income and live more comfortably (source). And these guys had worked longer working lives than either of the other two groups.

But what of the people who were no longer working and living only on retirement benefits? Well they had spent an average of 34.6 years working. Of all the European countries, only a handful boasted shorter working lives (source), and these included fellow PIIG Spain, fellow Greeks Cyprus, and of course Romania, Bulgaria and Poland.

So you see, Alex, it is possible for both you and idiot Greek-bashing journalists or politicians to be wrong. Greeks work shorter working lives; hence the state cannot afford their pensions as well as other countries can. Or if it can afford those, it can’t afford their prolonged education before or their prolonged spells of unemployment during. No mythology, just pure math.

NOTE: As some trolls find it impossible to check official statistics for themselves, I should like to provide four pieces of advice.

1. click on the source links. It's way easier than making a washing machine, so even I can do it. The 2006 study is an ad-hoc module of Eurostat's Labour Force Survey - the collated dataset made up of the individual labour force surveys that we get, say, our unemployment statistics from; I know it's not as good as your anecdotal evidence based on a small sample of acquaintances, friends and relatives but it is the best I have access to, or that anyone else has access to for that matter. Check with someone of a nationality that you trust if you don't believe me.

2. If you need trade statistics that are up to date, go to an official source, not a random website. And remember to read the 'about us' section before you decide what is or is not a government website. As a rule you can tell a gov't website because they carry all manner of insignia showing which ministry or investment programme they are funded by.

3. if you don't know where the data come from or what they mean then perhaps you should look up the answers. For a start, I would look at Eurostat's metadata for the 2006 study. If that won't do, try the full evaluation report. Don't like the findings? Write to Eurostat and demand a correction.

4. read the article again just to make sure you've understood what I'm saying before vomiting your tedious thoughts onto my comments section.

I guess all of the above shows just how hard it is not to take the bait.

U CAN HAZ HAIRCUTS!

2011-06-22T03:26:00.001+03:00

One of my favourite things about the UK is that occasionally, not often mind you, people collectively turn around and say 'wait, this is getting a bit confusing. Does anyone have the facts?'

The product of this mentality is the brilliant @fullfact, an independent fact-checking service which undertakes to clarify what the facts are in heated public debates. One day, when Greece has emerged on the other side of this LOLery, I hope we will have our own version of FullFact. I'll work for them for free while they get up and running and that is a promise.

Earlier today I gave them a few hints on the issue of the UK's exposure to Greek debt - their factcheck can be found here. Basically I relied on the latest figures from the Bank of International Settlements, which break down Greek debt into private and public and then into the countries it is owed to. A composite table of this looks as follows. (Source: BIS Quarterly Review Detailed Tables pg. 103 onwards)

All figures are current as of Dec 2010 (so quite dated), and expressed in US Dollars. Please note this is only banks' exposures to Greece, not those of other states or of course the ECB and IMF.

And are you wondering which banks are most exposed to Greece? From Barclays Capital, via FT Alphaville, who are now back in my good books:

MEN AT WORK

2011-06-22T02:24:00.007+03:00

In recent days a number of blogs are reposting a well-conceived but incomplete mythbusting exercise about Greece. I've most recently come across it in @panos101 's blog here, but the original source is Alex Andreou's celebrated post in sturdyblog. What follows is an elaboration on my comments in response. See also my post on the retirement statistics here.

The point of the exercise I take it is to disprove pejorative stereotypes of a siesta nation by demonstrating just how hard the Greeks actually work. The money shot is the OECD working hours statistics: at 2,120 hours per person, the Greeks blow everyone but the Koreans out of the water, working our knuckles to the bone. Take that, Merkel!

...except, there are several catches. But first, let us enjoy the music:

The first catch has to do with the contribution of the self-employed.

Toggle from total employed to dependent workers only (i.e. employees), and the average goes down to 1,777, which is still a very decent amount of work but hardly the triumphant show-stopper some might have hoped for. And it actually says pretty much what we knew; that in Greece the employed have it a hell of a lot better than the self-employed (that's business owners and freelancers, but also our small army of 'contractors' who are simply the thralls of rogue employers). Now these guys work like f***ing dogs. Consider that at the end of 2009 they made up about 36% of the workforce and yet adding them to the total increases the average working day by about a quarter. A calculation based on Q4 2009 figures tells me the average self-employed person worked over 2,700 hours a year or 53.5% more hours than the average employed person; these people account for 46% of all the hours worked in Greece. Adjust for this and you'll find that, instead of working 53% more than the Germans our proletariat end up working 35% more. Still a lot by the way. But it goes to show that the real graft in Greece takes place outside the cushy reality of employment regulation and that's nothing to brag about.

The second catch has to do with part-time employment, which our unions have declared war on from the get-go. You see the OECD figures actually lump part-time and full time employees together without any adjustment so countries with a larger percentage of part-time employees will tend to have fewer average hours to show for it. As this OECD table will show you, part-time employment is very rare in Greece. To take the example most likely to raise eyebrows, 22% of German workers work part-time against 8% in Greece, based on a common definition of part-time work to ensure comparability. Bearing in mind on top of this that according to Eurostat the average part time worker works 48% of the hours of a full time worker in Greece and 44% in Germany (source), the discrepancy between German and Greek part-time employment artificially adds about 8% to the working hours of the average Greek vis a vis the average German.

The third and biggest catch is that the data reported by the OECD are simply not comparable between countries even with our little adjustments in place. The OECD warns, in its metadata:

The data are intended for comparisons of trends over time; they are unsuitable for comparisons of the level of average annual hours of work for a given year, because of differences in their sources.

So the OECD are not happy for people to cite comparisons. But surely, you may object, the differences can't be that vast! Well, elsewhere the OECD says:

For several EU countries, the estimates are made by the OECD using results from the Spring European Labour Force Survey. The results reflect a single observation in the year and the survey data have to be supplemented by information from other sources for hours not worked due to public holidays and annual paid leave. Annual working hours reported for the remaining countries are provided by national statistical offices and are estimated using the best available sources. The data are intended for comparisons of trends over time and are not fully suitable for inter-country comparisons because of differences in their sources and other uncertainties about their international comparability.

I think we're all getting the gist of this by now. But there is more: an international review of labour statistics by the US Bureau of Labor Statistics found that LFS-based measures of hours worked, like the one we use, tend to provide consistently higher estimates of hours worked than other measures, probably because they are more accurate. How do they put it...

Data series of average annual hours actually worked based on normal and contractual hours concepts from administrative sources yield low measures of hours worked, whereas series based on establishment and labor force surveys provide relatively higher measures. The highest levels of hours worked are estimated directly from labor force surveys.

We've established by now that either the methodologies used by many other countries to measure hours worked tends to artificially deflate the actual number of hours worked. To this I should add that ELSTAT does not, as some people might think, have an *incentive* to inflate the number of hours worked to make us Greeks look more industrious.

You see data on hours worked are rarely published on a standalone basis (and few people actually notice them when they are) but are rather used to inform labour productivity estimates at the European and international levels. If anything, ELSTAT has an incentive to present the Greek economy as an ever more productive one in order to attract FDI and so on, so the thing to do is to deflate rather than inflate the number of hours worked in order to make it look like we're working smarter, not harder. Whether they have enough latitude to do so I don’t know but there’s certainly no incentive to inflate the figures.

This last point also explains why people like the OECD and Eurostat actually tolerate such large discrepancies in the measurement of data; in model-driven productivity estimates that single out Total Factor Productivity from other inputs, all that matters is the rate at which hours worked increase, not their absolute number. So as long as our hours total is internally consistent, the OECD and Eurostat are not too bothered about reinventing the wheel of Greek labour statistics.

Perhaps a better way of approaching this is to check whether hours worked increased or decreased in Greece over the last decade. I think most people's intuition is that they increased sharply but actually they did not, because productivity has grown instead. Hours are down 2.3% for employees (see below) but flat for the total workforce, which means the self-employed have been working harder. Simply put, the employment relationship, whose rules we the Greek people control through the law, is not much less favourable in terms of hours worked than in other countries, and it's getting better. It is what happens outside of the world of regulated work that increases our collective working hours.

Mind you, going by these figures alone the numbers still say in the clearest of ways that, say what you want of the country, the Greek people are not lazy. Good. That will come in handy when we default. They're not very productive either because, let's face it, if you bust your ass making products and services people won't pay for you can work your hands to the bone and it still won't make a difference. But that's another day's blogging, isn't it?

ALL RISE FOR THE NATIONAL ANTHEM

2011-06-21T22:12:00.002+03:00

Or perhaps something more Greek...

CONSCIENCE OF A LIBERTARIAN

2011-06-19T20:55:00.006+03:00

Dear readers, critics and trolls:

I've spent a lot of my time in the last few months debunking conspiracy theories, responding to populist bullshit and generally being contrary to a lot of the popular sentiment in Greece. I am happy to take on this role as I feel it's desperately needed and I enjoy it most of the time because I feel genuine contempt for some of the people I criticise (though not all, and I hope the difference is discernible).

However, it is often the assumption of critics in Greece and elsewhere that enemies of enemies are friends etc, and that since I lambast populist MUPPETS who denounce the IMF and the memorandum I must, by inverse association, be an IMF apologist or "memorandum cheerleader" as one commentator put it. Here's some news for my critics: any idiot can criticise the IMF and the memorandum, and many idiots do. Don't make assumptions on where I sit ideologically just because I don't agree with populist bullshit.

Still, I would like to very briefly set the record straight on this one in one post that I can use in future as a handy reference. Here goes.

I am on the record as saying, back in May 2010, that Greece is insolvent and will have to default.

I am on the very public record as saying, back in July 2010, that Greece was bailed out to save European banks, not Greece itself, and that the bailout was only a temporary liquidity measure, when our problem is solvency. I explained back then that a massive recession was on its way and that there's no reason to expect anyone to lend to post-memorandum Greece who would not lend to pre-memorandum Greece, as the country will be more indebted and less capable of growth; hence the importance of reform. Finally, I pointed out in that interview that default has been historically proven to be a workable solution to a solvency problem and is an option for Greece. I still believe this, although people have to realise that timing the default is crucial and getting people to demand one right now is not going to help.

What I believe of the IMF is, first and foremost, that its intervention is tantamount to a loss of sovereignty (hence my 'Vassal State' references), which needs to be reversed as soon as possible (though note that as soon as possible does not mean 'now'). Had I been asked in a referendum, or if I had been an MP at the time, I would have voted in favour rather than accept a forced disorderly default and would have supported that decision even in hindsight. I actually also believe that any debt incurred under the IMF in excess of the original plan is in fact very close to odious and thus fair game for default because it has nothing to do with the will of the people. I have been very quick to sign a petition for an audit of Greece's government debt, even though I strongly disagree with the way the matter has been treated by Debtocracy.

That said, I agree with some of the IMF's programme, including liberalisation of the labour market and the professions, privatisations and of course with fiscal austerity itself. I wish less emphasis was placed on tax and public investment and more on benefit reform and government consumption. I also believe that the IMF reforms that I do support should have come at the urging of the Greek people, not some outside agency. If we can't do it for ourselves, we'll only reverse it when the IMF is gone.

My view is that the IMF's proper role is to administer an orderly default in Greece, a role which they are refusing to perform properly because they lack the right theoretical or practical tools. It doesn't help that no one in power can openly admit that Greece will have to default - least of all the IMF. Still I think the IMF realise their plan doesn't work and have resorted to openly fudging the numbers.

A libertarian's instinct is quite simple in these cases: insolvent debtors (like Greece) must be allowed to default and creditors must be allowed to take their losses without compensation. That's how it's supposed to work. I do believe this but I also think that human nature introduces some constraints - make people too miserable too quickly and they will turn back the clock by decades. The closest I can think of to a good compromise is bail-ins, and I've called for this to be our primary response.

I am on the record as demonstrating that the cost of internal devaluation without substantial reform will be enormous, throwing living standards back to the late 60s. However, I also realise that unilateral withdrawal from the Euro would be enormously costly and even impossible. This means that I believe in striking a deal with Brussels and Frankfurt which would involve the entire European banking system.

The deal I would like to see would be based on bail-ins, forcing creditors to accept equity stakes in debtors which would then allow calmer markets to price in the right level of default - Europe would only have to use its bailout tools in order to ensure no one takes an equity stake in sovereigns. I am also a big fan of Europe advancing future subsidy money to us instead of handing us any further loans, which will help, in the post-default world, to ensure that we are weaned off the corrosive influence of European subsidies and might actually increase FDI.

I have written before that the purpose of bailouts is to give one party (usually the Government but others too) some time to reallocate losses from a default away from the people they want to protect. In this case, the EU and IMF were always going to opt to protect European banks, and the Greek government would opt to protect their constituents - which is not to say the Greek people; just that part of the Greek people that they think are important to their re-election. Although if I'm honest, it's up to the Greek people to put pressure on the Government with regards to who needs protecting. To me the optimal scenario now is one in which we use the bailout to buy time to return to a primary surplus - after which point we default on as much of our debt as we can get away with.

The reason I am so hell-bent on an orderly v. a disordely default is two fold. First, because we need to be able to finance ourselves after the default. If we give the wrong signals, we could be shut out of markets for many years and if we don't have a primary surplus that will mean more pain (see here).

Second, unlike Dubai or Iceland, or even Ireland come to that, Greece has been relying on its current unsustainable model for 30 years. All of our social structures, all of our politics and all of our economy are tainted by its poison. Remove the loose supply of debt and there isn't readily something else to prop up the way we live. And while letting the political system collapse is appealing to me, letting household finances collapse is not. People say in response that the Greek people can't possibly suffer more in default than they are suffering now. If you believe this, then you haven't travelled very much and are probably less imaginative than you think.

Finally, I believe that, in the long run, publicly traded government debt is a very small subset of our government liabilities and that without reforming the liabilities created by our welfare system we will not become truly solvent even if we somehow manage to default on all of our debt in one go. That's another reason why I don't like the defaultnik literature in Greece - they don't seem to realise that the problem is much wider than the evil machinations of our creditors.

What do I think of the Greek people? We are no better or worse than the Swedes, the Germans, the British or the Zimbabweans. We respond to incentives and when incentives are skewed we act in ways that are harmful to ourselves and others. The role of the state in Greece has been so warped for so long that generations have been born and died believing that the role of the Government is to run the country, rather than the State. Like any other nation, Greeks don't like tradeoffs and it is the role of the political leadership to make tradeoffs explicit while seeking ways to overcome them. Ours did not. They simply pretended they do not exist.

I do believe, however, that freedom comes at the price of vigilance and the Greek people have not been vigilant enough or have accepted corruption in return for personal gains. There is no point at which the Greek political system forces people to choose one party or the other, and elections are free. Sure, the media will come up with their own propaganda in favour of major parties, but frankly it is the citizen's job to see through it. We know who owns the media and can take note of what they do and do not report. Plus in the age of the internet, media oligarchy is no excuse (nor is it a viable business model). I've spent the last five years not watching the Greek media and I still get all the information I need, thank you very much.

This doesn't mean that the Greeks somehow deserve some kind of punishment. Simply that we shouldn't blame outsiders. It does mean however that we are bound by the Government. If you don't like how much power the Government has to bind you into spending and debt, then vote consistently for whoever promises to reduce this power. We have not. Tough shit.

This is a reversal of the Greek saying, "The fish stinks head first", meaning that the leaders are to blame when things go wrong. I don't believe this. Sticking with the analogy, I believe it's relevant when you are a fishmonger but irrelevant if you are the fish, which can only be all alive or all dead but nothing in between.

Nor do I believe that surplus nations have some kind of moral high ground over us. They respond to incentives just as we do. Their incentives are skewed in favour of production; ours in favour of consumption. If we were to swap places they would only act as we do.

I believe in the Rule of Law. I believe that once you denounce that it's Good Morning Zimbabwe in a flash. I believe that it's right and imperative to punish those who have broken the Law, and that we should strive to change the Law so that what is generally believed to be unacceptably immoral is made illegal, subject to evidence of the public's beliefs - via referendum if necessary - and respect for human rights, or else we'd end up making things like homosexuality and atheism illegal.

However, I do not believe that we can expect the Law to punish anything beyond what the Law prescribes, or apply new laws retroactively. If the Courts do not apply the law, then we need to pile pressure on the Government to clean them up. Have we ever demonstrated for a truly independent judiciary? Not in my memory. Another case of failure in vigilance and such a crucial one at that.

While we're waiting for the Courts and the Law to change, it should be social, rather than legal, sanctions that we shoudl use to make things right. The first of these are dinner table sanctions, which we failed to apply - did society shun known tax dodgers in private interaction? Or people with non-jobs in the public sector? Or champagne socialists? Or irresponsible employers? Or the Far Right? Was this stuff brought up at the dinner table? Well if it wasn't it should.

I also believe that we should refrain from the Greek hobby of netting off social ills. Two wrongs don't make a right. If regulation makes it too hard to employ people, we should relax regulation. If businesses get around this by illegally abusing the employment relationship, we should crack down on them. We should not accept one as a pressure valve for the other and tolerate it by turning a blind eye and permitting the other. The same argument works with tax and tax evasion.

Similarly in our misguided tribalism we net off wrongdoing by one faction against wrongdoing by another. If the police are being brutal and have too much latitude in carrying out their duties, we should rein them in, sharpish. If a small part of our anarchist population think torching people alive is fun we should catch them and bring them to justice. But suggesting that the two somehow net off, or that one side is more 'right' if the other side is more brutal is tribal pointscoring bullshit and people should wear bells for indulging in it.

Finally, I believe in Parliamentary Democracy. No I don't believe ours works. I believe in Proportional Representation, which keeps parties on their toes and forces them to learn to compromise and build bridges. But to denounce the whole thing is ludicrous. Look at the happiest places on earth, or the most equal, or the most just. Their system is more similar to ours than to any spurious notion of Direct Democracy. DD works for whichever 200 people in Syntagma are close enough to the Assembly to take the floor and vote, but it doesn't work for 12 million people. I am happy to be proven wrong. The closest we can get is referenda, and I am entirely in favour having those; we don't have enough as it is. As long as we realise that the will of the people can change and are mindful that we don't get locked in to what people believed at one time forever. All of this should be written into our Constitution so that the Greek people can trigger a referendum relatively easily. We cannot, as things stand, and that's wrong.

So this is what I believe. Please leave comments if you disagree and I will try to update this to explain as many of my views as possible.

#AlphaFAIL [UPDATE]

2011-06-14T05:07:00.017+03:00

UPDATE #2: Please make sure to note CoveringDelta's response to my critique and also his comments on this post. Dimitri has done the honorable thing and issued a correction as well as a robust defence of his editorial choices, and so is owed - as he correctly notes - the same courtesy. I have therefore amended the language of the post as requested by him; apologies for the delay, Dimitri, but I was travelling most of yesterday.

UPDATE: Alphaville have been in touch about this almost immediately over Twitter, and issued a prompt correction that seems genuine enough to me. Try not to give them too hard a time, as to err is human and they have served us all well in the past. I am still not happy about that post being up for everyone to find but at least a certain level of integrity has been restored.

I hope Zerohedge will do the same, as it turns out they too have reposted this hoax. Needless to say I'm pulling them from my list of links as well, but I think we'll have to take them on tomorrow. Suggest Twitter hashtag #ZeroBrains

I'll restore them to the blog's links eventually but let's give them a few days first. I'd hate to have to take them back off again if they relapse.

Readers will not that I've also spent some time criticising the source that originated the Alphaville story in the first place: NY Greek Demetri Kofinas of @coveringdelta who in my opinion could have done a little bit more digging on the usual quality of S. Chios' reporting or at least listened to what he cites as his sources ('the internet', 'the bibliography', 'K. Hardavellas'), or at least questioned why it is he cannot provide footage of the works but must cut to black and white archive photos, all the while urging VIEWERS to go see for themselves. Presumably if viewers can go and see, so can a TV crew, yes?

I would add to this the sheer impracticality of MPs walking 9-10 km in the (supposed) tunnel to Peireaus, and whether it would have made sense to them to risk getting trapped in such a thing when there are perfectly serviceable alternatives.

I still wish to note Demetri's response to the objections of commentators on the Alphaville site:

@ George

It's from a mainstream news outlet in Greece George. What do you want the FT to do, send an investigative team to Lykavito and search the mine shafts with little flashlights? It's a globalized world. You do what you can.

DIMITRI, YOU *ARE* THE SOURCE!!! It is you that Alphaville and the rest (none of them Greek speakers) trusted, not a TV programme they don't know in a language they can't understand. Just because you're a not journalist doesn't mean you can't caveat a story, especially when the stakes are so high.

Now as to how Chios' say-so got turned into an almost-publishable fact... That tends to happen when other, more serious people who however don't have the time to do any background work on the story refer to it in the understanding that it's *just about* plausible enough, and so onwards until you reach someone who can be taken seriously (on things that they know about) and is generally assumed by others to speak with authority. So first @StaceyHerbert of the much celebrated Keiser report posts this on her feed, then a whole bunch of people among whom @LorcanRK, Chief Europe Strategist at Trend Macrolytics LLC who added: 'I love this story!' and then of course Alphaville. (She has since indicated she didn't think for a moment that it was true).

===============================================================

THE ORIGINAL POST

Dear readers,

you know I'm the last to blame smirking journos for our economic woes but in this one instance I will make an exception.

Please write to @FTAlphaville and @FTAlpha if you think this is irresponsible bullshit. Twitter hastag is #AlphaFAIL [Note I am no longer using this following Alphaville's correction]

Alphaville is banned from my blog's links until they address this with a sincere apology.

SOMEBODY TOOK TOO MUCH EXTASYNTAGMA!

2011-06-14T00:33:00.014+03:00

Twitter friends alerted me this morning to a new batch of delusion being peddled by the pub crawl crowd in Greece. Readers will recall that pub crawl theories are a reference to one of the best analogies I’ve seen so far of Greek debt repayment delusions, originally reposted here:

When you’re having the time of your life and suddenly the lights go on and you’re told the party is over, what do you do? Someone pipes up and says: ‘why not go to the bar next to my place and keep this up?’ And the crowd goes ‘Yeeeah!’

We’ve tried getting Indiana Jones to bring back the stolen Nazi gold. We’ve tried free bailouts from the Russians, the Chinese and even the Swiss (WTF dude?). We’ve tried inventing nonexistent oceans of oil and gas, diamond deposits criss-crossing the land, pools of pure gold and uranium and of course LOL-ium¹³⁸, the radioactive isotope of LOL-ium found only in Greek defaultnik blogs, which causes permanent stupidity and whose half-life is a billion years. Now that this crap has failed to catch on we come, finally, to the final pub, the one whose name is never far from the tip of the populist's tongue – the selective abolition of property rights.

Enter economist Dimitrios Kazakis, a recent darling of the Greek Indignados, who shot to fame with this video (titled: THE BEST ECONO-TECHNICAL ANALYSIS EVER MADE ABOUT GREECE, whatever ‘econo-technical’ might mean), which has gone floppily viral like an elderly streakers’ club. I was amazed actually because despite his abhorrent politics he generally sounded reasonable enough to me. Not any more.

In short, Kazakis has written a post arguing that our debt problem could be substantially reduced if not eradicated by taxing the wealth of high-net-worth individuals in Greece. For data, he draws on the Credit Suisse Global Wealth Databook, which readers may recall from my half-finished scenario page here, though cunningly he’s omitted any hyperlink to the original so that his readers may reach their own conclusions. Anyway, I’ve included it above and in the comments section.

With a grand flourish, Kazakis reveals that, according to Credit Suisse, private wealth in Greece is close to 300% of GDP, or an absolute $897bn as of 2010. This he pretends to find shocking but actually, since wealth is a stock figure and income is a flow figure it’s fairly normal. If anything, given that the average economically active life of a Greek person spans decades, it’s only fair that accumulated wealth should be a multiple of GDP. That has been the way of every economy since the industrial revolution.

Anyway, back to the wealth issue, and the CS report. Turn to p. 72, do a little population math, and you will see that of the total household wealth in Greece, a net $162bn as of 2010 ($339bn assets minus $176.5bn liabilities) was in financial assets, and the remaining $736bn was in non-financial assets. This, by the way, represents a 72% rise in private wealth per adult between 2000 and 2010.

Naive readers will predictably recoil with shock at the massive numbers. It must be the rich weighing this upwards. He must know what he’s talking about, look at how big his numbers are! Actually, at under $100k, mean adult wealth in Greece is equivalent to a modest house owned between two people. And home ownership in Greece is a staggering 84%.

This is where, pumped up on hopium, or perhaps Extasyntagma, Kazakis bids a fond farewell to reality by assuring his readers that:

...these data are derived from private wealth management firms and refer only to those with enough wealth to merit management by professional asset managers. This means that this wealth total does not include all of those who hold some bonds by way of savings, or some real estate for their security in old age. The data we provide refer to about 60 thousand Greek residents and this refers to assets held at home (whether liquid or illiquid), which appear nowhere and are registered nowhere.

I am tempted to add: ‘Trust me, I’m an economist.’

Actually, as it happens, he either failed to read the report properly or is lying deliberately. You can tell that the 897bn figure refer to the whole population by looking at pg. 84 and multiplying mean wealth per adult with the number of adults to derive the same 897bn figure. Moreover, Credit Suisse do explain, in pp. 11-14, where their data on Greece come from. For financial assets and liabilities, it’s actually Eurostat, whose tables do make for interesting reading.

Table 1: Greek household financial assets (in millions of Euros)

Table 2: Greek household financial liabilities (in millions of Euros)

CS’s estimates also rely on extrapolations of publicly available data, using a power law function to simulate the tail end of the wealth distribution – the ultra rich. Credit Suisse are so unconvinced of the quality of their country-by-country estimates of the wealth of high net worth (HNW) individuals (their target audience) that they simply refuse to report on them. In fact, they only seem willing to report estimated numbers (using the methodology described above or international figures at the super-aggregate level. They make these points explicitly in the report, so to assume that Greece has been an exception is a little disingenuous.

So to summarise, Kazakis has either misrepresented his data in order to support a conclusion he was always going to get to anyway, or has been blinded by his prejudice into seeing only what he already believed: that we must seize the assets of high net worth individuals. Why not just say that and be done with, sparing us the amateur dramatics?

Something good did, however, come out of this.

With this admittedly misguided post, Kazakis has scored a spectacular own goal, exposing one fact which, to my profound embarrassment, I had not thought to check. You see, as you can tell by glancing at pp. 84 to 86, both Argentina and Equador, the poster-children of the defaultnik movement in Greece, have more unequal distributions of wealth than Greece, as measured by the Gini coefficient of wealth distribution. So does Chavez’ Venezuela, the darling of carefree populists. So do Communist China and Vietnam, who are nobody’s darlings in Greece but at least they seem to be making socialism produce some gains for the actual people. This is not to say that Greece’s distribution of income or wealth is optimal (a lot of it is still driven by systemic distortions supported by the state) but if the premise is that it is suboptimal because it is extremely unequal, then that premise needs be revisited. Bear in mind here that CS has an incentive to over-estimate, not under-estimate the concentration of wealth in Greece and indeed in all countries as extreme inequality makes more money for the wealth management division.

In fact, since we’re talking defaults again, it appears to me that, out of 13 countries that were in foreign-currency default in the past decade as some would have us do right now, ten now sport wealth gini coefficients worse than Greece’s (source). - Note: some people seem to be getting confused here. The Gini coefficients comes from the CS paper cited by Kazakis. It's only the default info that comes from the source. PLEASE read the blog properly before commenting.

Perhaps they were even worse to begin with, but my take on this is slightly different. My take on this is that default is followed by massive inflation (yes, trolls, that's what happens when you leave a hard currency for a softer one, especially if it's a good idea in terms of competitiveness), and inflation is a cross-subsidy from savers and wage earners to investors (the cleverer ones at least, but then the richer ones can afford cleverer asset managers too). In a more financially developed country like ours the effect would be heavier, not lighter.

And as one of my commentators points out below, other countries usually held up as exemplars, like Denmark or Sweden, both absolutely kick-ass countries by the way, also have more unequal wealth distributions than Greece. So do places like the UK, the US etc, where it could be argued that a lot more wealth is stashed offshore because the financial system is so much more developed. In fact, as another less approving commentator points out, some inequality can be the result of innovation and enterprise and is probably acceptable.

To rephrase: the Greek wealth distribution is actually pretty equal by global standards. And that's that really.

A note on the Gini coefficient:

As per one comment made below, a Gini coefficient is a property of a statistical distribution. There is a wealth Gini, an income Gini (which some people have used in critiques to this article), a longevity Gini and in fact a Gini coefficient for just about anything you can describe through a statistical distribution.So let's please try not to confuse the matter. Credit Suisse's Gini coefficients refer to wealth; because a lot of the consumption of the typical household is fixed, savings rise disproportionately with increased income, and therefore income Gini coefficients tend to be much lower than wealth Gini coefficients. As readers of this blog know, Greece's income Gini, despite being almost half the wealth Gini, makes us a very unequal country in income terms.

For further reading on how Greek fiscal policy affected income (but not wealth) inequality measures in Greece, check out this post if you haven't already.

UPDATE: Kazakis has issued a Call for the Immediate Formation of a United People's Front (Ε.Πα.Μ.). Good luck.

U CAN HAZ DICTATURZ!

2011-06-11T03:09:00.004+03:00

A sensationalist title (some of you are biting already), but do bear with me. This will be a very brief post.

I've heard a good deal in the last two years about how Greece has been hijacked by thugs who have been fleecing us for all we're worth. I've got some sympathy for this statement, though you won't be surprised to find I interpret it slightly differently from many other commentators. Also, I like to back up what I say with evidence. So here goes.

Some of you may have come across the Political Compass: a clever little test that, instead of looking simply at where one sits on the left-right spectrum, combines this with a reading of where one sits on the authoritarian-liberal spectrum: whether they want freedom to prosper or suffer according to their choices or a measure of state guarantees that no matter what crap life throws their way they will be given some basics and a helping hand. I took the test a couple of years back and the result will not surprise you, although my friends' results might.

Now you might think that the libertarian corner is a pretty lonely place, the political naughty step reserved for bloodthirsty neoliberals. But in fact you may find, upon reflection, that I am in very good company. Consider for instance the Political Compass rating of the European ruling parties as of 2008:

Not too shabby, and probably about right actually - although I bet some of these governments will have since shifted to the Left, if they know what's good for them. Now, if only we could sort of replicate this for the entire Greek people - what a lovely insight it would give us. Turns out we (sort of) can. Astute readers may remember this post, where I used data from the 2008 Survey of European Values (which you can get for free here) to look at Greek attitudes towards foreigners.

So I did some snooping around tonight to see what else I could dig up and managed to draw up a nice little grid of the Greek population according to where they sit on this spectrum. You see the Survey asks respondents whether they prefer to trade off freedom for equality or vice versa and where they would place themselves on the Left to Right spectrum, on a scale of 1 (far left) to 10 (far right). I also threw in an extra measure. I assumed that everyone who responded 'Neither' to the 'Freedom v. Equality' question is not comfortable with tradeoffs in general. I also assumed that everyone who rated themselves 5 or 6 (the two middle points) on the Left-Right scale also has trouble accepting tradeoffs. I know I'm goint to get some stick from people over the latter assumption but I'll stick to it. You have a 10-point scale to choose from dude. WTF does 5 mean? Or 6 for that matter. Give me a break.

Run this analysis and you get the following grid breakdown of the Greek population (weighted figures, thank you very much) as of 2008, just before the 30 years' worth of shit we pretended not to see hit the massive, country-sized fan we spent 30 years building so we couldn't smell said shit. It looks like this:

I've done the math for you too:

Old school socialists (including communists): 13.5%
Liberals (modern definition, including but mostly not anarchists): 12.6%
Fascists (big or small f): 10.2%
Libertarians: 16.7%
People who think they don't have to make tradeoffs: ~~49%~~ 47% (The figures in the pic add up to 100 even if my sloppy, early morning sums don't. Still, many thanks for the correction!)

Dear god, we never stood a chance... The people that don't believe in tradeoffs would decide any election hands down. That's why we can't help but elect whatever muppet tells us that 'there is money' (Yorgo), or that his first priority will be the following five priorities (Karamanlis Jr). These are the people that have run Greece to the ground with their stupid voting for years, making a mockery of elections. They are, in fact, collectively, the real Greek dictators.

ZIRZI-RISING: @zirzirikos BLOGS GREECE

2011-06-08T17:02:00.000+03:00

Readers may, for some time, have noticed that my old friend @Zirzirikos is credited as a contributor to this blog. You may have been wondering whether he actually writes here as all. In fact, he does not; he's just doing me a favour as it is comforting to know someone can jump in and take over one's blog should one be flattened by killer cucumbers.

However, as a seasoned Greece-watcher, blogger, technologist, and debater, it was only a matter of time before @Zirzirikos put virtual pen to virtual paper and started writing about the Greek question. Unlike myself, he's not afraid of semi-literate trolling so he writes in Greek.

I am therefore proud to direct Greek-speaking readers to his new blog, Ζιρζιρίσματα, dedicated to commentary on the Greek situation from the point of view of a Greek living abroad. I cannot be sure that @zirzirikos' blog will espouse similar views to mine (our conversations suggest otherwise on several topics) but I'm sure he will argue them as well as anyone could. I'll be checking regularly for inspiration.