Πέμπτη, 17 Σεπτεμβρίου 2009

Latvian debt crisis and Greece

Ms. Christofiloupoulou, PASOK MP candidate for Attiki, gave a speech at a private gathering last Sunday in Varkiza that I thought was very disappointing. I resented especially what I felt was her abuse use of her academic qualifications for political ends by advocating what I regard as crank economics. In politics, this happens over and over again. I wrote in ER.KE.L a reply on Monday. Today an article on the Latvian debt crisis on the RGE monitor and a discussion last night with a local PASOK representative has led me to want to further develop these issues.

Ms. Christofiloupoulou's political speech was the usual Robin Hood politics of the Left: Giving money to the poor with the excuse of needed economic stimulus, chasing the rich to pay for it and promoting state-sponsored investments from the EE. PASOK has been advocating these theories for years and their track record in improving Greek economic performance has been dismal. Further, PASOK has huge moral and political responsibility for Greece’s debt crisis and structural economic problems. Let me go into some detail below:

The ploy of a stimulus based on pensions and wages would only have a temporary stimulus effect but the resulting increase in national debt to fund this would exacerbate the underlying structural problems of the Greek economy. I suppose there is a fair share of corruption and political bartering in Brussels, but the trend in the EU shows a growing reluctance of the large contributor countries to bail out the smaller, weaker members. The facts are that the majority of EU governments are currently center-Right and the economic thinking in the EU has always been more neo-liberal and disciplined than the US.

Greece still has an oversized, bloated government sector that is unsustainable for the means of the country. Because it is a bastion of political patronage, nobody wants to downsize it. Further, it subsides a lot of private sector business, so there are common interests to keep it alive and growing. Whilst the GDP has increased over the years and was widely touted in the Simitis days, economists like Joseph Stiglitz as well as Greek commentators like Panagiotis Kondylis have long pointed out that GDP is a poor indicator of economic performance because it ignores critical qualitative elements.

Greece’s GDP is based on growing consumption. This is other side of the coin in Greece’s entry into the Euro system and EU transfer money. The big EU countries are boosting their exports from Greece and taking control of key elements of the economy at the expense of local Greek production. This is the hidden cost of economic tutelage under EU domination. Further, the US dollar-Euro currency distortions also suck in lots of Asia imports, which is an EU-wide problem. Greece has a bulging trade deficit whilst local production is in a shambles and services are not developing at a satisfactory rate. There is also the issue of the financial sector, where bank profits have been enormous due interest spreads between deposits and loans, which are probably a world record. On the other hand, they are currently carrying a fair share of bad debts and exposure in investment paradises in the Balkans.

Stimulus money for pensions, etc may provide some relief to middle men in Greece, but the primary benefit will go to boost consumption for EU and Asian exporting countries rather than doing anything to improve in imbalances in the Greek economy. There will be little bang for the money spent, especially in view of the need to fund this by further debt. On the other hand, with the declining productive base and the economic downturn, Greece has an eroding tax base. Long run, only more new business and investment will provide new jobs, businesses and a broader tax base. Apart from her reference to timeworn ‘carrot’ of EU transfer money, Ms. Christofiloupoulou totally avoided these issues.

PASOK is ideologically against private foreign investment. Already ND has tried to maximize participation in EU programs. It is a great political ploy, but this money is slowly drying up and there is not nearly enough productive investment to make up for this. The great success of the economic programs of the Junta years was due to the increase in private foreign investment and reasonable levels of public spending on infrastructure, albeit there were some inflation problems in the last 2-3 years of this period. The political system subsequently has largely failed in making Greece an attractive place to invest for foreign investors. Their record on controlling costs and running government efficiently has been dismal.

Greece badly needs to encourage entrepreneurship and innovation. The current state university system is a disgrace. It needs autonomy, revamping with a proper administrative structure, accountability and reorientation to serve the private sector rather than the public. There is very serious problem with labor productivity and entitlements; so I append below an article on Latvia, which is very pertinent to Greece locked into the Euro system.

Neither PASOK nor ND really wants to face the facts but PASOK is definitely further off base out on left field. Simitis avoided needed structural changes like the plague, but now he is démodé anyway. Ms. Christofiloupoulou’s rant on Sunday had nothing new in thinking and was not encouraging.

See for comparison Latvia Defies the American Conventional Wisdom: http://www.rgemonitor.com/piie-monitor/257446/latvia_defies_the_american_conventional_wisdom

Έλλειψη σοβαρότης

Έλλειψη σοβαρότης της ΝΔ αποτελούν οι ανόητες επιθέσεις στο ΛΑ.Ο.Σ ως 'ακραίο' κόμμα. Οι ψηφοφόροι ΛΑ.Ο.Σ δεν είναι μόνον πληβειακά στοιχεία, αλλά και παραδοσιακοί αστοί. Πολίτες της κατηγορίας αυτής είναι οι διαμαρτυρόμενοι εμπράκτως για την κάκιστη εικόνα και τις ισχνές επιδόσεις της ΝΔ.

Κοινή πολιτική λογική οδηγεί αβιάστως στο συμπέρασμα ότι ο προεκλογικός αγώνας δεν αφορά την προσέλκυση ψηφοφόρων από τον «μεσαίο χώρο», διότι αυτός κατευθύνεται σταθερά προς το ΠΑΣΟΚ. Πρόκειται για ad hoc ψηφοφόρους που έλκονται από όποιο κόμμα προηγείται.

Ο Καραμανλής διχάζει παρά να ενώνει τον πολιτικό του χώρο. Μέγα λάθος τακτικής που περνάει τη σκυτάλη στο ΠΑΣΟΚ!!! Μόνο μια σημαντική νίκη του ΛΑ.Ο.Σ θα σώσει το πολιτικό μέλλον της χώρας με μία εθνική αναγέννηση.


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