Immediately after the traditional 25th March independence parade protesters took to the streets to demonstrate against the government austerity package.
Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts
Thursday, March 25, 2010
Greeks protest during independence day celebration
Sunday, March 14, 2010
Greek riot police forced to retreat
Taken during the general strike in Thessaloniki, Greece. Riot police units attempted to divide the strikers' march into two, meeting fierce resistance which forced them to withdraw.
Wednesday, March 10, 2010
Giorgos Papandreou drives a hard bargain with Obama
After hours of tough negotiation the Greek prime minister, Giorgos Papandreou was happy to announce the full support of US president Obama for Athens's plan to combat speculators and raise new funds on the international finance markets.
Papandreou said that the sale of the island of Crete was a small price to pay for ensuring the country's future and continued economic well-being. Whilst he anticipated that there would be some adverse public reaction, he was sure that Greeks would understand the need for sacrifices at this crucial juncture in the nation's history.
Rumours that the German Bundersband was interested in acquiring a controlling stake in Rhodes were dismissed by Greek minister for Culture and Tourism Pavlos Geroulanos as "idle speculation."
Monday, March 08, 2010
Greece set to explode over austerity package
On Wednesday the Greek government announced its long awaited package of economic measures to deal with the financial crisis the country has been facing since the discovery that the previous conservative government under prime minister Kostas Karamanlis had systematically lied about the country's debt load,. At the beginning of 2009 the Greek minister for finance, Yiannis Papathanasiou confidently predicted that Athens public lending requirements would not go above 3% of GNP, a figure that gradually creeped up over the following months.
However, no one, including Greece's EU partners nor the international money markets were quite ready for the real figure of 12.3% which only came to light following the crushing defeat of New Democracy in the October general elections.
On taking power Giorgos Papandreou, like president Barack Obama immediately found himself in the middle of an economic maelstrom unprecedented in recent history. Unlike America, Greece's chronically weak economy combined with a history of fiscal deception and misinformation meant that newly elected socialist PASOK party had very little room for manouevre with state coffers empty and debt repayments looming. A situation not aided by the role of speculators who saw in Greece a way of exploiting fears about the Euro and so bet on the currency losing value.
The upshot of the crisis is that a socialist government elected on a platform of social reform and aid to the poorest is currently attempting to implement a conservative fiscal reforms which are straight out the Thatcher - Friedman play book and so achieve in five weeks that which the previous right wing administration failed to do in five years in power.
Already swingeing price hikes in the cost of petrol, VAT and and the promise of wage cuts across the board have produced a wave of strike actions and protests. And this is just the beginning. Last weeks marches were marked by violent confrontations between marchers and the riots police who, despite orders by the Minister of the Protection of the Citizen, Mihalis Chrysohoidis used tear gas to disperse those present.
In scene reminiscent of December 2008 the heart of Athens once more resembled a war zone. In addition trade unionists and left wing protesters attempted to storm the ex-ministry of Macedonia and Thrace in Thessaloniki, Greece's second largest city. Like the 2008's outbreak of violence the confrontation are being fueled by a deep sense of outrage and injustice and are drawing support from a wider cross section of society. Enraged pensioners are just as likely to take part in these protests as disenfrancised youths.
As the austerity package starts to bite and the knock on effect of such a drastic change in the economy is reflected in skyrocketing unemployment then these clashes are set to increase in both size and intensity as more and more people take to the streets to voice their disagreement.Next week the country's trade unions have declared another general strike and with the work stoppages are planning public demonstrations which are likely to see a repeat of last Friday's violence.
At the heart of the protests lies the belief that while the country is indeed corrupt and that the public service is bloated and inefficient billions of euros has been siphoned off illegally and that the man in the street is being asked to pay for the folly of the local economic and political elites who have used their power to get rich at the cost of the rest of the country.
The fact that the PASOK politicians asking Greeks to make sacrifices have been repeatedly embroiled in corruption and bribery scandals has done little to convince voters to accept such painful cuts. Over the last decades members of both main parties, New Democracy and PASOK have been accused of a seemingly endless list of scandals involving corruption and influence peddling yet not one MP has ever been convicted or gone to jail. In such a climate of lawlessness where those in power seem able to float the law with impunity few have the moral stature to ask ordinary Greeks to give up so much in such a short time frame.
Although untouched by scandal personally, Prime minister Giorgos Papandreou's party is currently facing allegations that the German Siemens electronics corporation paid bribes to high ranking PASOK officials in order to win contracts for the 2004 Olympic Games held in Athens.
The Games which cost three times the previous ones in Sydney provide an insight into how the present economic crisis came about. Massive cost over runs, lack of transparency over contracts and a legacy of expensive facilities which lie rotting and unused across Athens are testiment to Greece's system of crony capitalism where efficiency, cost, competion, and innovation count for very little in an economy where political favours, kick backs and bribery are the rule rather than the exception.
Sunday, February 28, 2010
Greece: Looking beyond the cliches.
One effect of Greece's recent financial problems is that the country has been on the front pages of the world's newspapers and media sites for the last few weeks. It is not the kind of publicity that any country, especially one which relies so thoroughly on tourism would wish for. As a result journalists round the globe have turned their attention to Athens and with it brought with them an array of misconceptions and cliches which they regularly use to lard their reports.
One of the most common is the use of allusions to ancient Greece in order to explain the present situation. This, of course might make for a clever opening gambit but no more explains what is happening at the moment than an attempt to account for Gordon Brown's policy decisions in terms of King Alfred's burnt cakes or Sarkozi's foreign policy by referencing Gaul. By using these sad, old cliches reporters show us how little they understand about the dynamics of the modern Greek state and the political and economic forces that drive it.
Also the fact that Greece is a popular tourist destination visited by millions each year seems to have blinded foreign commentators to the fact that life really is not a beach. A week spent on Crete or Rhodes offers no more insight into Greece's economic woes than a week spent in a crofter's cottage in the Outer Hebrides can explain The Bank of England's base interest rate policy.
On the other hand the traumatic modern history of Greece which reads as a saddening litany of wars, savage political repression, and privation lightened only by a hard won fight to escape crushing poverty has been ignored in favour of pithy quotes about Athenian democracy. One of the reasons why people are so fearful of what the current austerity measures will bring is the raw memories of the hardships of the post war period, a time which saw millions flee the country in search of a decent living. The horrors of starvation and malnutrition are not just footnotes in academic journals but rather a part of many Greek's folk memory.
Along with material deprivation went a brutal system of social control which meant that those suspected of any kind of leftist or even liberal political views were subject to harrasment, detention or exile. Even though Greece's traumatic civil war ended in 1949 the repression it engendered continued for decades afterwards, seriously delaying the development of a modern democratic institutions.
It is against this backdrop, which is rarely mentioned in the foreign press that people are anxious and angry about what is in store for the country. There is the fear that with the massive cuts in public spending likely to be implemented either by Greece's EU partners or the IMF many will tumble back into the kind of grinding poverty that was the norm just a generation ago and that all the dreams they had for their children will become wishful thinking. With such dire economic conditions the fear is that the autocratic reflexes of much the country's political and economic elites will once more find more fertile ground with the desperate.
Thursday, February 18, 2010
Greece: The morning after
However, whatever happens in the coming months the question of what Greece does next in a world in which its financial choices are closely scrutinised by whatever monetary institution steps into the breach to save the country from bankcruptcy has not been addressed. The prospect that an elected socialist government will be obliged to implement a conservative fiscal policy controlled by unelected officials raises all kinds of political dilemmas which Giorgos Papandreou's PASOK administration will have to deal with in the immediate future.
Papandreaou will be forced to challenge directly exactly those public sector trade unions which have put him and PASOK in power. In addition he will be forced to cut areas of spending which have been used by successive government to ensure political support.
The prospect of a place in the Greek civil service has long been the source of political power for parties on the right and left of the political spectrum. This combined by the promise of public sector contracts to economic elites in the private sector form the basis of the country's feudal political structure and in no small measure contributed to its present woeful economic situation.
Instead of land and power being swopped for military service the present Greek version of feudalism sees votes and political support flowing up the system in return for public funds and the influence it garners flowing downwards. It is a structure of patron-client relations which links the heads of the major parties to the humblest villager and is the lifeblood of modern Greek politics.
The ebb and flow of such influence and the complicated web of personal, familial and political relations that it engenders helps explain much of the apparent confusion and chaos of modern life in Athens and other major cities. Much of the country's infrastructure is divided into a patchwork of competing fiefdoms that have formed as a result of the present political setup. Each participant owes their position and continued economic well-being to maintaining the right connections with those above and below them in the hierarchy. In such a system qualifications, skills, effectiveness and ability play second fiddle to being able to curry favour with those who are in a position to advance your career.
Another by - product is chronic inefficiency and confusion as its duty of every fiefdom to ensure that it gets the maximum amount of resources in order to guarantee its survival. Co-operation and cost cutting mean giving up exactly those resources one needs to make sure that money and influence continues to flow to those whose support you need.
The effects of this system also affect the private sectors as the companies competing for contracts with the public sector, a huge player in the Greek economy, do so on the basis of political, personal and family connections. In some cases this takes the form of outright bribery but many others there is the mutual understanding that favours given must at some point be returned. It is no coincidence that many of the country's richest men have media wings attached to their business conglomerations which can be used to promote or attack parties and politicians .
The upshot of this unholy alliance is that crony capitalism and "licence Raj's" dominate the economy stifling innovation and competition. There is little incentive to cut the cost of your product or improve the quality of your service in such a system. As a result Greek companies which dominant nationally rarely have the expertise to break into developed markets where transparency means that methods used at home cannot be employed.
Whilst foreign observers often point the finger of blame at Greece's powerful public sector unions for lack of competitiveness and low productivity the reality is that pay in the private sector has remained stagnant for years and that much critised worker protection laws that supposedly coddle unsuitable employees are rarely applied to non - public sector businesses. Despite a pool of cheap, educated labour which can be hired and fired at will the private sector has done little to prepare for the demands of a modern globalised economy and instead reaped the benefits of low wages while raising prices far beyond the rate of inflation.
It is difficult to see how an economic and political system run on such principles can reform itself in the kind of time scale being proposed by Europe and controlled by exactly those people who helped run the country into the ground in the first place. The obvious answer is that Greece will not be able to implement the kinds of reforms being demanded and that in trying to square the circle the country will tear itself apart as different social and economic groups turn on each other to preserve a semblance of their priviledges and power.
Already there has been a growing wave of political violence with terrorist attacks now forming a staple of the daily news. That combined with a burgeoning crime rate form the background to a society that appears to be gradually coming apart at the seams.
Wednesday, February 17, 2010
Greece's financial problems European roots
Today Greek prime minister, Giorgos Papandreou is in Russia, yet another stop on an itinerary which has seen him flit across the globe in a desperate bid to secure fresh funding for Greece's troubled economy. Faced with $420 billion debt the small Balkan nation with a population of just 11 million has sparked off a crisis which threatens to derail the European Union's grand experiment in creating a unified currency which started in 1999.
The revelations that Athens had massively under reported its debt load and so violated the conditions of the Stability and Growth Pact saw the light of day with the election of the centre left PASOK party in the country's national elections in October. The news that Greece's foreign debt load had reached 12.3% of GNP sent shock waves through European political and banking circles, raising the possibility that the Greek government might not be in the position to honour its monetary commitments.
The chance that a Eurozone nation might default on its repayments sent the cost of Greece's foreign loan requirement soaring and forced Germany's foreign minister Guido Westerwelle to backtrack on previous statement that the country had to put its own house in order before asking its European partners for help.
However, despite the storm of criticism Greece has weathered over its bloated public sector, rampant corruption and falling competitiveness the problems that Greeks face also have their roots in factors which have little to do with the country's internal pathologies that have long been known yet until recently politely ignored by fellow EU members.
As with the other PIIGS (Portugal, Ireland, Italy, Greece and Spain) nations the introduction of the Euro as a common currency has seriously limited the ability of governments to regulate their economies so leading to a fall in competitiveness. Unable to adjust their local exchange rates businesses in Europe's soft underbelly have been gradually losing traditional markets due to the rise in cost of their products caused in part by the strength of the Euro. Unlike their northern European partners such as Germany and France the introduction of the Euro has lead to rising costs and prices which their economies have not been able to offset with rises in productivity.
However, the current crisis its roots in the European Exchange Rate Mechanism which means the the European Central Bank is obliged to support the Euro should it fall or raise by 15% against other currencies. As Britain learnt to its cost during Black Wednesday in 1992 such a commitment means that the currency could be the object of speculators who make vast fortunes selling back Euros to the ECB as art of its attempt to shore up the price of the currency.
The UK burnt through 27 billion pounds in the course of a day in a failed attempt to prop up the currency, making international financier George Soros $1 billion dollars richer and leading to Britain to withdraw its application to join the ERM.
With the chance that such a feat could be repeated on a European wide scale with even greater profits there is the possibility that the intense financial pressure of Greece is simply a stalking horse for a larger effort to weaken confidence in the Euro so leading to a fall in its price on the international money markets and so triggering a buying spree by the ECB which could reap billions of dollars in profits for banks and speculators.
None of this bodes well for Greece since the underlying fundamentals that laid the country open to attack by speculators have not disappeared. The country still continues to be plagued by a lack of innovation and a public sector which has ballooned out of control to such an extent that even ministers have no idea how many people they employ. In addition any serious econmic policy is necessarily hampered by the fact the succesive governments have cooked the books so extensively that the basci data needed to plan changes to the economy is next to useless.
The demands by France and Germany's conservative governments that Greece radically cut public spending and raise more revenue by taxation is certain to create a wave of intense protest by public sector unions who will not willingly agree to pay cuts or loss of jobs. In the long term a shrinking public sector is unlikely to help address fundamental productivity issues which stem from crony capitalism and the existence of shadowy price cartels which mean that Greek businesses have traditionally only invested in innovation as a last result, relying instead upon personal and political contacts with the country's main parties in order to secure contracts and inflated profits.
It seems too much to expect those who have created a system whereby huge amounts of money can be earnt with minimum risk to change the habits of a lifetime and take their chances in the cold waters of real competition in harsh international markets.
Sunday, January 31, 2010
Poverty in Greece
To listen to some international accounts of the current debt crisis you might be forgiven for thinking that the 300 billion euros Greece owes has been used to fund some kind of Balkan version of a Scandanavian welfare state. That the money has been spent on funding an unsustainably generous social safety net.
However, even a brief visit to the country's decrepit hospitals and threadbare schools is enough to disabuse even the most casual observer that that the huge mountain of debt accumulated has been used to improve the lives of the poorest Greeks.
While in theory Greece has a welfare state that compares with other EU members the reality is that much of this provision is of low quality or non-existent. As a result of such systematic deficiencies people are forced to pay for services that other Europeans take for granted. Few, if any student entering the countries universities have got there without massive investment of time and money by parents in the form of expensive extra tuition.
Similarly, medical treatment in the country's supposedly free health care system costs billions in terms private charges and bribes.
Instead most of the money has simply evaporated in a miasma of corruption and incompetence which sees that any public service contract almost invariably goes over cost and requires double ot triple the time originally alloted.
Case in point is the underground system being built in the northern port city of Thessaloniki which started 45 months ago and already is 32 months behind schedule. That number is set to rise as the Itallian construction company which won the countract has announced that it will fire 80% of its employees in March if it does not receive extra funding.
On the other hand the country Greece's bloated public sector can still afford to pay some of its better connnected employees 16 salaries per year. Those luckily to be employed by parliament are paid for 16 months work annually. At the other end of the spectrum tens of thousands often wait months or years to be paid wages owed.
Giorgos Papandreou has been working hard over the last week at the Davos World Economic Forum to try and persuade fellow Europeans and international economic markets that the his newly elected socialist government can reign in spending and raise more revenue. However, how much influence a system that his party has been instrumental in setting up and maintaining over the last 30 years is open to doubt.
For the last four decades both left and right have used the public sector as a way of gaining and maintaining voter loyalty by handing out jobs and contracts in return for political support. As a result the country's infrastructure has been manned not by the brightest or the best but the most faithful.
Entry and progress depend not on competence but on maintaining the myriad of personal, family and political connections that form the basis on any succesful career in Greece.
With unemployment predicted to hit one million in 2010 conflict and clashes between social groups unwilling to make sacrifices and a government unable to pay seem unavoidable. Already farmers have blockaded much of the country's transport network in order to demand one billion euros in funding and sweeping changes in agricutural policy.
Friday, January 23, 2009
Iceland protests turn violent
Protests and confrontation in Iceland's capital Reykjavik escalated today when riots police and demonstrators clashed in the early hours of the morning. As a result two police officers were seriously injured and the police used tear gas for the first time in nearly 60 years to break up the demonstration.
Thousands of Icelanders have been gathering outside the parliament of the tiny Scandinavian nation to protest the present coalition government's handling of the recent financial crisis which has stalled the country's economy and left the island with debt ten times its annual GNP.
Prime minister, Geir H. Haarde also bore the brunt of protestor's wrath when his car was surrounded by demonstrators who shouted anti - government slogans and banged pots and pans, requiring the intervention of the police before he could leave. Such protests are unprecedented in modern Icelandic history.
Wednesday, September 17, 2008
May you live in interesting times
Supposedly this is a Chinese curse and although it's origins are obscure it still remains an apt way to worry and confound those who cross you. Indeed we are living in interesting times and with the global economic system facing the possibility of melt down you can't but help think of similar events in the past. There is a sense of eerie familiarity when one reads about failing banks, unsound lending policies, and government bail outs (click here to read the Guardian's take on all this).
Of course, the Great depression in the 1930's which was triggered by a Wall Street crash on Black Tuesday, October 29th, 1929 is the most obvious precedent but I'm also reminded of the stock market crisis that hit Asian markets on 27th October, 1997. Whilst that did not have a huge effect on the average European or North American consumer there were countries in South East Asia which were as badly effected by this as America had been during the 30's according to the historian Eric Hobsbawm in The New Century .
Just one last thing, many great stock market crashes happen, it seems in October.
* Stock Market Crash of 1929 - The Dow falls a total of 23% for October 28 and 29; then makes a sharp 12.84% rebound on the 30th. However, over the next several years the stock market fell dramatically.
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