Ilias Papageorgiadis' blog | Greece 2009 – Romania 2010:This reminds me of something…

Two years ago, during August 2008, I had shared with you my experience of what happened in Greece in 1999, compared it with Romania of 2008 and described to you what you should expect to happen in the following period: The market to fall. At that time I had received too many emails of people who criticized me for this approach (even if I didn’t clearly stated that the market would fall…). Now you know better than me what the reality proved to be.

For the ones who want to read these old texts:

05.08.2010. “Welcome to the avant premiere of our new film: Greece 1999 – 2008: This reminds me of something…”
Published on 5th of August 2008: Welcome to the avant premiere of our new film!

Your comments back then:

Listening to you / Replying to your questions part 1
Keep answering your comments …and Financial Times of Romania
Listening to you…replies to your comments part 3
Replying to you – 4th part (and last…)

This time I will not analyze to you the Romanian situation, but just the Greek one. All of you have your own opinion about Romania and it is not difficult for you to compare and realize what I am talking about… (I just suggest to you to compare Greece of 2008 with Romania of 2009, Greece of 2009 with Romania of 2010 etc)

Greece, 2008: Started with “we are protected from the economic crisis”. Soon reached the “our revenues have reached bottom”
Greece had elections in 2007, early ones. The reason was “the economy and the necessary measures we need to undertake, in order to keep it protected from the economic crisis”. The Greek prime minister was re elected, having promised to people “better days”. The minister of economy, a brilliant ex professor of top university, was almost shouting: “We are healthy, we have nothing to be afraid of”.

It took him just few months to… slightly change opinion. In August 2008 he held a press conference and informed the media that “our revenues have reached bottom”. The Greek society didn’t really bother. All these were usual, nothing new. All the governments throughout the last decades kept having problems with the revenues, but still they were borrowing and spending more. So, what?

Greece 2009, First half: “Soft” measures for the poor, cars for the rich, new air conditions for everyone…
2009 was the first full year of the world economic crisis. Not for Greece though. The government announced a “soft” package of measures in order to show to European Union that it tried to do something, while on the other hand it created a special law, just for few months, reducing the taxes of cars to half. Also, it created programmes to boost consumption, by contributing money on every new air condition one would buy etc. Thousands ran to buy new cars, hundreds of thousands bought new air conditions, giving to the State the old one and getting a 35% deduction on price.

…while the “wounds” kept bleeding…
In the same time, Greece continued to be deaf when all international organizations were arguing that the country was losing “rivers of billions” for:

Maintaining a rail company (OSE) which belonged to the State, with 100 million Euro annual revenues, 400 million Euro salaries, around 1 billion Euro annual losses and around 10 billion Euro total losses. By coincidence, its employees were VERY well paid…
Allowing thousands of people to steal the State being part of the “National Health System”. Doctors, other employees of hospitals, pharmacists etc kept charging the State incredible figures for fake medicine etc, with the monthly deficit to reach hundreds of millions of Euro! It was “too difficult” to implement control…
Letting every small or big social group to maintain privileges of the past, keeping their markets blocked and their profits high. Just a small example: Licenses for taxi drivers or transporters were sold between 200.000 – 300.000 Euro (black), as there were not any new ones. The last licenses for transporters were given in 1971 (!) by the military dictatorship regime and since then all governments allowed to owners to buy and sell licenses, without paying taxes.
Keeping a tourism industry with thousands of problems. Extensive tax evasion was the “rule of the game”, all sorts of illegal acts were “accepted” as well.
Paying pensions without having the money for this. Some millions of people were receiving small pensions, while some hundreds of thousands had tremendous conditions and bonuses, usually without having paid for all these.
Paying more public servants that the country could afford. Greece had almost 1,2 million public servants, a… mythical number for the country’s needs and budget. They had perfect work conditions, the State practically could not fire them and they were cashing in almost double the salary of someone working in the private sector.
Blocking the majority of investments, by using all kinds of tricks. The Greek bureaucracy in combination with hundreds of “small” or “big” politicians had blocked thousands of investments. Excuses were endless… The problem was solved only when “the investor knew how to deal with it”.

“But why the problem was not visible before?”

Because Greece:

Entered into Euro zone and benefited from very small interests, which boosted an artificial increase of consumption and (some) investments.
Benefited from European Grants, especially from the 2^nd and 3^rd round of Grants, which had less control and more “opportunities” comparing to the actual 4^th one.
Organized the Olympic Games and “it was accepted” for the country to finally lose some billion Euro, “as the results would help us forever”.

So, while the world lived many years of healthy growth, Greece had an even higher growth, which was not based on stable, solid foundation. When the world crisis burst, the Greek problems could not be hidden anymore…

Tomorrow: