Tuesday, 14 April 2009

Economic crisis made in Greece.

If I hear one more Greek in Greece bemoan the credit crunch I may have to fly over to hit them on the head with something heavy. A volume of ‘Economics for Dummies’ may be a good idea.
Why the urge for violence? You ask.
Am I doubting Greece is facing an intense economic crisis? No. Of course I’m not. Greece is in the midst of an intense economic crisis with a financial and fiscal crisis to boot. By there is no credit crunch. Not yet and not for a good reason: Greece is not a global financial hub. The credit crunch has not affected Greece. Not yet, not as such. The Greek crisis is at the heart of government, in the local market and in every household.
Leave American bankers and British traders out of it, guys, this is one of ours.

Yes, there is less money sloshing about the Greek market and there is less money going into the state coffers in the form of taxation. But you can’t blame it on the credit crunch.
Of course the flow of international capital into Greece is affected by the global crisis. And the knock-on trade melt-down has affected us all – although the real effect has been on the shipping sector and not on agricultural producers. Besides, as the agricultural crisis can be blamed on government mismanagement of European directives; and as the shipping sector is tax-exempt, all this can’t be blamed for the crisis either.
Neither can we blame the December riots for the crisis. Undoubtedly businesses were lost or damaged but statistically the destruction was not widespread enough to create a financial downturn. And, no, the strikes can’t be blamed either. They don’t help output and they don’t help consumer confidence. But strikes are usually the results of a crisis, not its harbingers.

The global crisis started in the private sector, it started in the moneymaking backyards of big corporates. Not so in Greece.

The government are still trying to put a positive spin on things – despite the prime minister being so very tired, poor thing. They try to argue Greece is faring well, comparatively, but the fact is Greece is weathering a different storm to the rest of the world and the government, rather than being our valiant captains, are part of the problem.

Der Spiegel ran a most depressing article listing small and medium-sized Greek businesses that are packing up and closing down, not because of the credit crunch, not because of the global fiscal crisis, but because the government owes them too much money for them to stay afloat. Yes you read it right, unpaid bills in the millions of euros to suppliers of medical equipment – a total debt across the business of 800 million euros and bills remaining unpaid for over four years.
Businesses that should be recession-proof are closing down, courtesy of the government. Of course there are reasons for this delay in payments and these reasons are built into the system, but even with those taken into account, the delays suffered and amounts outstanding are outrageous even for Greece. Plus banks are not playing ball any more and the business that had traditionally financed the wait with loans can no longer do so.

Can’t the government help?
As I said, they are part of the problem as the banks are not afraid the medical suppliers can’t pay up. They are afraid the government can’t pay the medical suppliers.

So the government is taxing like mad and not paying up.
In many ways, what’s new?
Well, the extent of the badness is new. The numbers are new. Even higher unemployment. Even higher costs of living. Even higher taxes.
And in the midst of it all government secretary general of information Panos Livadas announces Greece’s triumph where the global economies have failed, describing the Greek economy as ‘indestructible’ on the strength of the fact that the cafés are full of customers.
Because sales figures for espresso are how you assess the robustness of an economy.

Meanwhile people are sinking into debt; qualified and unqualified, skilled and unskilled workers alike fail to find work, spending savings, cutting spending, living in poverty. But Mr Livadas is right. This is not the credit crunch. This is a crisis of biblical proportions made in Greece.

Now Mr Livadas keeps quoting growth figures. While people can’t make ends meet.
The banking sector is sound, he says.
So what? No credit crunch does not mean no crisis and what good is escaping the global tidal wave if everyone is being crunched regardless, courtesy of home-grown deficits and deficiencies?

Greece’s national deficit has exceeded the euro zone limit of 3% three years in a row and counting. Meanwhile, and for comedy’s sake, the government is steeped in financial scandals of all hues and varieties including, my favourites, the ones including the Lords’ Lambs, the Orthodox Church – from the Vatopedi land sales to the bishops of Thermopylae and Velestino’s appropriation of 13 million Euros worth of charity money. And the state’s response to all this: the silence of the lambs with dirty hands.

Greece owes 94% of its GDP according to Der Spiegel. Europe practically owns us. Not a very sound investment on their part but I guess they see us as a fixer-upper. Provided the current tenants move out. Because until they do, Greece will retain the lowest credit rating in Europe.

So: corruption in the public sector, bankrupt pension funds, underemployment, unemployment and rising taxes. No wonder the Prime Minister is tired. Inheriting chaos and making it worse must be hard work indeed. Wait till the global recession hits Greece, we won’t be able to get him out of bed he’ll be so exhausted.

So the world is floundering and so is Greece.
But don’t let them fool you. The world’s problems are not at our doorstep yet. As the summer nears, dipping tourism figures will bring the global crisis home to roost. Greek investment in Eastern Europe will also soon be in danger.
But things are bad already. Without the credit crunch.
And although the credit crunch will come to our corner of the world sooner or later, merging with our own troubles and magnifying our woes, don’t let them fool you: this one is a crisis made in Greece.


  1. I'm with you on this one.
    (although I hope you don't refer to my post on the bubble thing)

    No crisis. Just bad politics.

  2. Hello stranger.

    I don't disagree with your bubble post at all - and even tho minimalism is not my thing, I see where you are going with this and may come with you for the ride ;-)

    But on a serious note - I agree it's bad politics. Really bad politics. But bad politics for a prolongued period of time have created very real financial problems on the ground that are experienced as a crisis by those facing them.
    And if it looks like a duck and walks like a duck...

  3. Well I merely meant minimalism on a social level. We both know capitalism - which is still alive and kicking - can't feed off minimalism.

    As far as Greece is concerned, there's not much the governing parties can do. I hate to say this but there are not politicians that have the insight and the knowledge to help get the country out of that mess.

    And it's really easy for Karamanlis or whoever to try and blame the so-called "crisis" for the financial problems that Greece is facing.

  4. Δυστυχώς θα συμφωνήσω μαζί σου...

  5. Καλή Ανάσταση και Καλό Πάσχα με υγεία και χαμόγελο!

  6. @ bastard: I know what you mean – I’m just messin’ ;-)
    And I agree that it would not hurt Greece to move – on a social level – away from the culture of the luxury brand and glamour-seeking demeanour. And capitalism can survive without the sort of conspicuous consumption Greece has witnessed in the post-Papandreou era.
    And sadly you are spot on. The politicos can do nada at this point. They just don’t have it in them. No ideas, no backbone, no energy. They wouldn’t know where to start even if they wanted to do something about the mess. Which they don’t.

    @ Thanos: ‘Aστα φιλε μου. Και μη χειρότερα...

    @ Molemou: Καλώς τον και καλο Πάσχα και σε σας!

  7. στη κουβέντα σας θέλω απλά να προθέσω και αυτή τη μοναδική εσωστρέφεια αυτού του λαού, ως παράδοξου καταλύτη στην οικονομία, στη κοινωνία, στη σκέψη, στα πάντα...

  8. El Romandante - μαζί σου. Κάτι τέτοιες στιγμές με πνιγει κι εμενα η εθνική υπερηφάνεια...

  9. Greek crisis is going to affect us all, other democraties will follow the same path under the dictatorship of the IMF, CBE, and the EU....