The Greek way.

by Capricorner

About one in four Greek Businesses employ “ghosts”, illegal immigrants who have no work permits, are not registered anywhere, are not insured, receive wages far lower than their Greek counterparts and cost their employers almost 40% less than Greek employees. Of course the Greek Government can not lure foreign investors with the promise that they will find, in the “black labor market” workers that cost 40% lower than the official wages, so foreign investors will continue ignoring Greece with its legalized impediments to business and legally rigid labor laws.

Foreign Investors do not invest in a country to profit by skirting the laws of the country. The laws should guarantee to them conditions which enable legally earned profits. Greek Businesses are accustomed to disregard for the laws and that is how many survive.

It’s The Greek Way.

In Greece there is what is known as Collective Contract. Accordingly, workers receive raises equal to the rate of inflation plus a little over that. These are automatic raises that have nothing to do with other considerations. Additionally, workers receive the so called maturities. These are raises that are given automatically every year, or so, to every employee, irrespective of performance/productivity/contribution of the employee, or the employer’s profitability. In other words workers receive raises come what may. Employers reward the unworthy together with the worthy. Employers may be loosing money, but workers get their raises. Workers do not care about the quality of their work, about their employers, about the profitability of their employer and thus their long term prospects of employment. Raises come automatically, as an entitlement, not a reward.

It’s The Greek Way.

In 2003 Business Investment amounted to 19.8% of GDP, in 2008 to 15.8%. Wonder why?

Taxation is on a unified scale. Work incomes and incomes from stock dividends are taxed equally. Rumor has it that this will change, in favor of incomes from stock dividends which will now be taxed at a flat 25%. If the rumor is true it will be one more blunder. To attract Investments Greece does not need to change this tax law. Greece needs a profound change in the attitude of the Public sector from one that is hostile to business to one that is friendly and encouraging. It needs to change its deterring legal attitude to investment to one that is friendly and encouraging. It needs to relax its rigid Labor laws by deregulation and encouragement of negotiations between employer- employees. Ministers in Greece do not understand business, but they none the less, want to regulate it.

It’s The Greek Way.

In 2008 Greece was already in a recession, 0.3%. Its Government, however, kept borrowing. In 2009 the recession was 3.2%. The Eurozone was worried about the Greek debt, but the Greek Government was not. National debt reached 300 billion Euros. Papandreou won the election promising raises, knowing full well this was a promise he would be foolish to keep. The Greeks got, instead, cuts, for the known reasons. In a country that has little production of anything, with consumption accounting for about two thirds of GDP and a non sustainable debt, Papandreou did not rush to borrow while he still could, did not announce an austerity plan aimed at a reduction of Government spending, to display determination to create surpluses and reduce dependence on debt issue (something the markets would have appreciated) he, instead, wasted precious time and delivered the country to the control of the Troika.

It’s The Greek Way.

In Greece the political struggle is not about ideology, it is about the control of the “purse”. Those who control it can do whatever is beneficial for them and their cohorts.

Political discussions are ostentatious, seemingly about what is good for the country, factually about what is good for the party, the control of the “purse”.

Even today they all talk about the re-construction of the country, but in fact they mean the re-instatement of their control of the public “purse”. Politicians fight for their personal supremacy, the outcome of which is of paramount importance, the good of the country being of little concern to them. That is what Greek politics is about.

It’s The Greek Way.

Currently the debate is about minimum wages. They are unreasonably high, because politicians, syndicates and the pressure from the LEFT of the Political spectrum has pushed them way above the level of Greek Productivity. From 2001 to 2009 Greek average wages rose at an annual rate inexcusably higher than that of the Eurozone. Even worse is the rate of increase on a per unit labor cost. By reducing minimum wages Greece will regain competitiveness, the Troika (erroneously) thinks, as do some of the politicians. The cost of unskilled labor and the new entrants in the Labor market is not the problem. The lack of investments purporting to increase productivity is one of the main causes of the Greek un-competitiveness, together with the institutionalized hurdles to business. The years of socialist fervor to burden businesses and the state with costs for welfare the country could not -rationally- afford and of course the deficits from overstaffed and unprofitable state enterprises, which the public purse had to cover, by borrowing, have accentuated the problem. To make things worse the Greek consumer had to pay with the increased cost of living, since the increased cost of the public corporations became an increased cost burden for Greek businesses. The increased burden of the ancillary costs made cottage, small and medium Greek industry uncompetitive. Greek production caved in to cheap imports.

If Greece sweeps away the hurdles to business and views business profit as an achievement, not a sin, then minimum wages will not be a problem. Technology investments will minimize their effect on the overall cost of business. Besides now is the time to safeguard incomes/expenditures, because, ironically, now is the time to go out and spend, to sustain sales levels-jobs- and, through this, taxable income and encouragement for investments to increase competitiveness. Will the Troika, which until now, has not displayed constructive thinking, insist on the reduction of minimum wages, when in fact overall costs can be addressed otherwise, by tackling all the other institutionalized factors which burden the costs, or will the Greek Government present a counterproposal of an equally beneficial effect? Chances are it wont.

It’s The Greek Way.

In 1980 the Drachma / Dollar parity was 42.64 Drs to the Dollar. In the year 2000 it was 308.93, a 724.5% increase ! In the same time the Greek Trade Deficit climbed from 5.4 Billion Dollars to 18.6 Billion. The Drachma was devalued twice and was let slip in value, month after month. Additionally, the Greek Economy was barricaded behind tariffs, until 1993. The outcome? Greek Exports did not benefit, as was expected they would.

In 2010 Greek Exports amounted to 21.8 Billion Dollars, of which only 10 Billion were 100% Greek, the rest containing to some, or, to a considerable degree, I M P O R T E D materials. A return to the Drachma, which several people preach to the desperate Greeks, means no gains. The Drachma will tumble by the day, because foreign materials are necessary for the production of both Exportable and Domestically consumed products and these will be hard to procure given the scarcity of foreign currencies and the refusal of foreign suppliers to accept Greek Drachmas. The resulting inflation will “kill” incomes and the social “explosion” will come shortly thereafter, as shelves in Supermarkets will be half empty. How will Greece pay for the European Milk and Cheeses the Greeks consume? The Belgian Tomatoes? The Bananas? Canned Foods? Frozen Foods? Cereals? Coffees? Cocoa to make Chocolates? Bulgarian meats? and on and on? How many of the goodies in the Supermarkets are 100% Greek, no imported content? Even detergents contain imported materials.

How will Greece pay for Cars and spare parts? Motor Cycles and spares? Chemicals? Factory Equipment? The list of vital, of necessary, of desirable imports is long, the availability of Foreign Currencies short. Foreign Exchange from Tourism and Shipping will be inadequate to cover the needs and yet there are, supposedly serious, people, proposing exit from the Euro and return to the Drachma as the end of the problem. They, of course, propose the cancellation of the Greek Debt as well, so that what the Greeks will earn the Greeks will keep.

These people also presume that Turkey will not take advantage of the Greek inability to borrow a cent and, thus, inability to keep up its weaponry fly its Air Force and move its Navy. They pay no heed to the fact that the Former Yugoslavian Republic Of Macedonia has ceremoniously staged the FUNERAL of Greece, knowing full well that Greece is biting the dust and is struggling to survive. It goes without saying that Turkey will not stage merely ceremonial jokes.

Of course Greece may be sitting on Petroleum and Natural Gas that has yet to be verified, quantified and explored. If and when these Resources’ come to bear on the Greek Economy the situation may, then, become amenable to the Drachma. IF and until THEN how do the Greeks continue with their present living standards? It’s a no brainer, but none the less there are people who advocate the return to the Drachma. Insane?

It’s The Greek Way.

Questions: Is the Greek Way a good way? What has it done for the Greeks? Should the Greek Way change to a “rational” way? How can this come about? Who? What can instigate the change?

God forbid a catastrophy.