3 Truths, 3 Lies and 1 Fatal Mistake
By Panos Xenokostas
Europe does not intend to withdraw Greece from the Eurozone, since a decision like this would probably mean the beginning of the end for the united Europe. Europe cannot administrate such a case, neither financially nor politically, while concerning banks sector this would mean the transmission of a “systemic virus” from bank to bank, equal to a crisis that no one, even today, could easily predict. Given the low and uninspired reflexes of the European Economy, if such a case occurred, then Lehman Brothers’ collapse would seem like a common bankruptcy under the article 11 of the US bankruptcy code. On the other hand, Germany is “bluffing” and the threats it is unleashing return back and against the EU itself; the EU that Germany “exploits” as the milk in the coffee: ad hoc, from not at all to plenty.
At present, the European Economy needs the Greek Economy more than the Greek Economy needs the European. All “small” European Economies- that help Europe to expand continuously- reflect on the Greek Economy. These Economies find in the EU their “safe haven” of fixed exchange rate, something extremely crucial within the environment of the economic globalization. These Economies though, provide in exchange a large portion of their competitiveness and their free economy to the Brussels bureaucracy. Hence, the EU Economy expands based on these Economies, it strengthens its protectionism and it generally fulfills its main (if not the exclusive) reason of existence, that is to function as a free trade zone with a single currency.
The biggest challenge for the Greek Economy is the Greek Economy itself and not the markets and the investors that are seeking for opportunities. If Greece wishes to attract strategic investors, then Greece first has to incorporate a National Strategic Plan instead of political parties’ programs that are only projected every 2 years during the pre-elections periods. If Greece wishes for long term investors then it should develop long term policies. If it wishes for development then the initiative of next movements should be given to those that create development. If it wishes for a welfare state then it should restrain the State’s role to that of the supervisor and auditor instead of also being the producer, the industry owner, the banker.
The Greek Economy is sustainable without haircut. It is practically impossible the debt to be restructured, at the height it has now reached, given the size and the status of the Greek Economy. The haircut is ultimately a one-way-street and logically Europe is in a greater hurry than Greece since the chain-like reactions risk (especially in Italy and Spain) through a new debt crisis is already present. History has proven that in great crises, the politicians “have their head in the sand”, opposite to the solution of such an issue, creating ultimately a bigger problem. Currently, both Greece and EU likewise wish the Greek debt haircut to proceed. Its political administration and the message to 3rd parties is what, mistakenly, delays it. If a child breaks his hand because he disobeyed his parents, he cannot be punished by being isolated in the emergency room forever..
The forthcoming elections result is related with the collapse of the political stability. Will Greece leave EU and NATO or they will force Greece out? As known, life in Greek territory started 100,000 years ago while Greek civilization started 4,000 years ago. Greece is an independent democracy since 1830, is member of the EU since 1981, of the Eurozone since 2001 and NATO’s since 1952, while it is also founding member of the UN. In 2010, during crisis, Greece ranked 21st country regarding the quality of life worldwide. In every country, the potential of a new Government to take over is only related to ideological approaches and mentalities; that could not possibly mean war or downfall of countries and alliances. Simply, Greece is shareholder and founder of EU as well as of the others alliances. Greece has the same likelihood as Germany, France, Italy to withdraw from the alliances. The pre-elections “dictums”, “misleadings”, “blusters” that are meant for “internal consumption”, are attracting readers in the various Media and through global information exchange, they are transmitted to the investments company worldwide, where they are transformed into a measurable risk, in whom some people invest and receive the bet with respective returns. Therefore, if Germany wished, for some reasons, to drop the exchange rate of Euro related to Dollar, then, what happened in Greece was just serving this strategy. The threats for the Greek Economy are the lack of reforms, the loss-making government-owned corporations, the professional syndicalism that ceases the development, the lack of stable and guaranteed tax system, the lack of stable and guaranteed labor cost, simple and accessible regulations, freedom in the commodity of labor.
2015 will be a prosper year of progress for Greece if the Greeks vote right! Whatever the elections outcome is, the current year will be extremely harsh. What is feasible though is to implement simple but radical and modernized steps so as the year 2015 could be improved related to 2014 and each and every single year now on could be better from the previous one. The Greek People shall retrieve the Vision of The Next Day and the reforms, that the Economy requires for attracting capitals and resources and for convincing investors that they can reliably invest in Greece, shall be applied. Greeks have “philotimo” (love of “honor”) and respect their word. But Greeks have to prove these every day.
The Fatal Mistake
EU is a union whose history is written reversely, from the end to the beginning. The monetary union that should normally be the last step, was realized at first. This resulted in a union without political or cultural unity, financial and banks linkage, common foreign policy, overall, a union with few common features apart from a free trade zone with single currency. Certainly, the speed and the focus on result can sometimes lead to “shortcuts”, and -if by its own- this could be administrable in case the Governments of the European Countries hadn’t been engaged since 2008 in a contest of EU’s political disintegration. As said, the love and the friendship are tested in the hardship. When the crisis started, the European Leaders divided the Peoples of Europe, on the altar of internal policies, into “white and black ships”, they intervene through leaks and announcements in the elections result of other countries, they transform the Union from a “federation of states” into a self-splitting and self-destructing entity. The EU is lacking in strategy, development plan and certainly, in marketing and communication. This is due to the fact that within the EU no one is ready to self-exceed and be self-annulled. Greece heretofore simply imitates the “pattern” and struggles to achieve balance only at political level. Nobody attends to the Economy internally, so to solve structural issues. Further, the European Leaders when the timing is (for them) right, they find the “medicine” but then it is already too late as the “disease” has by that time “transmuted”. Greek and EU politicians need only listen to the connoisseurs and make decisions at real time and not at political time. The “game” globally is for professionals and not “hobbyists”. Europe is also called “the old continent” proves to be as well old as “tired”, without inspiration and solution plan for the economic crises..that will constitute the everyday routine in the years to come..
**** Panos Xenokostas, Head of PE opportunity funds, ONEX Technologies Group-LKS Partners