Manufacturing in Europe: Re-emerging or grasping at straws?

Smiling faces, green trees, blue skies, a winding road leading to a hill with the sun rising behind it, have all traditionally been part of billboards to advertise some new development, economic growth, industrial might, elevation of living standards, to name but a few of the uses of subliminal advertising. Has not the same thing been happening to words, ever since somebody used the word “Volk” to unite and then destroy the very entity he was referring to and addressing?

There is a proposition that the word “manufacturing” is also one the demagoguery of our era has used and abused, thankfully not with the same consequences. A good definition by Wikipedia ( ) is that “manufacturing is the production of goods for use or sale using labour and machinestools, chemical and biological processing, or formulation”. In its very nature therefore, manufacturing refers to mass or bulk or discrete production to satisfy a demand, a process that invariably employs and thus remunerates people for its implementation.

It also came to pass that manufacturing is a game loads of people can play, irrespective of colour, race, religion, creed or indeed location; the only parameters missing for a number of decades for the East to take the leading role over the West in the “making of things” were a modicum of social stability in the former and a lack of far-sighted entrepreneurs in the latter. Once these were attained, both the adherence to process instructions and the absence of cost-adding state institutions and legislation, created what is today aptly named the “Made in Japan/Taiwan/China” phenomenon. Moreover, the Eastern countries, facing lack of natural resources and a “waste-not-want-not” attitude, instead of copying the admittedly wasteful Western manufacturing methods, turned them upside-down, thereby creating the new “lean” paradigm.

While this real Eastern renaissance was taking place, the continent of Europe was content with having half of its area imprisoned, and thus irrelevant, behind an Iron Curtain, with the other half playing some game of “mock” competition with illusionary short-term profits, happily enjoying the fruits of abundance and propped up industrial harmony. Welfare states burgeoned and industrial regulations amassed, ostensibly caring for extreme human suffering scenarios presented as the norm by politically motivated parties. It was only after the 2002 decisive rationalisation of the German welfare state, that some whiff of a paradigm change stirred the air; still, it would take many years for the European industry to be truly allowed to feel the gale-force winds of cut-throat competition and manufacturing within the newly founded EU, for its first few years at least, pretended not to notice its gradual withering, thanks to currency eccentricities and state interference.

In the meantime, Eastern European countries were freed, thereby presenting the continent with an opportunity to create, in manufacturing terms, its own “East” far closer to the home European market. Albeit institutionally robust, the European countries of the former Iron Curtain did not hesitate to restructure, to the opposite of their former self in terms of worker rights and welfare demands. This did indeed provide some sort of safe haven for the western firms, many of which gradually moved their operations there in order to take advantage of, among others, the purchasing power differentials. It was yet another buffer that cushioned European manufacturing from the full mettle of global competitors and gave the gravy train of the private sector some more time to enjoy the peace and quiet of former years.

In that respect, one should make the distinction between what is colloquially called the “Anglo-Saxon” model and that of the “Continental” system, both terms in relation to manufacturing. As the UK has had the experience of the Thatcher decade, enhanced labour flexibility allowed the crucial resource to be the human element, while within the continental practice, labour regulations and state subsidies, forced companies to become more industrial-assets oriented. Thus, the German industry is not unjustifiably said to be more technologically endowed than the UK in terms of plant and automation, with the UK firms dealing with excess demand by employing more emergency labour resource. This has allowed the continent to produce at a competitive unit cost, surreptitiously though turning it quite defenceless in times of economic austerity, like the ones Europe was destined to live through and is living through as we speak.

The old Buffett maxim “when the tide goes out, you find out quickly who is not wearing a bathing suit” found its perfect application in the European manufacturing base of the 1st decade of this century: entire countries going bust, unable to shelter their supposedly healthy corporate citizens, to whom the withdrawal of global liquidity and generous state patronage caused the equivalent of a blood-clot; geared for mass production at a time of suddenly and unexpectedly reduced demand, they began churning out unemployment slips to their workers, as they couldn’t even service the interest payments their huge manufacturing capacities had them commit to earlier. It did look like the end of the road for the continental European model wherever this was employed, including cases in the UK.

However, the straights do not appear so dire after all for the Europeans, thanks to the very definition of manufacturing and the way this has evolved as discussed above. It turns out that manufacturing, in the sense of its very definition, used to be such big a deal once because, in European and American hands, it was responsible for the biggest chunk of the product cost and thus price. The implication and perception was that manufacturing an item is where the greatest value-added lies, a fact that did not have to be the case, as the “lean” techniques the East ably discovered proved. Value is now understood to lie among others in astute marketing, professional logistics and innovative design, as well as combining resources cleverly to gain optimisation and obtain the best synergy among erroneously perceived as conflicting objectives.

It is true though that none of the above could have been possible with the timing and precision required, if the dissemination of the Internet and, more correctly, its commercial applications hadn’t dawned when it did. Neither would this paradigm change have been so seamlessly applied if the World didn’t possess the huge asset of the English language to turn to in order to communicate intelligently, despite the advent of the bureaucracy-imposed Esperanto that never really took off. One might even get away with arguing that the entire European way of life and evolution were spared a cataclysmic setback by the universal need to agree and implement global standardisation in as many fronts as possible; as standards and needs evolve, this is being done at the speed individual circumstances dictate as conveniently expedient per country or individual, whichever is faster.

Another undeniable fact that saved European manufacturing from what could have been total annihilation is undoubtedly the creation of the Euro. Apart from the economies of scale in terms of transactional costs, the continent has now a currency the value of which, thanks to its botched introduction regarding individual EU members convergence, has allowed the industry to operate at a relatively low exchange rate to other major currencies, thereby making exports innately competitive. The ability to help increase European exports at a stroke by just threatening to delay any instalment of the Greek debt repayment for a week or two or by creating a minor fracas within the various EU admin layers in that respect, must be a welcome relief to the European powers that be.

Thankfully, however, the World did not stand still for the European politicians to clean up their own Aegean stables. Using the new paradigm of added value, peculiar hybrids started emerging all over, combining competitive advantages not only at country level, but at the very level of each individual contributor. Having realised the shift of value from the product-making, previously called “manufacturing”, to the actual product positioning, people create virtual chains that link advantageous manufacturing to expert logistics and innovative design to brilliant market-ability. Virtual market places like or or bring demand and supply of skills together, thus facilitating the creation of the most competitive “brain-ware” value chain.

It can be argued that in this particular arena Europe can play a leading role in the foreseeable time horizon. With an above average educated personnel pool, the need for nearly every country comprising it to restructure itself and a flow of immigrants from the Near and Far East providing flexible labour, the prospects may yet be in Europe’s favour, as far as value-adding activities in a global interconnected World are concerned. On the other hand, institutional harmonisation, both in the form of comparable legal frameworks and standard of living requirements, is an avenue the sofar low-cost economies can’t but embark upon, thanks to both an institutional player (chiefly the World Trade Organisation), but mainly human evolution and market realities. This latter point has to do with process/product requirements forcing the hand of companies to comply with specific quality and technology certifications, all of which have, sofar, managed to convince even Red China to run their own brand of capitalism, indicatively enough starting with areas geographically close or with easy access to Hong Kong.

It all looks like there is a safe evolutionary process going on, thankfully based on enhancing the freedom of the individual and thus theoretically unstoppable. One can even see Europe re-invigorated and emerging as a World power in manufacturing, provided the pendulum is allowed to swing freely. Still, in the course of human events accidents have happened that delayed or even reversed the human progress. This discussion has attempted to convince that it is a fallacy to rest the course of this evolution on manufacturing; it has proposed instead that the best way to judge Europe’s chances on becoming a continent resembling the “happy growth” billboard lies solely on its ability of becoming a truly global corporate citizen. For that to be achieved, let’s make sure we understand that the saying “a journey of a thousand miles begins with a single step” is true irrespective of the length of the journey, or the distance already travelled.


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Που τα βρήκαμε για να τα φάμε redone…

Αναρωτιέμαι Κε Πάγκαλε, πώς φτάσαμε στο σημείο για να βρούμε τόσα πολλά να φάμε και ενώ έχω ακούσει πολλά για πολιτικό σύστημα και εκλογικό σώμα, δεν άκουσα αρκετά για αυτούς που δημιούργησαν τις συνθήκες για “να τα φάμε όλοι μαζί για τόσα χρόνια”. Επειδή οι Έλληνες δεν σηκωθήκαμε μια μέρα το 1981 (τις 18 του Οχτώβρη) και είπαμε “ας φάμε από όλη την υφήλιο ένα σκασμό λεφτά και μετά βλέπουμε”.

Φαίνεται ότι από το 1981 έως το 2000 οι αγορές πήραν το ρίσκο και αγόραζαν τα ομόλογά μας. Οι αριθμοί λένε ότι, ως το 1981 χρωστούσαμε 20δις,  τα επόμενα 20 χρόνια μας έδωσαν οι αγορές εκτός ευρώ €120δις και στα επόμενα 10 χρόνια εντός ευρώ €220 δις. Μας είπαν ότι αυτό συνέβη επειδή ήμασταν στο ευρώ, αλλά τελικά μάθαμε ότι ήταν στην ουσία η γερμανική πιστωτική κάρτα, την οποία εμείς ειδικά ξετινάξαμε. Οι Γερμανοί δεν είχαν καταλάβει, μας θεωρούσαν τίμιους και «νοικοκυραίους», ενώ εμείς αποδειχτήκαμε το DNA του λήσταρχου Νταβέλη ως έθνος και πολίτες.

Σήμερα βλέπουμε ότι η γερμανική ηγεσία έχει υποβαθμίσει σε ρόλο προεδρεύοντα διάφορων συνάξεων εκείνη της Ευρώπης και, θεωρητικά primus inter pares, επιβάλλει ευρωπαϊκή πολιτική. Και αυτό δεν θάταν κακό, αν είχε δείξει ότι οι αποφάσεις της ήταν για το καλό της Ομοσπονδίας και όχι της Γερμανίας αποκλειστικά.

Αλλά, αντί να δούμε ευρωπαϊκές πρωτοβουλίες μέσα στην δεκαετία της ανάπτυξης, είδαμε την Γερμανία να κάνει τις μεταρρυθμίσεις της το 2002 με Σοσιαλιστή μάλιστα Καγκελάριο και όλη την υπόλοιπη Ευρωζώνη να χρεώνεται, κάνοντας έτσι τις γερμανικές μεταρρυθμίσεις ηπιότερες για τους Γερμανούς πολίτες. Σήμερα βλέπουμε την Γερμανία να ευημερεί έχοντας φιλελευθεροποιήσει τον εαυτό της, ενώ εφαρμόζονται φορομπηχτικά ισοδύναμα με την κακή εφαρμογή των μνημονίων, την υλοποίηση των οποίων επιβλέπει.

Στην Ελλάδα μπορεί να δημιουργήθηκε χάος στην διοίκηση, αλλά στα 30 χρόνια της ρεμούλας δημιουργήθηκε και ένας ιδιωτικός τομέας με σαθρή κοστολογική δομή, στον οποίο δεν μπορούμε να εμπιστευθούμε την ανάκαμψη της οικονομίας. Γιατί όμως πρέπει να «στείλουμε στην αποχέτευση το μωρό μαζί με το νερό του μπάνιου» δεν μπορώ να καταλάβω.

Εν ολίγοις, συμφωνώ ότι όλοι τα φάγαμε με τον ένα ή τον άλλο τρόπο, αλλά φοβούμαι ότι αυτοί που μας τα έδωσαν δεν το έκαναν με όσο καλή προαίρεση διατείνονται. Οι ίδιοι σήμερα διαχειρίζονται τις τύχες μας με την ίδια νομίζω τοπικιστική υστεροβουλία. Για τον λόγο αυτό και αντιστρέφω κάπως το σκεπτικό του βιβλίου σας, με την ελπίδα ότι συνεισφέρω. 

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Καλά εμείς τα φάγαμε, ποιοι μας τα έδωσαν για να τα φάμε?

Αναρωτιέμαι Κε Πάγκαλε, πώς φτάσαμε στο σημείο για να βρούμε τόσα πολλά να φάμε. Συνήθως, όταν γίνεται μια τόσο μακροχρόνια ληστεία από τόσους πολλούς (10.000.000 Έλληνες, ακούσια ή εκούσια), για τόσο μεγάλο χρονικό διάστημα 30 χρόνων (10 τα χρόνια του ευρώ και 20 που προηγήθηκαν αν πούμε ότι ξεκίνησε το φαγοπότι το 1981), ποσού συνολικά €360.000.000.000 ή 122.670.000.000.000 προ-ευρω-ικών δραχμών (122,6 τρισεκατομμυρίων), κάποιος τάδωσε, από κάποιον έφυγαν και, λογικά, από κάποιον έλειψαν. Εμείς, που ως χώρα το 2000 είχαμε ΑΕΠ $124.418.000.000 ή €100.442.000.000 ή 34.225.833.000.000 δρχ., καταλήξαμε να χρωστάμε 12 χρόνια αργότερα 3,6 φορές αυτά που συνολικά βγάζαμε τότε! Καλά, τρελοί ήταν και μας τα έδιναν?

Δηλαδή, έχω ακούσει πολλά για τους Έλληνες εξουσιοδοτούμενους (πολιτικό σύστημα) και εξουσιοδοτούντες (εκλογικό σώμα), αλλά δεν άκουσα τίποτε για αυτούς που δημιούργησαν τις συνθήκες για “να τα φάμε όλοι μαζί για τόσα χρόνια”. Από την άλλη, είναι γεγονός ότι οι Έλληνες δεν σηκωθήκαμε μια μέρα το 1981 (τις 18 του Οχτώβρη) και είπαμε “ας φάμε από όλη την υφήλιο ένα σκασμό λεφτά και μετά βλέπουμε”.

Και ας πούμε ότι από το 1981 έως το 2000 οι αγορές πήραν το ρίσκο και αγόραζαν τα ομόλογά μας, με αποτέλεσμα το τέλος του 2000 να χρωστάμε € Από εκεί ως σήμερα έχει άλλα €, τα οποία πήραμε ως μέλη της Ευρωζώνης. Το 1981 λέει ότι χρωστούσαμε $26.739.000.000δηλαδή χοντρά €21.586.000.000, οπότε από το 1981 ως το 2000 πήραμε άλλα € Δηλαδή, μέσα σε 20 χρόνια μας έδωσαν οι αγορές εκτός ευρώ €120δις και σε 10 χρόνια εντός ευρώ €220 δις. Είχαν παλαβώσει?

Μας είπαν ότι αυτό συνέβη επειδή ήμασταν στο ευρώ, το οποίο έδινε μια εγγύηση παραπάνω. Έλα όμως που μάθαμε ότι το ευρώ ήταν στην ουσία η γερμανική πιστωτική κάρτα, την οποία και εμείς, μαζί με τους Ιρλανδούς, τους Πορτογάλους, τους Ισπανούς και τους Ιταλούς κυριολεκτικά ξεσκίσαμε. Αλλά, καλά εμάς που λέγαμε ψέματα, τους άλλους δεν τους έβλεπαν? Και αν όχι, πώς συνέπεσε και οι Γερμανοί έκαναν τις μεταρρυθμίσεις τους επί εποχών παχιών αγελάδων το 2002 με Σοσιαλιστή μάλιστα Καγκελάριο και όλη την υπόλοιπη Ευρωζώνη να χρεώνεται, κάνοντας έτσι τις γερμανικές μεταρρυθμίσεις ηπιότερες για τους Γερμανούς πολίτες?  

Βλέπουμε επίσης ότι η αυτό που κατ’ ευφημισμό αποκαλούμε «εκάστοτε Ελληνική Κυβέρνηση» μετά το 2009 να συνδιαλέγεται επίσημα με την γερμανική ηγεσία, όχι την Ευρωπαϊκή της (φεντεραλιστικής) Ευρώπης. Η τελευταία έχει περιοριστεί δραματικά σε ρόλο προεδρεύοντα διάφορων συνάξεων, των οποίων τις αποφάσεις ουσιαστικά εκδίδει η ηγεσία ενός των ομόσπονδων κρατιδίων, η θεωρητικά primus inter pares Γερμανία. Και αυτό δεν θάταν κακό, αν η συγκεκριμένη ηγεσία είχε δείξει ότι οι αποφάσεις της ήταν για το καλό της Ομοσπονδίας και όχι της Γερμανίας αποκλειστικά.

Αλλά, αντί να δούμε πολιτική ενοποίηση και δημοσιονομική σύγκλιση μέσα στην δεκαετία της ανάπτυξης, είδαμε την Γερμανία να εκμεταλλεύεται την ανάπτυξη για να μεταρρυθμιστεί με όσο το δυνατό λιγότερο πόνο. Είδαμε την Γερμανία, μέσω της Ευρώπης, να μας επιβάλλει μεταρρυθμιστικά μνημόνια, των οποίων την υλοποίηση εκχωρεί στους ίδιους πολιτικούς που επέφεραν την ανάγκη υλοποίησής τους και όταν αυτοί αρχίσουν τα γνωστά κόλπα με τα ισοδύναμα (πλέον τα μάθαμε), η επιβλέπουσα αρχή να κάνει τα στραβά μάτια και να τα επιτρέπει.

Καταλαβαίνω ότι μέσα στα 30 χρόνια της ρεμούλας δημιουργήθηκαν κρατικές δημόσιες σπατάλες άνευ προηγουμένου. Αυτές, είναι αλήθεια ότι βρίσκονται και ξεριζώνονται εύκολα, αν τα κράτη θέλουν το μπορούν. Αλλά είναι και αλήθεια ότι στα χρόνια αυτά δημιουργήθηκε και ένας ιδιωτικός τομέας με την ίδια νοοτροπία και, το σπουδαιότερο, κοστολογική δομή, που πρέπει να στραγγαλιστεί για να αντικατασταθεί με ορθολογικά δομημένες ιδιωτικές επιχειρήσεις. Αλλά γιατί πρέπει αυτό να γίνει με την κρατικίστικη γερμανική μέθοδο είναι κάτι που είναι, νομίζω, λάθος σύλληψη και χειρισμός. Ειλικρινά, όταν στην Βρετανία η Θάτσερ και οι συν αυτή τάλεγαν ότι θα γίνουν έτσι τα πράγματα από την 10ετία του 80 ήδη, προσωπικά θεωρούσα ότι η Ευρώπη θα είχε αναπτυχθεί εξελικτικά για να το ξεπεράσει. Πλέον λυπάμαι που ο Αγγλοσαξωνικός τρόπος του σκέπτεσθαι δεν αποτελεί μέρος της Ευρωπαϊκής αντιμετώπισης του προβλήματός μας, διότι πιστεύω ότι θα είχε κάτι πολύ υγιές και χρήσιμο να συνεισφέρει, πέρα από το πληθωριστικό πνίξιμο της αγοράς με χρήμα που θέλει ο κ. Γκάιτνερ.

Ναι, να κλείσουμε τις ιδιωτικές επιχειρήσεις που κτίστηκαν με βάση την λαμογιά και τις μίζες την τελευταία 30ετία, αλλά γιατί στραγγαλίζοντας το σύμπαν και όχι επιτρέποντας σε άλλες να γίνουν που θα τις αντικαταστήσουν? Φορολογώντας, αστυνομεύοντας και εμποδίζοντας την ιδιωτική πρωτοβουλία, κλείνει ένας δρόμος για τους υπό «εφεδρεία» δημόσιους υπάλληλους, που, αρκετοί από αυτούς, αντί να μετακινούνται «από χωρίον εις χωρίον» κάνοντας ότι δουλεύουν στις νέα τους μεταταγμένες θέσεις, θα μπορούσαν να δοκιμάσουν την τύχη τους σε ένα ανθρώπινο και δημιουργικό περιβάλλον (για μια αλλαγή απ’ ότι είχαν συνηθίσει).

Εν ολίγοις, συμφωνώ ότι όλοι τα φάγαμε με τον ένα ή τον άλλο τρόπο, αλλά φοβούμαι ότι αυτοί που μας τα έδωσαν δεν το έκαναν με καλή προαίρεση, επειδή μας θεωρούσαν τίμιους και «νοικοκυραίους», ενώ εμείς αποδειχτήκαμε το DNA του λήσταρχου Νταβέλη ως έθνος και πολίτες. Επειδή όμως όσοι έφαγαν-έφαγαν και η διαδικασία δεν αναποδογυρίζει (ίσως με την εξαίρεση του Άκη), εμένα με ενδιαφέρει το παρόν και το μέλλον. Εκεί νομίζω ρόλο παίζουν αυτοί που μας τα έδωσαν, οι οποίοι θεωρώ ότι εξακολουθούν να διαχειρίζονται τις τύχες μας όχι με Ευρωπαϊκή, αλλά με τοπικιστική υστεροβουλία. Για τον λόγο αυτό και αντιστρέφω όλο το σκεπτικό του βιβλίου σας, του οποίου βέβαια την διδακτική σημασία για τους κινδύνους στην λειτουργία της κοινοβουλευτικής αντιπροσωπευτικής δημοκρατίας δεν παραγνωρίζω. 

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A Failed State

At long last, we all now agree the structure of the Greek State resembles the medical condition of gangrene at an advanced state. And there came our saviours to cure gangrene by any means other than removing the affected tissue. Troika, task forces, politicians, EU officials are all taking the easy way out, relying on apolitician who is the personification of the adage that, in Greece, political acumen is never passed on by heredity. Mr GAP is trying to fix the situation through a single-party administration and Parliament majority. Both he and his party have, by now, tasted the bitter pill of political suicide and are, by all accounts, destined for the litter bin of history. Another opportunity forgone.

And, whilst having a stable majority under the Papademos government, the latter is not allowed to run on technocrats, as the other pole, the ND party, requires elections so that their machiavellian leader realises his own ambition of becoming PM. Well, that has wrought the havoc of the ungovernability of numbers, as our Parliament cannot form a solidly supported administration, mainly due to the various political splinter groups created by the malcontents of the mainstream parties. Congratulations, our gangrene is spreading fast and strong; I cannot believe this death spiral was not foreseen and foretold by any of our high and mighty political minds, as stupid silly me was seeing it coming for some years now.

Looks like our destiny is in the hands of the “saviours”. The fact that other countries, being in thankfully lower stages of peril, are also involved in this European debt black hole, with Germany benefiting from it nonetheless, only reinforces my view that we are left to rot slowly, as an example to the rest of the EU in terms of dealing with their restructuring requirements. It is a pity, as the entire affair could have been dealt with so painlessly through proper implementation of the guidelines, not the partial one followed by PASOK; the world would have been made a safer place economically. What a shame we couldn’t have been chosen to be an example to imitate, but instead we ended up the exact opposite.

History and also the future, won’t be kind to our self-professed saviours either, though. Everything that happened in the past two and a half years was, this time, done under their supervision and control; it was they who allowed the botched up implementation and who stood by when things were clearly going from bad to worse. Politically and economically, turning Greece into the sacrificial lamb of a f*cked up restructuring project for all to see and avoid, will hurt our “saviours” exponentially hard. And, if I know and undestand markets, this won’t be in the long run but sooner, as political gangrene combined with economics does not need any pre-existing means of transport to spread in an interconnected Europe. For reference, just read “Asterix & Obelix – Caesar’s menhirs” to understand how…

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Well, thank you. I came back to Greece in 1993 from the UK to find a country where things just “weren’t done” the way I knew things are done all over the civilized world. You can’t get a job if you don’t know the boss; you can’t profess and verify you have a specific experience carried forward from abroad, as “people over there are pussies, not hard realists like us over here”. Nobody listens to you when you say that, truly, you have been there and seen that, like a Stock Market crash, or a fall in the property prices, or mobility of labour that splits families into “the weekend dad” and the rest.

In Greece at the time, people were spending like there was no tomorrow. They were justifying their salaries on the “look what the neighbour has” and were going for more. Paying tax was indeed an indication one was “simple” or a downright idiot. Personal relationships wer also going the same way; a lathe machinist decided to get a loan for €3000 in order to baptise his newly-born, as the relatives are expecting a big event, at least the same one they got during the baptism of the older two children and the “man of the family” needs to show off.

The entire mood of the country was on overdrive with everybody expecting; kids expect the newest cellphone on the day it is introduced; parents expect the highest salary; wives go to the supermarket and buy to their heart’s content “and if not consumed, we throw it away anyway”. Everybody says “well, they are all thieves, why should I be left out of this, for as long as it lasts”. This, combined with the mediterranean mentality, brings forth an “ego-centrism” and human relationships are based on the money and their ability to paint a false reality and paper over cracks as wide as the Grand Canyon.

And then it all implodes. Your first priority is to procrastinate. Thankfully, the markets won’t allow it. You choose the institutional option, i.e. any change will come from the Government. Horizontal cuts to achieve an internal devaluation and spread the problem to as many, to reduce its impact. No state reduction, no state assets sales, as the socialist government had been provided a working majority and they want to “protect their turf voters”. The situation was so grave that cutting down on state expenses and imposing an internal pay-freeze does reduce the deficit quite dramatically. But the markets aren’t convinced.

Meanwhile, the European Institutions are losing the impetous and their crisis-handling authority; the latter is transferred to the purse-string holders, i.e. the strong-core countries governments, actually dealing with the issue directly. The Mercozi duo decide to wait it out and quell the fires when they appear; the idea is to get the idea of a EU country defaulting clear in investors heads, allowing the toxic bonds to move on to speculators in the secondary market at a vastly reduced price. To these final Greek bond owners, greatly reduced bond redemption purchase offers can be made, a fact that happens and the PSI works.

Within Greece, the private firms that were born during the affluent years, are feeling the brunt of the financing dessert that was created, with the local Banks been made bankrupt as the voluntary haircut has drained their balance sheets. Lots of them close, as they would have to, with the remaining ones struggling to survive by adapting to something they are not used to. Real unemployment soars. That too was an expected development, as firms were expanding by callous bank lending in the previous decades, without a rational plan or solid finances and they ought to go. The same for individuals, though the last bit is not an option.

This is the German definition of changing through pain, by centrally initiated action. It is not the easier way to change a country, as the politics of “the plight of the individual” makes the process cumbersome and dependent on many behavioural factors. What could have been done instead? Liberalisation and the state of the Greek economy, more like an old Soviet one, should have provided the clues. Therein lays the bone I have to pick with you folks.

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The British predicament

It is a history of empire and world openness this of the UK, which, although the only, at the time, philosophically astute European country in terms of Liberal Economics, decided to play it alone. The structure of the UK governmental system is, no doubt, one where the “man in the street” feels he can have his say, as the system of checks and balances, along with the meritocracy of the private enterprise culture, have embed a strong feeling of solid governance. Laws enacted are being applied to the finest details, there is verification, monitoring and control and the criteria applied are practical and applicable, leading to full compliance.

The same cannot be said to be true for Napoleonic code structured countries, most of the ones in the European mainland. The UK has also been through the Thatcher revolution, which has brought forth an amazing degree of understanding of the workings of the Economy vis-a-vis the individual. It has been my strong belief that, should the UK have entered the Eurosystem, the continental European Economies wouldn’t have been as arrogant and successful today, as the competitiveness of the UK, combined with the exchange-rate stability of the Euro, would have made the country extremely rich and a magnet for investment.

It would also have turned the tables around, when it came to the profligacy of the peripheral countries; as the debate (on the suicidal arrangement of creating a joint currency area with individual countries’ right to issue own bonds) had already (1990s) been addressed there, this would have been sorted with the UK at the table. As would the crisis mechanism that had to be sloppily organised by the Germans et all, following the Greek implosion in 2009.

I am also convinced that the measures implemented in Greece in response to our debt crisis would have been far more liberal and effective, should the UK be a major player in these negotiations. As was said, Germany didn’t know how to handle crises, really never had an economic one since before the 2nd WW. Imagine what clout and influence  a UK input would have resulted for British business at that time. Although I appreciate Cameron’s hesitation to join the fiscal mechanism, I blame the Europhobic mentality instilled by the Thatcher administration, carried forth by its labour successors. For the long term, this has been bad for Britain in my view and completely at odds with the policy of philosophical expansion that made Britain the system-provided of many countries in the world. A pity, in my view.

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What were they thinking – Part 2

OK, so the Germans et all (the “strong core” EU countries – “SC”) allowed the periphery countries (PC) to play around with their economies, by using the AAA bond rating “transfered” to their bonds, thanks to the Euro club membership. We take it as a fact that the SCs weren’t stupid, back in the Kohl-Mitterrand era), they knew that the PCs, if allowed to issue their own bonds, would go way over the top, as their politicians would use the bond proceeds to bribe their own electorate, as amply demostrated in Greece. There was this little matter of the Maastricht criteria, especially the 2nd and the third of these (, related to deficit <3% GDP and debt <60% GDP, which were supposed to be policed through the countries’ statistics, overseeing by Eurostat. As transpired through recent history, Eurostat were lied to or in some way presented with false information; let us assume the SCs knew that was going on, but had no political or technocratic argument to strengthen the control over the derivation of the statistics, as this would be considered an infringment on the sovereignty of independent states.

Thus, our SCs were seeing the PCs growing richer year-by-year, wages/salaries and prices increasing within these countries and the increases being absorbed, but couldn’t intervene, as the markets kept financing the “blighters”. Then, out of the blue if you believe, this credit crunch crisis hits the US, following the Lehman saga, and the markets all over the world experience this financial “tide”. Suddenly, markets become selective in lending, with the PCs, due to the general economic slowdown, being initially somewhat affected, as US investment is withdrawn from them to return back home. The PCs do exactly what they have been doing all these years, they keep borrowing to close the gaps. That leads their deficit / national debt levels to unsustainable heights and the markets become skeptical on European sovereign debt. Spreads begin to diverge and a vicious cycle reveals its ugly head.

And of course the weakest link within the EU chain is the country with high levels on both counts, deficit and debt, especially as its statistics turn out to have been bogus; hey presto, the country that hosted the 2004 Olympics with such splendour and success, becomes the “sick child of Europe”. And the Greek saga begins right there, with a new government installed in the country in September 2009, sporting a very workable majority in Parliament; as it turned out though, nobody told their 162 MPs.

Lets stop here and go back to the title : OK, the SCs knew the crime was in the making, were watching it  taking place for 10-odd years, couldn’t do anything whilst it was being committed. Why did they let it go on as long as it has? Is it possible that they wanted to have trouble in the Eurozone, to be able to manipulate their currency and gain export markets? We saw that Germany, during Schroeder, a social democrat, underwent a serious structural process in their economy regarding wages, the power of the unions and the welfare state. Is it possible the SCs knew that, provided their own countries were well-run and competitive compared to the rest of the Eurozone countries, the currency manipulation-ability the PC troubles would allow, were their weapon against competitive pressures from the rest of the world?

I would only venture the general view of politics, as being the art of gaining as much time with the least possible disturbance of the status-quo. The Euro gained 10 years of functionality, during which it made some inroads in the wider world as a credible alternative to the dollar. The question is, has the time gained indeed produce the least possible disturbance of the status quo, especially considering the European short vs the long term?

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What were they thinking – Part 1

I am at a complete loss to comprehend what the European Union’s founding fathers (Kohl, Mitterrand, Delors) were thinking when they opened up this can of worms called the Euro. My only explanation is that, when economists of all creeds, a well as Maggie Thatcher, were screaming about “economic convergence“, these guys were :

  • either hoping that reality would catch up with the lack of it and the landing would be a soft one,
  • or not giving a monkey’s about it and caring only about their short-lived fame in the political field

I understand Commission Chairman Prodi had requested, at the time, to strengthen the Commission’s control powers over national governments, in terms of compliance with the debt/deficit rules; in a recent interview, he admitted they totally refused to even consider such a measure, for fear of losing their respective countries’ flexibility in dealing with the economic troughs. But I find it totally unacceptable that, with the debate within the UK having reached all the crucial issues as early as then, they allowed a bunch of countries, very much prone to electing governments that would be clueless on economic management, the use of the German credit card, which was tantamount to issuing their own bonds uncontrollably.

The rest is, really, history, as my country, Greece, has been using the German credit card to buy elections by bribing its own electorate for close to a decade. Funny thing, the EU “strong core” countries seem to have done all right out of this and are still doing so, with the euro been depreciated against the dollar (at least), thereby pricing both countries’ exports very competitively in the global arena. Their bonds are also doing all right, since they are compared with the rest of the Euro-countries’ bonds (the Germans especially were paid to accept money from lenders lately). Is it possible they could have known the developments from that far back in the past? Is it possible?

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Hello world!


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