By Markos Kaminis
Wall Street Greek Blog
The day’s focus is once again on Europe, where it is looking more and more like austerity is a useless effort for troubled Greece. On Monday, Standard & Poor’s (NYSE: MHP) cut Italy’s credit rating, and despite Moody’s (NYSE: MCO) and Fitch’s affirmation of ratings, global markets fell into tailspin. Europe is a disheveled beast today as a result, and because of lost confidence in Greece’s ability to survive financial ruin. The Greek Prime Minister faces pressure to tighten the noose around the neck of his electorate. Unfortunately for Prime Minister Papandreou, his rivals are finding opportunity countering Greece’s failing efforts.
The government is moving ahead now with developing plans to sell off state held assets, including stakes in Telecom stalwart O.T.E. (NYSE: OTE), state-owned Hellenic Postbank, and Greece’s two main ports of Piraeus and Thessaloniki. The New Democracy Party is also pushing for the sale of Greece largest electricity producer, P.P.C. Such privatization actions have been proven wise moves through their initiation in the United States and follow through in the United Kingdom and Europe. The question is, what kind of price will a desperate Greece get now? It must not act like the desperate seller, and be patient for hungry buyers to emerge if it wants to best serve its citizenry and my spiritual brothers. In the end, more efficient business operations will emerge and likely grow in the place of currently fat and fraudulent operators.
New Democracy is taking an important strategic position now in opposition of the cornered Papandreou’s socialist government (PASOK Party), and yours truly happens to agree with the position, despite my favoritism of Papandreou, the man and pseudo-New Yorker. The fact is that I’ve argued against austerity since its start, and clearly stated it matched the American mistake of the Great Depression.
However, when I said Greece would do better to raise taxes across tourism, thus forcing visiting foreigners to my paradise-like spiritual homeland to help front Greece’s bill, detractors said it was a mistake. They said it would kill tourism, to which I correctly forecasted that riots and crime would do more to kill Greece’s tourism industry than well-spread taxes across flights, cruises, hotels and taxi rides. The Greek people would have appreciated its government’s efforts to guard them from financial distress. Instead it told them, my dear people, you take the poison for the sake of our heritage. Greeks responded with angry dissatisfaction.
Greeks have plenty of reason to mistrust their government, with scandal and corruption as common in Greece as it is across the globe. Who would pay taxes to a lost cause, or more taxes to a futile escape effort? Thus, it has done well to target corruption, but perhaps it was too late to establish credibility.
The Greek government currently too closely resembles the panicked Bush-government and its pressured quick decisions. You’ll recall Bush’s mailing of $300 checks to every American, a useless waste of important funds and an illustration of the government’s poor assessment of imminent economic catastrophe. We sadly remember the butchered bailout legislations that sent billions into nebulous necromancy, or better stated, into Wall Street executive bonus packages.
Greece cannot raise taxes forever; rather, it can until its Parliament building burns to the ground. The torch that would start that fire is already burning, and New Democracy can sense it. At least though, for Greeks, it is New Democracy gaining attention for seeking change rather than the Communists or Isolationists or Nationalists. Hopefully Greeks will not remember that it was under New Democracy that the nation’s financial position was mishandled and misreported.
The last thing I want to see in Greece is radical leadership gaining control because of the failed establishment. This threat extends throughout Europe, the Middle East and the globe, and is not negligible. This is how Hitler gained power! Who else would have listened to him but the desperate? So beware and be wise Europeans and Middle Easterners.
I disagree with the position of my better-schooled acquaintance, and I hope friend, Economist Charles Calomiris. I disagree with the view that Greece must default, or has no better option. I also would rather not see Greece dislocated from the euro zone or the umbrella of the E.U. Papandreou must change course, but there are many roads to choose from, each of which looks perilous from here. I’ve supported two of them here, selling assets and taxing the use of them by foreigners. I remain available to Greece should she call, because I bleed for her.