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Germans offering solutions for Greece’s economy re-start

I too often fall to the Greek trap of “being introvert”. I focus on the strict Greek reality of protests, mocking and grimy mood, and forget to take a look around. For example, how our esteemed German allies and friends look at Greece of success story, while it struggles – more or less, but rather less – to get out of the crisis.

Germany’s priority seems to be that Greece is lead out of the crisis. On very specific terms and conditions, of course. Nobody offers solution at no cost.

One thing is very clear: we need investments to re-start our economy. Banks-recapitalization takes longer than planned, loans are scarce as a pine tree in the middle of the Sahara dessert. More and more people lose daily their work places and income sources. While our elected (government, ministers) and non-elected (finance minister) leaders do their utmost to make our lives difficult and poorer.

A observation I’ve been repeatedly making over the last three years is: the glorious ideas the others have about the economical future of Greece.  with others, I primarily mean the Germans. IT is so far correct that they do propose concepts of our economic recovery, as no Greek government on power since 2009 has even been able to put on the table project with the title: “Aspects of Greek economic development.” What the Greek governments do – three since 2009 – is just to impose revenue increasing measures.

 So the Germans come with revolutionary ideas.
Professor Hans-Werner Sinn, for example. The economist and President of the “Ifo – Institute for Economic Research”.
The advocate of German neo-liberalism expresses the view that “the peripheral countries need to do what Germany did after 2003 – reduce their price levels and regain competitiveness through domestic deflation.”
Financial Times notes however that Sinn’s “argument is simply not credible” and thus for reasons you can read by clicking the link.
At the recent Annual Meeting of the ifo-Institute , H-W Sinn offered the following four solutions for the North/South problem in the Eurozone:

1. Zero inflation (or even deflation) in the South;
2. Higher inflation in the North;
3. Transfer payments; and
4. Eurobonds.

To be honest I cannot deal with much too much macroeconomics theories and concepts. But I can translate them into my real Greek life. My friends and the readers of this blog, too.

Austrian blogger Klaus Kastner, a retired banker, commented on the theoretical level of Sinn’s proposals. He wrote in his blog:

“There is something missing, as far as I am concerned. Prof. Sinn assumes that all, say, Greece would have to do is to become cheaper (‘more competitive’ is the jargon) relative to the North and positive things would start to happen automatically.

That, it is my firm belief, would not happen automatically in Greece because that assumes that Greece has enough of a productive capability to start booming as soon as competitiveness is restored relative to the North”

Kastner notes correctly that without productive capability, ‘competitiveness is not enough to re-start Greek economy. He mentions

“the need for the North’s shifting investments to the South. The only way to strengthen the productive capability of the Greek economy is to steer investments into it. As the CEO of the Allianz Group said a couple of years ago: “We will have to shift some of our (Germany’s) foreign investments from the East and Far East to Greece”

How should steering investments to Greece would looks like? According to Kastner:

(a) the preparedness of the EU to implement the proper incentives (i. e. guarantees for the political risk including a possible Grexit); and

(b) the preparedness of Greece to offer a competitive economic framework for such investments. That could be either in the form of individual agreements with individual investors or in the form of Special Economic Zones where all investors have those terms. Either way could work.

A friend of mine and KTG reader,  translated the German concept of Greek competitiveness and North investments into following real life impact:

“Once Greeks are sufficiently “competitive” – ie Chinese wages & no social benefits, absolutely begging to work 13 hour days, 6 days a week – Germany will shift factories from China to Greece. On its part, for Greece to benefit from these German ‘investments’, Greece will need to give German companies attractive ‘tax breaks’ PLUS a state guarantee against ‘Grexit’. Thus the German companies will pay little or no taxes to the Greek state and the burden of taxation will fall more heavily on Greek ‘workers’.

German investors, German banks, German economists and Greece as a country,  they all lived happily ever after

PS all but the average Greeks.


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  1. Klaus Kastner is right in his criticism of Sinn in that Greece has not “enough of a productive capability to start booming as soon as competitiveness is restored relative to the North”.
    And he, rightly, mentioned the need of steering investments into Greece.
    But his solution to succeed in this (guarantees and SEZs) is not the way to go either.
    The KTG-reader puts his finger on the right spot there: low wages and no tax-income for the Greek state.

    Where is the solution in making individual agreements with individual investors? Or a State (now EU) that makes investments risk free for a specific group of investors?

    What would be the difference with how things are done now? It’s just another way of starting a whole new wave of corruption and trading favours to friends and family.

    No the only way to get investments back into the country is creating a general climate of stability and justice. Not just in some isolated patches of the country like the SEZs would be. To get a tax code that will last longer than just a couple of months. To get a justice system that is independent and works swift. To break up all the kartels and underhand practices. To name just a couple. In short, to reorganize the state in a way that it does it core business: protecting the weak and those who fall between the cracks of daily and economic life. To uphold and enforce rules and regulations. To protect the lives and environment.

    Because there is enough will to invest in Greece. Opportunities are abundant. It’s just totally madness to put your money in the bottomless pit it has been made to be in the last decennia. But not by micromanaging the economy and getting some huge investments by some huge companies or governments. No, just the small steady flow of investing in ideas and good companies. Do that for two or three years and Greece will find itself in a total booming state.

    It’s still not too late. If everybody could agree for a moratorium of a year in which the Greek state would be reformed in the way I mentioned, with money from the EU to tie things over it still could be done. The talent, inventiveness are still there in abundance in the Greek population and in all those who love the country but are abroad. Just give us that environment and, heck, I even would be willing to re-establish my company…

  2. Since I am cited in this article (thank you!), I need to make some clarifications as to what I mean. It seems to be a Greek reflex to read into every suggestion which comes from foreigners (particularly if the suggestions come from the German-speaking world) an intent by those foreigners to take advantage of Greeks. No one in his right mind would be suggesting that Greece should adopt ‘Chinese wages & no social benefits, absolutely begging to work 13 hour days, 6 days a week’. Whoever says such a thing is driven by self-pity and a victim’s mindset and refuses to look constructively into the future.

    As is said in the article, without investments, there is no good future for the Greek economy. Why particularly foreign investments? Two reasons. First, because they bring the non-interest bearing and non-repayable foreign funding which Greece so desperately needs. But that is only half of the story. The other (possibly even more important) half is that foreign investors bring know-how in all areas which Greece also needs desperately in order to build up a value-generating economy.

    The Greek economy has been reduced to by and large a service economy. The productive capacity is minute. Just one example: Greece’s entire machinery industry has a volume of only little over 300 MEUR annually. That would be a medium size company in Germany. Details can be found in this link.

    Ever since I discovered that the toothpaste which I buy in Greece is produced in Brazil and distributed by a company in Hamburg, I use this as my favorite example. All the product development and production jobs and most of the distribution jobs are outside of Greece. Where those jobs are, there are the wage/income taxes, social contributions and revenues for the state. Greece must get those jobs, those wage/income taxes and those revenues for the state back home. Does one need Chinese sweatshops for that? I don’t think so. All one needs is an economic framework which allows a Greek producer to make toothpaste in a quality/price mix which allows him to make a profit.

    A couple of years ago, McKinsey came out with a report how Greece could create 500.000 new jobs over the next ten years with additional GDP of 50 BEUR. The report does not talk about toothpaste. Instead, it talks about much more interesting projects. Why in the world would no one in Greece pay attention to that???

    Greece does not have to become as cheap and exploiting as China to accomplish that. Take a look at the World Bank’s ‘Doing Business Report’ or at the ‘Index of Economic Freedom Report’ by the Heritage Foundation. Both rank Greece last among all EU countries. Now look up the categories which are examined in those reports. You will not find among them the lack of sweatshop conditions. In fact, most of them relate to structural issues of the Greek economy.

    It is impossible to reform the entire country in such a way that Greece would move from last place to the top of those lists within a short time. That would be a project for a generation. However, IT IS possible to start pockets within the Greek economy where the investor is offered those top conditions which they desire right away. I would put ‘perks’ (like tax gift) at the bottom of this list. Friends whom one buys with perks, one loses when the perks are gone. Instead, I would offer in those ‘pockets’ an optimal economic structure. I refer to it as Special Economic Zones but one wouldn’t need to have zones. One could make individual agreements with individual investors. What do I think would be important issues for investors? Here are just a few: one-stop service to obtain all permits within, say, 3 months; regulations which are for the good of the investment instead of damaging it; free labor negotiation between managements and employees’ representations; etc. etc.

    If Greece does not manage to get more economic value creation into the country, there will not be much of a future. Greece’s creditors should have a great interest in that, too. The only way one get get one’s money back from a weak borrower is by doing everything possible to make him strong again.

  3. keeptalkinggreece


  4. keeptalkinggreece

    Klaus, you’re fully right. people here developed a kind of allergy against theorists.
    ps gotta go right now.

  5. I should add that I do not speak from theory but from practical experience. I lived in Chile when the economic team there turned around an economy which had been in much worse shape than Greece is in today and they set the stage for what today is possibly the strongest democracy and best functioning economy in Latin America. And all of that within 10 years.

  6. Since you have not quite understood what I tried to say, I add a link below which explains this in more detail (article written over 2 years ago). You are probably not aware that issuing guarantees for the political risk of foreign investments is a standard procedure in many countries, certainly in countries like France (Coface), Germany (Hermes) and Austria (OeKB). Typically, there is only a small deductible and the fees are quite low (unless it is a problem country). So if the EU did that, it would not be a bad precedent but only the continuation of policies which are deemed important and growth-supporting at the national level. The economic risk, of course, stays with the investor because he can and is supposed to manage that. The political risk he is not supposed to manage.

  7. keeptalkinggreece

    do I miss the point of a stable taxation system?

  8. The political risk he is not supposed to manage.

    Not even through bribery and fakelaki (Siemens, Janssen, Glaxo Smith Klyne, currently in serious trouble in China for similar non-management of the political situation).
    And isn’t the whole principle of

    issuing guarantees for the political risk of foreign investments,

    precisely that, the management of political risk. Or, to put it differently, an attempt to stop political change once the “right” formula has been found to “attract” investors, and by implication deny the voters the right to change the political landscape if they so decide?
    This whole system, as practiced and suggested, guarantees one thing, and one thing only, the race to the bottom continues, and Joe Soap pays the ultimate price.
    While our governments make the correct political noises about stamping out sweatchops and “inhumane conditions” in the 3rd world, they are creating those very same conditions on home soil. The only difference is they that they are preparing to back up the home-made versions in law. In the 3rd world, the conditions exist because of the lack of a legal frame work.
    Example, the pharma industry in Ireland. 20 years ago, they couldn’t wait to get in, because “the conditions” were right. Today, Ireland faces a 19 billion € reduction in export from the pharma sector alone. They can’t wait to get out, because others are offering “better conditions”. Ever wondered who the beneficiaries of those “better conditions” are? Hint, Joe Soap isn’t.
    And if it doesn’t suit the investor any longer, meaning, if somebody else comes in with a better (=more profit)offer, he packs up an goes, regardless of the agreements and guarantees. I have wathced this go on for years in Ireland. Check out “Fruit of the Loom”, “Semperit”, “Pfizer”, “Dell”, “Ford”, etc.

  9. free labour negotiation between managements and employees’ representations

    First argument on the table: In China/Thailand/Indonesia/etc we are not bothered with minimum wages, we can get a “worker” for x cent per hour.

    Second argument on the table: In China/Thailand/Indonesia/etc we are not bothered with environmental laws

    Third argument on the table: In China/Thailand/Indonesia/etc we are not bothered with pesnion and health care contributions

    Fourth argument on the table: In China/Thailand/Indonesia/etc we are not bothered with worker representation

    etc. etc.

    Now, compare these conditions, ie. demands, to the “achievements” in Greece under the MoU’s and tell me that Greece (and the other periphery countries) are not being pushed into becoming an enormous Special Economic Zone designed to become the biggest sweatshop on earth…

    Here is a perfect example of how your Special Economic Zones work in practice.
    Ford Genk (Belgium) was recently closed (overnight!) by Ford Europe, with the loss of 15,000 jobs. Reasons given, old technology, end-of-line models, economic forecasts, etc. 2 weeks later, it emerges that Ford has decided to move the entire production unit from Belgium to Spain, and continue production there. Suddenly, the models are no longer end-of-line models, the economic forecasts are excellent, the technology is up-to-date. Funnily enough, the very same factory was initially move to Belgium from Ireland, after the Irish unit (Ford Cork) was closed because of old technology, end-of-line models, economic forecasts, etc. In Ireland 6,000 people then lost their jobs.
    Am I really just a conspiracy theorists when thinking that Ford was offered conditons they could not refuse, this time by the Spanish government? Could it even be possible that Rajoy’s illegal party slushfund (the so-called Barcenas account) in the Swiss bank account increased with a few million?

  10. they set the stage for what today is possibly the strongest democracy in Latin America

    You are joking, right?

    this is what former Interior Undersecretary (Lagos Government) Jorge Correa Sutil, currently a member of the Constitutional court in Chile has to say about this “strongest democracy”.

    What our current Constitution needs regarding citizens rights, to assure a real democracy, cannot be changed with a few additional words added on. Rather, a very large eraser is needed.

    Under the current political set up, in terms of electing legislators, 65 percent of the vote weighs or counts for exactly the same as 35 percent of the vote. And when it comes to voting for any important matter in either chamber of congress, 44 percent of the vote is all it takes to make sure everything stays the same.

    the system is afraid…and works against the majority.

    there is just an anointed few… who fancy themselves morally superior to all the rest of us mere mortals.This posture is one that’s been around a long time: it’s called fascism.

    This is a man who currently lives the result of the “turn-around” you describe as a roaring success. And he is not the only one who critizes the “strongest democracy” in Latin America. In fact, it is estimated that some 70% of the population in Chile would prefer to see the end of it by yesterday rather than keep on going the way they are. The same person, when decribing the way the Chilean democracy “works”, quotes an Italian thinker

    there are two ways to resolve differences. The first is to count heads. The second is to cut off heads.

    Nice endorsement of the strongest democracy in Latin America…

  11. Giaourti Giaourtaki

    Greece only needs to get on the bike to propeller its economy, ships and windmills. No more cars, no more oil and no more competition. Getting out of the capitalist market and it’s barbarity and stopping food export and import is the only way to strengthen the economy.

  12. Well, after having read the comments I get the point. And it is not a new point for me. When someone makes suggestions, the reflex is to explain why they wouldn’t work instead of thinking how they could possibly work.

    Let me just share an experience which I had after the Iron Curtain fell. The bank I worked for started operations in just about every East European country. I frequently had to visit these operations. Those economies were really in miserable state (no comparison with Greece today!). Wherever I went, I ran into people with a can-do mindset. I felt a sense urgency on their part to learn from others what they could do to get ahead. I even asked a couple of bank colleagues if they wouldn’t like to come and work for me in Salzburg because, there, I could use some of that can-do mindset to shake up my somewhat spoiled staff.

    The only place where this didn’t work was the former DDR. There, the people expected that the West was going to solve all their problems for them. The West threw money at the problem (over 2 trillion Euros todate) and yet, the East does not have a self-supporting economy to this date.

    I fully recognize the mentality and cultural differences between Greece/Greeks and Northern countries. I am glad that Greece is different. I can also imagine that 30-40 years ago, when Greece was a lot poorer, perhaps Greeks were happier because they could have a way of life, however chaotic from a Norhern point of view, which suited them.

    I would only point out that a hard currency does not allow the way of life which Greeks had until the Euro. Sharing a hard currency with the North (and being a member of the EU with its 4 freedoms) makes it a necessity to assume some of the economic policies of the North. Otherwise, the Greek economy will not be able to employ its people and there will be mass out-migration.

    I make the following suggestion to the readers. Read the below Executive Summary of report prepared by the Athens office of McKinsey and discuss it amongst yourselves in a constructive way. If you are not prepared to read such a short document, then you really have to ask yourselves exactly what you are prepared to do to make your country a better place.

  13. As a resident not an economical expert, how do you kick-start the Greek economy when 1] Wages and pensions have been cut by at least 35% and in some cases 50%. 2] When taxes are increased or new ones added. 3] When there are families without ONE person working, but bills [electricity, water, telephone and internet, a luxury.] 4] For those “lucky” enough to entitled to the dole of 360 Euros, and for the most 12 months. 5] Petrol costs in Athens on average 1.60 Euros per litre. 6] When we are taxed by “paying rent” on our own homed accomodation [which when was built or bought all taxes attaining to them where paid – didn’t see any govt. help us to build or buy, other than loans with high priced interest. 7]When the price of heating petrol was increased to such a height, that very few2 people could afford to have their central heating working, thus sitting in freezing cold [yes our winters here get below 0], and how many famiies didn’t have electricity because they couldn’t pay their bills, plus the new property tax.[A total of 47 different taxes, come with being a home owner]. 8]When an increase [nearly double] in car yearly registration came in force, approx 800.000 people handed their number plates back – thus a loss of income, which had been counted on by the financial ministry. So who lost there? 9] Why didn’t Troika demand the wages of MP’s, not be over a certain amount [theirs is approx 5000, compare that to the new basic wage of 410 [if you are lucky enough to have a job] 10]People who put life savings into govt bonds [over 250.000 Euros] can expect back an approx total sum of 80.000 Euros, round about 2040!!! . 11] Oveer 2000 persons have committed suicide because of the crisis. 12] No ones says that Germany is getting out of Greeces’ bad luck approx 16 billion, and to date, has been stated that into our bail out they have not put in one euro!!! .13] Having a clause in the lending, that the English laws over defaulting on a repayment, means automatically our creditors can have a ‘free for all’. Taking the pickings i.e. minerals – gold -, the Natural gas and petrol fields, re-newable energy sources [solar and wind]. Which are all up and coming businessess to help get us out of the hole we are in. 14]And the icing on the cake [though i’m sure there are many more issues, unmentioned], is the demanding that shops be open on Sundays.??????????? If they arde, does that give the Greeks more money to spend? We are hardly surviving now. Down to basics ad even worse. 15] From 250 persons being provided meals,from food kitchens, that figure has now gone up to 2500 and climbing. 16] If Germany and Multi-national companies come into Greece, they should be taxed just as the Greek businessess are. 17] When Greece was ordering tanks, military equipment from France and Germany, we were the good guys. France and Germany knew our economical situation, but turned a blind eye, and deaf ear because we were providing THEIR factories with work. So they are qually to blame for the position we are in. 18] As for our Economica Minister, he might not be an elected official, but he is a Professor of Economics, from one of the Greek Universities. Can that be said about Thomsen, who after 5 years admit to “making a mistake” with the calculating of the 1st memorandum. Didn’t have the decency to resign.[Think how much he’s getting out of it all, why should he resign?????????[]. 19]The Troika wouldn’t let us have a decrease in VAT, from 23% to even 10%, when Spain and Turkey are at 6%, so that we could become more competative, now that we have the tourist season going. Everything is fine on paper, but reality is what shows what works. That for now. Maybe back later with more facts and figures

  14. What a democratic site you’ve got. Answered as a Greek, living through this ‘crisis’. Where is my reply? File 13 – i.e. rubbish bin. Same way this will end up. Can you only be a German economologist, to reply? What do you know about what you have done to Greece and getting us in this mess. Of course i forgot you were partially responsible, and my reply had too many truths in, got your nosed pushed out so was considered offensive. Bravo. Re=enstate my original reply, for one and all to read and get them to know the other half of the story – the one that is never mentioned, so that German elections wont have the expected and fore concluded results, affected.

  15. keeptalkinggreece

    oh my! ?

  16. I’ve just spend a few hours reading through some 70 pages outlining the ultimate neo-liberal wet dream “Greece, 10 years ahead”. If you are serious in stating that this could even remotely be considered a blueprint for the future, then we cannot but conclude that there is no future.
    The whole “executive summary”, laced with the compulsary pictures of happy children holding hands while staring into the sunny future, makes the most fundamental mistake over and over again. It is once again based on a debt and interest driven economic model, designed to create economic dependency instead of an economic model based on sustainability, designed creating economic independence. The need for “growth” is created solely by the need to pay the ever increasing debt and interest generated by the suggested model, and has absolutely nothing to do with “improving the economy”. We do not need an economy based on continuous growth, we need an economy based on maintained sustainability. A simple example of the suggested lunacy in the report is the building of 2-3 large scale conference centres in Athens and Thessaloniki. Europe already has over 625 large conference centres, so what is being suggested is, in reality, not the development of a new market, but the dilution of an already oversaturated existing market. The only winners here are the developers of the new centres and those who loan the money to do so. If things go wrong, neither is held responsible for the losses, they somehow become ours to pay. Deja vu! Equally so deja vu is the suggested creation of another property bubble as a means to somehow increase “tourism”. Generating income from tourism requires people coming to visit and spending money. Building hotels and holiday homes all over again destroys the very thing those tourist come here for, and creates the concept of “package tourism” which makes money for the foreing tour operator/resort owner, but contributes virtually nothing to the economy of a nation. Ditto with cruise ships. Herding 4000 or so sheep from the cattle ship, sorry cruise liner, through Athens for 3 hours on the “planned stop-over” generates little or no revenue for the retailers in Athens.
    This report is not a summary of a vision for getting Greece out of the trouble it’s in, it’s a blueprint on how to further exploit a struggling country (in this case Greece and its people)for everything it may have left to offer. It becomes really sickening when, in the total absence of a basic national health care service, the emphasis is instead put on “medical tourism”. Whip out the credit card and you get seen to by the doctor/dentist/plastic surgeon (are these tourists entered into the car raffle as well?), however, be an austerity impoverished local and you’ll have to make do with your local street hospital, if you’re lucky enough to have one. Otherwise, too bad…
    The immorality of the suggestions on how to deal with the recognized problem of an aging population are shocking beyond comprehension.
    It is high time that our leaders start looking at economics as if people matter instead of economics where only money matters.

  17. If I had asked for a list of all the terrible things which are currently making Greek society suffer, I would find your list rather encompassing. Except, that’s not what I asked.

    What I asked was that you read the Executive Summary of the McKinsey Report and discuss it. Not with me as a foreigner. Instead, amongst your fellow Greeks. Only Greeks can change their country for the better. Foreigners can and should assist, but they can’t do the job.

    Would you not want to take a few minutes to read the report? Or are you just not interested to read what Greeks could do for themselves?

  18. What got Greece into this mess? In financial terms, that’s easy to explain. From 2001-10, the Greek economy spent 199 BEUR more outside of Greece than it earned outside of Greece. Thus, the Greek economy had to borrow abroad. It not only borrowed the 199 BEUR but, instead, borrowed as much as 283 BEUR. In short, the Greek economy not only borrowed abroad to finance overspending abroad but, instead, to also blow up domestic money supply and to facilitate capital transfers to Switzerland & Co.

    That’s the financial aspect and easy to explain. The trick is to understand the systemic reasons which facilitated all of that misuse of borrowed funds. One reason is, of course, that financial markets threw money at the Greek economy like there was no tomorrow. But the same thing has been happening to Switzerland in the last 2-3 years and Switzerland’s economy is still stable. I am not going into the ‘systemic reasons’ because there are many and some of them are debatable. However, if one only got agreement which domestic processes lead to the current unsatisfactory results, one would only have to turn these processes around to make for a better future.

  19. Klaus, it should be time for you to accept that Greece is a lost case. The only agenda that would make sense is to introduce capital controls, declare a default and start again with the new drachma. That’s it.

  20. Of course, after having read this so called report, it is clear that this is not a list of what Greece could do for itself, this is the ideal shopping list of what foreign investors would want Greece to do so that they can make loads of money again.
    Things they would happily lend billions of € for, at a juicy interest no doubt, in the secure knowledge that if it goes wrong, (which it guaranteed will because of it being based on the unsustainable debt/interest cycle)the above mentioned “political risk guarantee for foreing investors” will kick in and the losses will be carried by the Greek people, not the speculators building conference centres, hotels, etc. History will keep on repeating itself until we learn from it. And until then, big finance will keep on finding ways of dressing the wolf in sheep’s clothing and keep on screwing whole nations for profit, regardless of the price to those nations and their people…

  21. accept that Greece is a lost case

    On the contrary, Greece is a golden opportunity to develop an alternative to the disastrous economic model and subsequent policies of the last few decades. And in that sense, Klaus is right, it is up to the Greeks to grasp that opportunity.
    It would however by suicidal for the nation to do so in the manner suggested and invite the wolf in sheep’s clothing back in through the back door. The report he points us at is nothing short of the ideal shopping list for the foreign investor to optimise profit. It has absolutely nothing to do with developing the country. What is painted as “assistance” is in reality nothing other than an even heavier set of shackles and handcuffs, otherwise known as debt….

  22. Klaus, why do you bother? I enjoy your work and your kindness to address the nay-sayers, but at some point, maybe you need to move on to a country where they are interested in change instead of grousing about the past.

    Bravo Klaus, and I have to admit it was interesting watching you and Ephilant battle it out.. Maybe you guys ought to share a blog together (Point/Counter Point) as I think you guys both have interesting words flowing from those minds of yours!!

    But, I agree more with Klaus (Sorry Ephilant! 😉

  23. P.S., note to KTG:

    This is the first article in over a month that your darn Spam protector (says I have entered the wrong sum) lets me comment on. Will you ever fix that???? arghhh!!!

    and now this to be posted on your “lottery post” which didn’t allow me to post it again:::::

    HI KTG, hope you are well!! So, I have been trying to post for over a month, but the spam number answer never works. I just gave up!! But, thought I’d try again… Will you ever fix that??? 🙂

    So, regarding this credit card issue:

    – First to AntonisX: One way to get around the surcharge by greek businesses for using the card (they try) is to just do what I do and tell my card company and they give me the money back on my card that the merchant tried to charge extra. Then I guess they get it back from the merchant. IT’s happened twice to me and twice the card company gave me back the extra they tried to charge me.

    – Second: My cousin only visits Greece during the summer and is wondering will he be able to get the discount using the credit card even if it’s a US based credit card? And how will the lottery work with US based credit cards since the Greeks don’t have view to these?

    And hello to AntonisX and Ephilant and happy summer to all!

  24. keeptalkinggreece

    yes lol they should do it

  25. keeptalkinggreece

    PS. How can I know the spam protector does not work if you don’t write about it ( we have contact form & e-mail)? Especially, when other readers can post comments.
    also one more reader wrote me about it, his problem lasted just a couple of days.

    and No, I didn’t fix it – no resources available.

  26. Now now, Klaus, you put it right that the Greek economy did indeed borrow abroad. Recklessly. But, nobody can borrow without somebody willing to lend. The borrowing is a direct result of the willingness to lend, not the other way around. Meaning, reckless borrowing is in fact impossible without reckless lending. It doesn’t justify any of what got Greece or others in the mess they are in, it does however highlight the responsibility of the lenders in this mess. A responsibility lenders have consistantly refused to accept or act on And, then there is of course also the criminal intend in a lot of what did/does happen. Anglo Irish Bank, Lehman, Dephta, Dexia Bank, Libor, Derivaties and other Ponzi Schemes.It is hardly feasible to blame Joe Soap for these, but he is made pay for it… They are not simply domestic processes that lead to unsatisfactory results. Of course they exist, and they need to be sorted by the respective people involved.
    Most of them are however firmly joined to the hip with the non-domestice processes that produced/produce unstaisfactory results. In fact, I would contest that most of the domestic factors were born out of the international ones, and are therefore sympthoms of the disease rather than the disease. And we are then back to band-aid economics instead of reforming economics.

  27. Well KTG, if you or anybody else fancies baby-sitting some of the grand, and great grand children, I’m up for it.
    No resources to pay (unless Klaus can organize a loan?), but you will be rewarded with the fascinating insights of life from 7 kids between the ages of 2 and 5. In September the numbers will drop to 4, and then just 2 kids. Who could resist?

  28. keeptalkinggreece

    YES! I can resist! but thanks for the offer.

  29. On this one I agree with you. That’s why I have argued from the start that, back in 2010, the EU should have said: ‘If Greece has a problem with its private creditors, then Greece should sit down with its private creditors and work out a solution. No reason for us to get involved. Presumably, the solution which Greece will negotiate with its private creditors will entail a deferral of interest and maturity payments. Perhaps even a haircut. In other words, the type of sovereign rescheduling which have come a dime a dozen outside Europe in recent decades’ (only that the EU didn’t know that).

    Now, quite likely this would have gotten a lot of European banks into very serious trouble. No sweat. Their governments would have had to bail them out. Many of them would have had to be partially nationalized. And what’s the difference?

    The difference is that European tax payers would have known from the start that of the 247 BEUR which politicians told them that they had sent to Greece from 2010-12 to save the country, only 41 BEUR really went to Greece and 206 BEUR went to banks to save them.

    Just as simple as that.

  30. It is refershing to hear a banker admit to this, you must be about the only one. So, the next question, as far as I know, when I last looked, banks are private companies, just like the bookshop on the corner or the computer manufacturer who keeps moving around the place depending on who offers the best deal.
    So, why

    Their governments would have had to bail them out

    I’m sure the bookshop owner wouldn’t be extended that bail-out courtesy if he makes bad decisions, leave alone decisions bordering on if not downright criminal (Anglo Irish Bank as an example of the last variety). Why not simply take them over, put the gangsters in jail, forget about the gambling projects they got involved in and start all over again with finance as it should be, government (=people) controlled, with funding seen as it should be, assistance, not a debt repayable with interest, creating more debt. For that is the self destruct button would you not agree with that?

  31. I should have been more specific. The government should only have bailed out those banks which, other than the sovereign debt problem, would have been viable (good examples: BNP, Deutsche). And all bank-bail-out’s on the part of governments should always be structured in such a way that the government (i. e. the tax payers) have a fair chance of making a good profit on it; see Citibank). All ohers should have been resolved in an orderly manner, thereby cleaning out the banking sectors and eliminating enormous ‘over-banking’.

    I am definitely not the only banker who understand this. On the contrary, I would suggest that every banker who had some experience with sovereign reschedulings would have said the same thing. No one in Europe listened to those who had experience with sovereign debt problems (Citibank & Co.). Instead, they rejected advice offered on the grounds that the Eurozone was different and experiences in other countries could not be applied. Foolish! Below is one of the many posts I wrote about this issue.

  32. Indeed, but you still insist that it is possible to make money on selling debt

    that the government (i. e. the tax payers) have a fair chance of making a good profit on it

    Isn’t that the very reason why we are where we are, the selling of debt, creating more debt, and trying to rectify the whole thing with the charging of interst, which is in reality more debt again. In very simple terms, if I borrow 100€ and have to pay back 105€, where does this extra 5€ come from. Unless printed by a government, which would dilute the value of the original 100€), there is no way this 5 can materialize, making the whole scheme an elaborate accountancy trick. And as we now know, even the trickiest of accountants of other would-be magicians get caught out by their own tricks, eventually… So why insist on the €5 being produced anyway, at any cost?
    Isn’t it the whole make-belief generated by the concept of “interest” that is indeed at the basis of the problem, compounded by insatiable greed fueled by the “bonus culture”?

  33. Great Blog KTG and interesting comments. I have to admit I am also very impressed with Mr Kastner’s patience. He highlights several crucial points and many of his suggestions are obviously from someone that is concerned about the economic situation in Greece and in Europe in general. Us Greeks have to stop playing the self-pity card and stop blaming the rest of Europe for our state of affairs. The first step is always acceptance…Then we can move on to a new level and try to fix things. Yes, it will take time but it is a chance to make things better than they were and improve the future our children will live in. All countries have been through tough economic times (Asian Tiger economies, Russia, Middle East, Germany after the unification just to name a few) but we have to look ahead and ACT now. Once bitten, twice shy and, hence, we now are extremely suspicious against anyone that is not Greek. That is not the way forward. Many foreign investors have the know-how we have lost over the past decades and can assist us to regain it. We have to be picky of course but not negative against everything proposed by non-Greeks. Ourself is our worst enemy – once we understand that we can move on…

  34. we now are extremely suspicious against anyone that is not Greek

    It is lunacy to be suspicious of somebody based on them having Greek nationality or otherwise. That is the essence of GD policies, and not exactly something to be wished or strived for. Interaction with others is without a doubt a necessity for econmic, cultural and social survival and progress.
    It is however very prudent to be extremely suspicious of the motives of anybody proclaiming to be willing to “help”. Most of the “help” on offer is speculative, with one result in mind, profit. Not for Greece, not for the Greeks, but for the too many vultures circling the corpse of what once was Greece, now, indeed with ample assistance of many Greeks, reduced to an economic wasteland. Ask not who they are or what they can do for your country, ask them why…

  35. You misunderstand how a bail-out works (or rather: should work). The state separates the bank into a good and bad bank. All problem assets are moved into the bad bank. The old shareholders remain shareholders of the bad bank, which will be liquididated. It is highly unlikely that the shareholder will ever see a cent on their investment.

    The good bank is capitalized by the state. The old shareholders might be given a few percentages so that they go along with the restructuring but they have to pledge those shares as collateral for the bad bank.

    The good bank operates for a couple of years to show that it is really a good bank. Then it is sold at a hefty profit for the state. On the other hand, the state will almost certainly take losses on the bad bank.

    If the profits on the sale of the good bank make up for the losses at the bad bank, the state has broken even. That should not be enough. Thus, the state will not only wipe out old shareholders but also make some form of a bail-in of old creditors.

    No investor in a distressed company operates on the basis that he should lose as little as possible on his investment. Instead, he wants to make a profit on it and that is exactly the way the state should operate with a bank bail-out.

  36. I agree in misunderstanding how it SHOULD work, in fact, I don’t think anybody understands this, it is simply another accountacny three hat trick. Best example going, the Irish bad bank NAMA, and the IRBC. So much for a working model of the theory.
    What we do understand is that we are all being screwed on a daily basis to save the butts of those who gambled and lost. The theory is fine, but simply because a theory is, in theory, ok, it doesn’t make the execution of that theory ok. It is the execution of the theory that we are dealing with, and paying for. We apy, they make the profit. Rather the reverse of what should theoretically happen.
    We see how it works in practical terms today, and how much it is costing Joe Soap, while the shareholders in the criminal organisations called bank, ie. Anglo Irish and the brotherhood of financial misfits, walk away with the heafty profits. I am also sure that Anglo is not the only one. Can’t help but wonder who will eventually profit from the musical banking chairs in Greece. One thing I do no, Greece or the Greeks it will not be.

  37. Please recall that the US made a hefty profit on its TARP bank bail-out!