Feb 7 2012

Colourful nonsense

[As the Greek politicians are drawing and re-drawing their “red lines”, their minimum thresholds against the demands of the troika, other ‘colouful’ Greek idioms come to mind, about “green horses” (meaning, imaginary realities), “black midnight” (meaning, utter ignorance) and, excuse my French, “blue ding-a-lings” (meaning, nonsensical drivel)…]

In his latest intervention on the Greek issue, the famous economist and Nobel laureate Paul Krugman argues that the new measures proposed by the troika will not work and instead will exacerbate the problem of the Greek economy, sinking it deeper into recession. This is exactly the case; but this is not the issue.

In his latest intervention on the Greek issue, the famous economist and Nobel laureate Paul Krugman argues that the new measures proposed by the troika will not work and instead will exacerbate the problem of the Greek economy, sinking it deeper into recession. This is exactly the case. Reductions in social security contributions will weaken the revenues of the pension funds and of the state. Cuts in the so-called “minimum” wage (which, however, in Greece is actually a wage floor on which other wages are indexed, not a mere minimum on hourly pay rates) will further weaken consumption and (labour) demand. And the reduction in government spending will further reduce liquidity in the economy. Further compression of labour (wage and non-wage) costs will not bring new investments and will not ‘push’ towards a reduction of undeclared employment and of the informal economy, because the structural problems – the high investment risk and the organisation of production around micro-units with low propensities to re-invest their profits and an orientation towards cost-based competition – will remain.

But all those who object to these measures on the basis of the above, fail to see that the alternative is not the preservation of the existing status quo, but rather the total bankruptcy of Greece. A bankruptcy that will fully erode people’s incomes, will evaporate asset values and will lead, immediately or eventually, to a Greek exit from the Eurozone.

They fail to see that this is it: there is no more the luxury of choice. The only thing that is, is the responsibility – one of truly historic proportions – to maintain the country’s position in the European political and economic system and to start (re)building things from scratch.

Those who are fighting in anguish for the preservation of supplementary pensions and who strive for the introduction a minimum floor on the proposed cuts, should better agree today on the (unjust and unbearable) horizontal cuts that the troika so desperately demands, and start from tomorrow, first thing tomorrow – since they care so much –, with new legislation that taxes high incomes and commits the accruing revenues for the introduction of a solidarity allowance for low-income pensioners. Because all these agonising fighters should know – and do know – that recipient of the €300 supplementary pension is not only the desperate elder who can hardly maintain herself and pay to keep warm in the winter, but also the 58-year old retiree with the fancy sports car, whose basic pension is four times that of the ‘elder’ and is nicely supplemented by a couple of thousand Euro of (typically, undeclared) income from rents. So let those who care so much, let them agree with the troika on an EU-sponsored introduction of a computerised system for recording and monitoring real estate holdings (hardly a cadastre – since the country has not been able to do even that, 30 odd years into its accession to the European Community) and let them start intensive and extensive checks on the use of property declared as empty or owner-occupied (e.g., holiday homes). Let them identify those who systematically conceal their supplementary incomes, let them tax those incomes, and let them use the obtained revenues for the establishment – at long last! – of a fair and redistributive social policy system. Let them seize those houses that produce undeclared proceeds and let them allocate these houses to the “neo-homeless” – for whom so much they seem to care.

But this will take for ages, you may rightly say, and by the time all this happens people will go hungry. Well, let them do! Why, will they somehow be fed if the country goes bust? Will they enjoy the delights of some imaginary feast of which the troika – and people like myself – are so tragically unaware of? I say let them go hungry – but give them the hope, and the assurance, that something is changing, that something is being done, that there is a reason for all this. Because if we do, we will then be able to say that we have the will, we have the resolve, we have the capacity to change. And we will then be able to turn to this infamous troika and demand – yes, demand – better terms for the loans and less stringent measures. And if we do, then we will have Paul Krugman – and common sense – as our undisputable ally. Only then. Not by refusing to face reality, not by pulling out silly-old “red lines” and by self-volunteering as some sort of “defenders of the poor and the needy” – while in reality perpetuating the society’s free-fall into poverty and deprivation and tragically wasting the last drop of dignity that the country possesses.

So let us put aside the “red lines” and all this colourful nonsense and let us all try, let us work together, to re-build this country from scratch and take it to the position that we think it deserves to be. If we can. If it deserves it.


This entry was posted in The Greek Debt Crisis, The Greek Economy, Vassilis Monastiriotis. Bookmark the permalink.

3 Responses to Colourful nonsense

  1. evi says:

    How safe is it to assume that most retired people have ‘typically undeclared’ income from rents? One would easily add that at the age of 60+ a great percentage of houses have only one person getting very low pension (said the the man; not the all times housewife) and still pay rent. I am wondering what makes so rational the horizontal cuts and the belated, postponing it to the future, reform (another to an endless series) of the tax law? Further, we all know that the tax law is not such a problem, its application is the problem. In this sense, to what kind of ‘structural reforms’ can we so violently proceed and be it successful? Other than this I agree with you in general and we should consider seriosuly your last sentence. Maybe this country doesn’t deserve any rescue.

  2. Vassilis says:

    Just to clarify, I wasn’t suggesting that “most retired people have ‘typically undeclared’ income from rents”; rather, that “most incomes from rents go undeclared”.

  3. F says:

    It is safe to assume that the only cause of Greece’s present crisis is just an outrageous overspending. But this is not the case. To be sure, when Mr. Simitis secretly arranged the swaps deal with Goldman Sachs, the population was living in “black midnight” avelys you say. His favourite motto by that time was “Powerful Economy – Powerful Greece”. The same “black midnight” situation occurred when the subsequent governments masked the real debt falsifying the state logistic books. After the ND’s minister of economics revealed the fraud for the first time the Greek Statistic Service (ELSTAT) was soon praised again for the professionalism of its accounts. Things would be very different if people happen to know the real situation. When Greece entered the Euro zone prices went up. People was grim at the situation as they realized that “1 drachma became 1 euro”, meaning that a cost of 10 drachmas turned to be 10 euros. By that time people – at least – were not sure that they wanted this currency change, that finally benefited mainly the construction companies that soon involved in the Athens’ Olympics. Greece became a very expensive destination for tourists, especially from US and states with weaker currencies. Of course you Know that from the Eurozone formation the mighty benefits were for Germany that with a cheaper (than mark) euro was capable of boosting it’s exports. But this didn’t happen to Greece (http://www.ijesar.org/docs/volume3_issue1/euro_technology.pdf pg.28) that it’s accession to the EMU had already negative effects from the beginning (http://www.asecu.gr/Seeje/issue07/koukouritakis.pdf).

    But who is responsible for checking out the logistics of the member states in the Eurozone? The Greek pensioner is definitely not at any rate (as he is not capable of borrowing trillions from the markets) and anyway Simitis’ transactions were not illegal by the time of commitment. So, the fact is that there were not any monitoring mechanism and at worst a member could legally mask debt without informing anyone. Of course it is rather naïve to insist that Germany was also living in a “black midnight”. That it turned a blind eye is a more logical explanation.

    Change in Greece is not only necessary but it is welcomed. In the last two years I must say that there is already a significant one. And this is not due to the fact that Papandreou Knowing already the graveness of the situation won the elections back in 2009 by deceiving once more the population with his favourite motto “there are money!”.

    It is fact that people remained uninformed about any of the consequences of the first memorandum that PASOK swiftly signed in the first place by the hand of it’s minister Papakonstantinou without even passing it from the Parliament and when he did it, it was by 160 votes and not 180 that an international contract would require.

    Now, an unelected government is going to sign the second memorandum, passed by the votes of PASOK, ND and DC while 21 New Democracy members and 13 Pasok members voted no and some dissidents were hastily replaced by substitutes “overnight”. It must be noted that the most recent poll gives to this three parties 6,7%, 21,4% and 1,9% respectively, comprising together a total of 30% (while 20% don’t know yet what they will vote). The democratic deficit has become grater than the economic one and unfortunately the IMF- ECB experiments are not convincing anymore.

    I remind you that according to the first forecasts Greece’s GDP should be + 1,1%, since 2011, unemployment was to reach up to 14% in 2013/14 but is already 21%, and the program was to complete at 2014 and now is extended to 2030. The new objective is that the deficit will be in 2020 at the same levels of 2009 (120% of the GDP). Apart from Paul Krugman there are other (http://factdrop.blogspot.com/2012/02/peter-bofinger-imfsecbs-austerity.html) prominent (German) officials (http://www.express.gr/news/finance/564064oz_20120211564064.php3) that don’t believe to the success of this experiment.

    The bet is that Greece will finally default, living a slow death till Eurozone is secured from the contagion. But how worst this will be with an excessively impoverished population, after an unprecedented social dismantling and with every bit of patience being exhausted?

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