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Greek FinMin Reveals the Benefits of Haircut-Agreement

Greek Finance Minister Evangelos Venizelos believes that the October 26th Agreement with EU gives country has up to four times … more benefits in relation to the “package” of July 21th and the relief of interest rates worth of € 4.5 billion annually – that is “as much as a ‘multi-bill’ per year “[containing taxes, lay offs, pension and wages cuts] as he said.

Informing the Greek the public about Wednesday’s night/Thursday’s morning Haircut-Agreement, Venizelos claimed that in the ‘fine print’ of the Agreement there are no new austerity measures, and that giving up “national sovereignty” was out of question.

But he acknowledged that there are problems  with the insurance funds and he promised that he would back the funds with funds from the €4.5 billion that will be … “released” through the haircut (pls, see above!).

He announced the timetable for the implementation of the program agreed: before the end of 2011 it should be put in place and be approved by the EU Member States,  by early 2012  the transaction with private investors, the news PSI, should start been implemented.Venizelos  presented the benefits of the new “package” as a  total of €100 billion (plus €30 billion in cash) but he declined to clarify whether the aid to banks will eventually come in form of common or preference stocks.

“We have quadrupled the benefits,” he said and stressed  that while the agreement of July 21 showed a 11.6% reduction of the  debt, now “we have a reduction of 50% which is 4 times greater. We are relievedthat we’ll pay less interest rates, we will reduce the marketable negotiable debt from €206 to €106 billion with an average 4.5% interest rate and thus the relief exceeds €4.5 billion ie 2.2% of GDP,” he said. (source: Proto Thema )


However Venizelos refrained to start a bet on whether the Haircut Agreement will pass the voting in the Greek Parliament.

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  1. that giving up ”national sovereignty” was out of question—-He’s lying, they don’t have a choice if they want the money, well they do, but they’ll hand sovereignty to Brussels anyway but continue to tell the Greek people it’s out of the question. Don’t believe a word they say when it comes to the EU the whole lot of them are compulsive liars.

  2. iaourti iaourtaki

    What about this new fantastic 15 billions they wanna make out of privatizing as announced in Bruxelles? Is that plus the 5 this year or plus the alltogether 50?

  3. Greece should return to growth in 2014, Mr. Reichenbach (Head of the EU Task Force in Greece) said. Perhaps that made some people feel good. Excuse me; feel good?

    Another at least 2 years of economic decline? Put differently: another at least 24 months of a development which has already tested social peace quite noticeably every month? By the way, growth after 5 years of decline is not growth; it is only the beginning of getting back to where one already was before.

    Now if that is not a final call that something needs to be done urgently to revive a dead economy, then I don’t know what is. Or does anyone really believe that social peace can survive another 24 months the experiences of the last 24 months?

    A well-known international consulting firm published a report which suggests how 500.000 new jobs could be created over the next 10 years. Over 100 specific projects are identified. What should be done?

    Well, first of all – read the report! Secondly, take the first 10 projects, implement them in 2012 and create 50.000 new jobs next year. Any further questions?

    Yes; who should finance this? Well, certainly not the government because government money tends to end up in the wrong pockets (and the government has no money anyway). Private money should finance it! But who would invest in Greece these days?

    Any investor will invest in Greece if he is offered an interesting project, a security for his investment and a competitive business framework. Can this be done quickly in the whole country?

    No, it cannot! But it could be done very quickly in selected parts of the country. The Chinese didn’t want to throw out communism but they also saw that without some capitalism they would never get their feet on the ground. So they started with selected Free Trade Zones. Why not learn a bit from the Chinese?

    So the recipe is quite simple: take the first 10 projects for 2012; structure them professionally and invite bids from investors; define zones where investors are offered all the security, economic framework and profit potential which they desire — and get started!

  4. Of course, only a fool would transfer money to Greece for investment in the present economic and legal framework. At the same time, it is impossible for a country to change its entire economic and legal framework overnight. Thus, Greece at large will have to live with the 14 tax laws in 2 years and all the other nuisances which are a hindrance to do business in this country. To reform this situation for the entire country will take many, many years. However…

    Greece should implement a new Foreign Investment Law which offers the investor everything which he desires in order to transfer money to Greece. If he wants 1 tax law (instead of 14 laws in 2 years), he gets that; etc., etc. It should not be too difficult for Greece to commission a task force which compares Foreign Investment Laws of other countries and designs the most competitive one for Greece. Again, the underlying principle must be that the investor gets what he wants because capital will never flow to Greece by mandate. It will only flow through incentives.

    You will probably say that no investor of sound body and mind will trust Greek laws these days. Maybe no, maybe yes. To be on the safe side, Greece should request the EU to guarantee Greek compliance with the Investment Law. In other words, if Greece did not comply, the investor would get his money back from the EU (e. g. should the investor take a loss from a possible Greek Euro-exit, he would have to be compensated for that by the EU). The bottom line is that the investor should have the same security in Greece as he presently has in, say, Switzerland.

    Think of a wealthy Greek who has millions in Swiss bank accounts which earn him at best 2%. If he has the same security in Greece as in Switzerland but much higher profit potential, why would he not transfer at least part of his money to Greece for investment?

    I am not a great fan of starting a new investment drive with “new-idea-projects” (e. g. a solar energy revolution). Those are untested waters and they take time to develop. You can do those later because right now Greece doesn’t have a lot of time to get at least the first kick into her economy. Thus, I would start this investment drive with import substitution projects because there you already know that a market for the products exists.

    As I said, you can’t apply this new Investment Law to the whole country (you would have a revolution). This is why I suggest selected Free Trade Zones where this law would apply. I guess one FTZ in the Athens area and another one in the Thessaloniki area would be sufficient at the start because that is where the masses of population (and unemployed) are.

    Alternatively, one could “mark” foreign investments which fall under this law regardless where they are made.

    I feel so passionately about this because the movie which is presently unfolding in Greece I have seen twice before (in Chile/Argentina during the 1980’s). The Chicago-Boys did in Chile a lot of things which could not be copied by Greece because they would not work in a democracy. However, their Foreign Investment Law was a true classic. The post-Allende Chilean economy was in a much worse situation than Greece’s is today. And yet, the Foreign Investment Law managed within less than 5 years to turn a formerly corrupt, planned, communist economy into the “darling” of foreign investors (my own employer, one of the large American banks, jumped on that invest-in-Chile bandwagon; transferred 10 million USD in capital and sent me there to manage the project). Please bear in mind that the only solution to a country which has a structural current account deficit is foreign investment!

    I would be happy to enter into a dialogue with you on this (if you prefer via email, fine with me). And I would look forward to your challenging my ideas and responding to your challenges. Below is a paper which summarizes my thinking.

    And here is the text of a speech which I gave to a group of Greek students. Since most of them had a liberal arts (and not economic) background, I made it a very basic, drawn-out speech hoping that everyone would understand. I shouldn’t have worried. They all understood perfectly. In the discussion at the end, there was only one question: “What can we do to contribute to this process?” I referred them to your politicians…

  5. No one speaks of taxing the greatest thieves of Greece : the Greek Orthodox Church. The church in Greece is hugely wealthy, corrupt, organised and powerful. It is the largest landowner in the country. And yet, it pays nothing back to society. Religion is a powerful thing, even speaking of it is taboo. From an article in the Telegraph: “”The Church reportedly owns property worth up to 700 billion euros. That is more than double the country’s national debt, a report in France 24 claimed out on Monday – yet it is the Greek state that pays the salaries and pensions of all Orthodox clerics in the country.”