As the eurozone further tightens the belt of the Greek economy and devastating images of destruction and social unrest once again dominate the international media, Neos Kosmos conducted an exclusive interview with Greek Australian expatriate Dr Nick Skrekas, an economist and lawyer who has lived in Greece for 12 years. Dr Skrekas, who is a regular interviewee of CNN, RT America and other international media, has written extensively for the Wall Street Journal, Dow Jones and Thomson Financial, and authored two books for Reuters. He has a background in investment, law, teaching professional seminars and acts as an advisor on EU programs.
Neos Kosmos seeks Dr Skrekas’ views on the new memorandum approved by the Greek parliament on Sunday, as well as the future of the Greek economy.
What does Memorandum 2 involve?
Memo 2 is a little more complex than meets the eye because it has very discrete but interdependent segments. Firstly, it is supposed to provide 130 billion euros in low interest loans to solve “liquidity” issues, allowing the Greek state to avoid a domestic payment stop and be able to avoid default. Then it is also supposed to slice about euro 100 billion euros of the nation’s debt-load so that debt dynamics eventually become sustainable.
Together it should put to rest the issue of ‘solvency”. There are promises to implement structural reforms like opening up closed professions, streamlining the tax system, as well as upgrading the education and judicial systems. Some prudent privatisations can also benefit the country by bringing in know-how and capital, even if the euro 50 billion target is quite unrealistic in such a globally difficult economic environment.
Do you believe Memo 2 is a good thing for Greece?
There is another side to Memo 2. I think it continues the self-defeating austerity policy mix which has crushed the economy by 15 per cent in real terms over the last two years. Greece will be forced to cut pensions and wages again, and some taxes will be raised. Health care and defence spending will also be reduced, while labor relations will be overhauled. Unfortunately, one more overdose of excessive austerity is wrong and very toxic medicine and will again fail. It may just exacerbate the debt trap.
As Greece spirals further into depression, outside of the social fabric being torn, financially it means less tax revenues and a deteriorating debt service capacity. This hampers Greece’s ability to balance its budget and increases outside dependence for it to provide basic social services to the community, as well as hampering our ability to defend our territorial sovereignty. Memo 2 will have contradictory results – some but not all will be beneficial – however, there are few other choices on the table for Greece.
In the event that there was a clear commitment of solidarity to provide Memo 2 by the EU and IMF without dithering, and the policy mix was altered from fiscal drag to Marshal Plan style investment program to kick start growth in Greece, then there would be clearer light at the end of the tunnel. At the moment the decision making has been unsettling. Additionally our allies in the EU have shown considerable arrogance and prejudice against us and have actually unwittingly sabotaged the country efforts by adding uncertainty, increasing instability. The latest data shows that the Greek economy contracted by around 7 per cent last year.
What in particular is pulling the economy down?
One of the obvious reasons that GDP plummeted 7 per cent, especially in the last quarter of 2011, was a palpable overwhelming fear of an economic collapse and a lack of any semblance of stability. This created an environment where few wanted to spend, invest or hire. Don’t expect the Greek economy to bottom out, with more fear mongering and drags on growth from taxes and cuts. Internal collapse leads to a sharp drop in domestic demand, continuing a moribund economic trajectory and will do little for external competitiveness in the short term. It appears that many “good Samaritans” outside of Greece are only paying lip-service to the notion of “solidarity”, since this program, which is imposed from 2012 to 2015, is in-part flawed.
At times it seems to embody a sense of punish for the weakest and poorest in Greek society for the profligacy and problems of the country’s institutions for many decades. All is not lost, but the challenges need to be confronted with more sensitivity and less blind and inflexible fervour. Naturally, our powerful and successful diaspora can assist in a Greek economic recovery, as well as lobby for our national interests. We are all Hellenes and we all have a stake.
Do you think that Greek society is ready to accept that corrupt practices are a thing of the past?
As Aeschylus said in about 500 BC, ‘wisdom is brought through suffering’. The ancient Greeks were of course brilliant and understood human experience. Applying that to the extreme financial pain suffered by ordinary Greek people since the debt crisis exploded, they are in no mood for “business as usual” foibles, and will no longer be forgiving replete ethical failures. These days Greek voters don’t want false promises, won’t tolerate corruption and demand truth and transparency from the political system and public administration. They are also deeply suspicious of distorted media, parasitic entrepreneurship and special interests in the private or public sectors. There is a catholic demand for a clear break with wasteful and illegitimate past practices.
The fiscal shock and a new reality has sunk in, and is being widely accepted. Long-delayed and necessary reforms won’t happen overnight, especially since cultures take time to change, but Greece has come to a crossroads of change, or wither. Have you seen new investors moving into the Greek market ? At the moment local and international investors are essentially in ‘wait and see’ mode.
They believe the jury is still out on Greek development. The protests against austerity and humiliating ultimatums are real, but rarely do they actually descend into violent riots. That isn’t the real or whole story. If Greece can get sensible help to deal with the sovereign debt crisis, reduce the bloated bureaucracy, eliminate the corrosive lack of regulatory enforcement, improve transparency and reinvigorate the implementation of reforms, then more foreign investors would seriously consider building a business here. At the moment, we don’t see much hard money investments in the real economy but we do see some short term hot money flows into the very oversold and undervalued financial markets, like the Athens Stock Exchange equity bourse.
A striking example of the profitability in Greek portfolio investments, is that shares in the largest local financial institutions, the National Bank of Greece has jumped to a 75 per cent return in the last month alone. Investors have been well rewarded for assuming risks.
What can you tell us about your initiative for the global TV program Greek Business Today?
It is one of the most important projects with which I am involved. This weekly English language business TV program is designed to assist in bridging the information gap between Greece and the many millions in our diaspora. The program will be editorially independent, cutting edge but not elitist and a very cost effective external production for ERT World. Some had to be convinced that in a time when Greece’s financial survival is on the line, that information is key to defending ourselves and that doing nothing means you allow your fortunes to be determined by media conglomerates that have different agendas. The program ascribes to a ‘glass half full’ approach to Greece and international Hellenism. It aims to rebut vilification of Hellenes anywhere, tackle prejudices with truth, mend the nation’s much maligned reputation, and assist in attracting foreign direct investment into the country. And to clarify, there are no “jobs for the boys’ or permanent public sector appointments involved.
The program will marry local private sector expertise and cost efficiency with ERT World’s significant audience potential and ability to distribute programming around the globe. Hopefully ‘Greek Business Today’ will soon be broadcast to inform many different constituencies from Sweden to Australia, from South Africa to the USA, and from Argentina to Canada – and everywhere in between.
The proposal is compelling and ERT senior management seem to at last be convinced that we can’t allow our rival economies a broadcasting advantage. It will be good for Hellas, good for the diaspora, great for the economy and will assist ERT in attracting a new younger Greek-something audience. The ‘Greek Business Today’ program will be launched in a few weeks. I think that we should promote foreign investment in Greece and It all begins with local credibility and an extroverted perspective to engage with the outside world.