Tag Archives: economy

There is no Greece

A Greek colleague of mine told me I have no right to have an opinion on Greece unless I lived there. I think its nonsense. I haven’t lived in countless other places and I still have an opinion on them. Nobody has lived on the Moon, but we all can have an opinion about it. By the same logic, most Greek who have not lived in Germany have no right to an opinion about it – they most obviously do. So I do have an opinion about Greece. And in my opinion, there is no Greece.

In a bizarre show of loss of touch with reality, the vast majority of the Greek, including their own government, believe they can say “OXI” to the rest of Europe. They decline all offers of help because they come with demands to demonstrate willingness to be helped and to do their share, and still want to remain a part of the EU and the Euro zone. The age-old truism that you can’t eat the cake and leave it whole does not seem to be able to “land” in Greece. But it will land, and it will be a very rough landing. As of last week, Greece simply ceased to exist. Having failed on its credit obligations, it has become a failed state – in line with other bankrupt countries like Zimbabwe and Sudan. Like the fathom image of the sun on your retina after you close your eyes, the Greek government and people are still there, but as the economy grinds to a halt and the institutions collapse they, too, will disappear.

As the country dissolves further and further and more and more services and parts of society cease to function, a torrent of refugees (there is no other word to describe it) already leaves Greece. For now, these have been largely the young, and even they are reluctant to leave, preferring to live on their parents couch off the pensions of their grandparents. As the reality of living in a failed state with no prospect of improvement in the coming decades will become clearer, all who are able to leave will leave. The real Grexit will be the mass migration of Greek who are capable of doing so. With the young and able leaving, the ones left behind are the sick and the elderly – which already triggers a downward spiral of an economic downfall and even higher migration rates.

The Greek economy has been sick for a while. Main cause are loans that were not covered by assets. Whether the Greek who took the loans or the Germans and the French who provided the money for the Greek banks to loan are to blame is by now rather irrelevant. Other countries have been able to overcome similar problems – Ireland, Cyprus and Iceland have all rebounded from a recent debt crisis. The ills of the Greek society are much deeper though and thus Greece, unable and (or?) unwilling to mend its ways, is rapidly disappearing. The Greek people are ill in the most literal sense of the word – Greece has the highest rates of obesity in Europe. What I find most astounding is that Greece has also the highest rates of smoking in the world. The adult Greek smokes an average of 3 000 cigarettes a year. A 5 to 6 BILLION Euro goes up in smoke in Greece every year – literally. If the Greek would quit smoking, they would have saved some 30 BILLION Euro since the start of the crisis in 2010. Talk about simple and efficient measures to help the economy – I’d say the EU should demand a ban on smoking as a condition to an emergency aid package.

It does not take a genius to see that the sick and ageing population, combined with an unprecedentedly low birth rate and mass-migration of the youth will lead to the disappearance of the Greek people within a couple of decades. Besides the human tragedy that envelops as we speak, this process is a unique opportunity. Greece, its economy (or lack of it), its demographics, its demise, are an illustration of what lies ahead for most of the rest of Southern Europe with Italy as the next in line. All the ingredients to repeat the Greek tragedy on a larger scale are present there. Greece is an opportunity to study ways to prevent or at least reduce the impact of the fall.

I doubt we will be able to learn the lessons from the Greek crisis. Which is sad, because its not only Italy that is next – it may very well be that the whole Euro zone, the EU and even all of Europe are bound to go down the same road. Worse of all – there are serious signs China is headed the same way. The Chinese economy is, like Greece, poisoned by irresponsible loans and is full of Potemkin villages. China has an ageing population of chain-smokers and, like the Greek, the Chinese view themselves as a cradle of civilization that must be if not admired then at least respected by the rest of the world. We might survive Greece disappearing and may even overcome Italy collapsing. But what are we going to do when China goes “boom”?

 

The Greek like to say they “invented” democracy and claim the rest of Europe should respect their democratic choice. They conveniently forget that in ancient Athens, only adult free male citizens were allowed to vote. Most significantly, citizens who failed to paid a debt were automatically stripped of their voting right (Atimia) and this disqualification was inheritable. The Greek should study their own history a little better before preaching about democracy. Next time a Greek says “democracy” – say “atimia”.

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7 things Americans don’t understand about Europe

I don’t understand Americans in Europe. Actually, I don’t understand them in their own country as well. I mean, I don’t get baseball, NASCAR, American gun laws, the American insistence on using an archaic measurement system and above all I don’t understand ice in whiskey. But I think Americans do not understand Europe either. Not all of them, of course, but I think the average American has no clue about may things that are quite common in Europe. Here’s a small guide to the visiting American, helping rectify the most common American misconceptions about Europe.

What most European cities really look like

What most European cities really look like

  1. Europe is a continent, not a country
    “Europe is my favourite country” – how many times have I not come across this statement? Admittedly, the last one I saw was made by a Canadian, which only serves to prove the point that Canadians (and Australians) are a bit of Americans in disguise. Perhaps for people from countries the size of a continent it is difficult to understand. But Europe actually consists of more than 50 countries (depending a bit on how you define “country”). They have their own flags, anthems, culture and for what its worth their own foreign policy. Lumping them together is like saying “animals are cute” – sure they are, but a bit overgeneralizing.
  2. Europe is not the same as the European Union
    Its true that by now the majority of Europeans live in EU-member states. But there are still dozens of countries in Europe that are not a member, and the EU still covers less than half of Europe’s physical area. Besides, contrary to what Eurosceptics and Europhiles alike would like you to believe, the EU is not a super-state. Its members are independent countries who largely run their own affairs.
  3. Europe is more than the tourist hotspots
    Sadly, most Americans who visit Europe, and even many of those who live in Europe rarely leave the beaten track of old town centres, business districts and tourist top destinations. Their impressions of Europe are limited to Paris and Venice, and perhaps a bit of the countryside of Tuscany or the valley of the Loire. Their image of Europeans is therefore that of sopisticated, cycling, latte-drinking fashionistas. Sad truth is that most of Europe is less like the Champs-Élysées and more like the suburbs of Dusseldorf or the Bulgarian countryside – full of moustached people in jump-suits, who drink beer for lunch.

    What most of Europe's countryside really looks like

    What most of Europe’s countryside really looks like

  4. The UK is not a part of Europe
    This is actually what the British themselves believe, and their Anglo-Saxon cousins have inherited this belief. However, the UK is separated from the European mainland by a stretch of water just 33 km wide and less than 50 meters deep. People have even crossed swimming! The UK has been a part of the EU for over 40 years. Culturally, economically, socially, ethnically, religiously, geographically – any way you put it – the UK is firmly a part of Europe. Dear Britons – you are Europeans. Get over it. And mention it to your cousins, will you?
  5. Europeans have more than two parties
    In the USA it is simple – you’ve got the Republicans and you’ve got the Democrats. Europe is a bit more complicated politically. In most European countries its an elaborate game of multiple parties and coalitions. I know Americans like things simple, but European politics just doesn’t work this way. But don’t worry about this one, most Europeans don’t get it either.
  6. Football – no, its not soccer, its FOOTBALL
    Americans don’t even understand the name of the game that drives Europe crazy. They think they have football and what the Europeans play is soccer. But seriously – American “football” is played with the arms and hands mostly. Even if the occasional kick is taken into account its “limbsball” at best.

    What football really looks like

    What football really looks like

  7. European social system
    “Social=socialism=communism=DEVIL” – that’s pretty much the line of thought of the average American. “Europe” is in the USA a symbol of all that goes wrong when the government takes over. In reality, in the USA government spending is ~47% of the GDP and in the EU government spending is ~49-50% of the GDP. Hardly a difference, isn’t it? True, in Europe poor people get various benefits and social subsidies. But in the USA the system is pretty much the same – the benefits are just called “tax credits” so that it sounds more business-like. But how can people who pay no taxes get tax credits? A-ha! That’s just social benefits in disguise!

So dear Americans – whether you’re visiting Europe, or just hearing some news about “Europe” – do keep in mind that things are a) a bit more complicated and b) perhaps not that different than at your place. And if you have stories of European misconceptions about the USA – I’d love to hear, I’m sure there are plenty.

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Israeli politics for dummies (2015 edition)

With voting taking place in just 1 week, on Tuesday, the 17th of March 2015, the elections campaign for the twentieth Knesset has entered its final stretch. And as usual with Israeli elections, predictions about the outcome and its consequences are worth less than the paper they are printed on. As any follower of Israeli politics knows, expecting the unexpected is a must. But even on the Israeli scale of surprising results, next week’s vote might turn a big surprise. It just might be that the next Knesset (the Israeli parliament) will not be as fragmented as it used to be.

Read on and this will make (at least some) sense! Image source – Wikipedia

The reason is that the electoral threshold has been raised from 2% to 3.25%, meaning that a party should win at least 4 rather than 2 seats to be in the Knesset (out of 120 in total). Many parties running, both established ones and newcomers (Meretz and Yahad, see below) are balancing just above the threshold. With that in mind, voters may at the last moment cast their ballot for a party that is sure to get into the Knesset, rather than risk having their vote lost with a party that just couldn’t make it. Other factors that complicate the eventual outcome are the application of the Bader-Offer method and the surplus-votes agreements. I’ll spare you the technical details, but it comes down to a slight favouring of bigger parties. So, the Likud got 38 rather than 36 seats in the 2003 elections after the numbers were crunched.

The surprising outcomes are not only a function of technicalities though. The main source of surprises is that Israeli politics is very poorly understood outside Israel. The way I see it there are 3 causes for the failure to understand Israeli politics.

Firstly, most coverage comes from left-wing affiliates. So, Omri Marcus, an Israeli who wrote a guide to “Israeli Politics for Dummies“, has named no less than 3 right-wing parties in Israel “extreme” and guess how many left-wing parties got that title? Right, zero! Not even the communists of Hadash were deemed worthy of the “extreme” label by Omri.

Secondly, It’s the economy, stupid. The Israeli politics is almost uniformly framed as revolving around security in the international media. Yet the Israeli governments usually fall on economic issues and election campaigns are largely focused on social-economical topics like the high cost of living, taxes and child support. Since this aspect of Israeli politics is by and large ignored outside Israel, outcomes of the elections do not fail to come as a surprise.

But the third and perhaps main reason the Israeli elections are so confusing is that, well, there’s just too much going on. This time, there are no less than 25 parties participating, with 10 or 11 standing a real chance of scoring seats in the Knesset. Granted, 25 is less than the over 30 that participated in previous campaigns, but its still a huge amount to choose from.

To enable understanding Israeli politics would take more than a blog post. But I will try to make the Israeli political map a bit more understandable, by presenting some definitions and the main actors, discussing them, where possible, in more general political terms. Without further ado, here’s my best attempt to make sense of Israeli politics.

The political map

Left-Right
The classical definitions of “left” and “right” apply in Israel as well. The “left” is pro-state involvement and government spending, the “right” is about privatization and less taxes. In security terms, as elsewhere, the “left” and “right” are “doves” and “hawks“. In Israel, in addition to traditional opinions on crime and immigration this means the “right” is Jewish-nationalist or Zionist and the “left” is… well, slightly less fervently Zionist. And, of course, there are the Arab parties, which are anti-Zionist.

Black-white
At least part of the Israeli politics is arranged around ethnic lines. In the Jewish majority the “black” are the Sefardi Jews and the “white” are Ashkenazi. With the ethnic divisions being rapidly erased as Jews of different origins happily intermarry, the division becomes less pronounced, with some notable exceptions (see below). The black-white division correlates slightly with the left-right, Sefardi Jews being on average poorer, less educated and more right-wing oriented than Ashkenazi.

Religious-secular
Religion plays a large role in Israeli politics, with at least 4 of the 10-11 main parties including a significant Jewish religious component, supplemented by the Arab Islamist party. Most Jewish religious parties are nationalistic, but their economic platform ranges from ethno-socialism to more republican-style views.

The main players (with the number of seats in the latest poll)

Likud (22)
Despite what some would like you to believe, Likud is nothing like the Tea Party. In social-economical terms Israel is more European than American and Likud is a classical central-right movement that can be best compared to the British Conservatives, the German Christian-Democrats or the milder Republicans.

Zionist Union (24)
The split and fractured remains of the Israeli Labour party have re-united for the 2015 elections under their traditional banner “anything but Bibi [Netaniyahu]”. A classical Social-Democratic central-left party (left-wing Democrats in the US).

The Joint Arab List (13)
Recognizing the very real possibility of being wiped out by the elevated electoral threshold, 4 Arab parties have formed an unholy alliance of Arab nationalists, Islamists and Communists, united only by their rejection of Israel as a Jewish state. Syriza is the best parallel, although if there’s one sure thing in Israel is that the Joint Arab List is not going to be a member of the coalition government.

Yesh Atid (12)
A secular centrist party, that came out of nowhere to become the second-largest party in the outgoing Knesset. As usual with secular centrist parties in Israel, is going nowhere after having failed to achieve any of its goals despite being a major coalition partner with Likud. Comparable to European Liberal-Democrats, or the right-wing of the Democratic Party in the US.

Jewish Home (12)
As you probably guessed from its name, a Jewish nationalist-religious party. Its economic agenda is more right-wing than that of other religious parties, so its probably comparable to the right-wing of the Christian-Democrats or mainstream Republicans.

Kulanu (9)
This campaign’s centrist newcomer. Formed, as usual, by a Likud fugitive who is unsure of most things except wanting to head his own political movement. See Yesh Atid.

Shas (7)
A Sefardi (“black”) Jewish ultra-orthodox religious party. Its program is a unique blend of social demands with religious propaganda. The “left-right” definitions fail here as Shas will sit in any government that will provide its MP’s a reach into the public funds.

United Torah Judaism (6)
The Ashkenazi (“white”) branch of Jewish ultra-orthodoxy. See Shas.

Yisrael Beiteinu (5)
Rather unique bird in Israeli politics, this is a secular right-wing party. Rapidly disappearing as its Soviet-made electorate assimilates into the Israeli society. Has a love-hate relationship with Likud, as the two keep merging and splitting.

Meretz (5)
The last remains of the Israeli left. Dreamy left-wing extremists, attempting to save themselves from (political) extinction by including a green agenda, much as the European Green-Left movements are doing. With about the same very limited success.

Yachad (4)
A splinter-movement of Shas, running together with the scarier components of Jewish right-wing extremism. Stand a real chance of just failing to pass the electoral threshold. Again.

BARUCH2

That’s me (on the right) in Hebron, with Baruch Marzel, the scarier component of Jewish right-wing extremism. This was way back in 2001, apparently he lost a lot of weight since. I do not support his views. I think he’s a fool.

The Day After

If you thought the Israeli politics was confusing, wait until the day after the elections, when the dust has settled and the seats in the Knesset have been divided. Since Israel has a multi-party system, and no party ever gets a majority, a coalition has to be formed. Whether the polls are accurate or not, it seems as if even the two biggest parties (Likud and Zionist Union) will get less than a 1/5th of the seats each. In the most optimistic scenario where they bridge their deep divisions and overcome the mutual resentment, they will need a third partner to achieve a majority. Yesh Atid is the most likely candidate, but even that might not be enough for 61 (out of 120) seats. Any other coalition will have to bring together at least 4 parties and be an even less probable combination of political views. All I can say is stay tuned for what may very well be the best show on Earth!

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Greece – just another small European country in big trouble

[Disclaimer: This post contains no shocking news and concludes that there will be “more of the same”.]

I’ve been to Greece once, about 10 years ago. It was a short visit – all I had was a 7-hour layover in Athens, and I went to see the city rather than hang around in the airport. The brand new subway, built for the 2004 Summer Olympics took me to town, past huge stadiums built only a year or two before, especially for the Olympics. Abandoned and disused since, the stadiums were already overgrown with weeds. Once in Athens, I didn’t do much – walked around town, climbed a hill to a church and a ruin, lunched on bread and olives from a local supermarket and headed back. The Greek capital did not leave a good impression. I found it dirty, the roads were cratered, the buildings in terrible disrepair and I’ve never seen such shortage of attractive women. Add to that constant harassment by street venders trying to sell me illegal cigarettes and counterfeited perfumes, and you’ll understand why I was relieved to go back to the airport. Greece was painfully far adrift from the cradle of Western Civilization it once was supposed to be.

The entry of King Otto of Greece in Athens and his reception in front of the Thiseion temple, in 1833, a painting by Peter Von Hess (http://www.pinakothek.de/peter-von-hess)

As we all know, since my short visit (and totally unrelated to it) things have only been worse for Greece. Last weekend’s elections result has just thrown in an extra portion of uncertainty into the situation. Syriza, a militant alliance of radical left groups, has won on a populist promise to “end austerity”. The statements by Syriza leaders before and after the elections are, of course, rather contradictory (before: “[Syriza will demand to] write down on most of the nominal value of debt“; after: “We are not talking about writing off 50% of the nominal debt”). So what is going on there? And where will Greece (and the EU) go from here? The way I see it, there are 4 possible scenario’s:

  1. What Greece wants
    The debts are forgiven (“written off”) and Greece is free to recover. Highly unlikely. The Greek have shown no intention to mend their ways. The rest of the EU is not bent on a repeat of the situation, having to save Greece again in 5 or 10 years. “Pardoning” Greece’s debt is politically unacceptable in the loaning countries (like Germany and the Netherlands) and will be met by similar demands by other bailed out countries (Spain, Portugal, Ireland). Such demands are clearly impossible to meet. Not an option.
  2. What the (Northern) EU wants
    Greece paying its debts. Equally unlikely. By now it is clear that the Greek economy is simply unable to recover sufficiently to generate tax income that will allow the government to repay the current loans. The pace of reform has been virtually zero. Syriza promises a lot (an anti-corruption task force, “an end to both bureaucracy, corruption and tax immunity“) but these promises have been made by previous governments as well. There’s no sign or prospect of Greece’s economy becoming “Germanized”. And without drastic reforms, there’s simply no budget to pay back the loans. Won’t happen.
  3. A creative solution
    Thinking out of the box and breaking taboo’s. Grexit is one such option. Again, unlikely. Greece has no intention of leaving the Eurozone. Grexit will deprive it from the only leverage it has – “help us or we will bring you down with us”. In plain words, we call it blackmailing, but its politics, so “using the available assets” is considered a more proper term. The EU has no legal means to force Greece to leave the Euro. And the fall-out will be too big for Grexit to be a real option. Other creative solutions are possible, but politicians are not really good in recognizing and applying them. Even less probable than the previous two scenario’s.
  4. More of the same
    I recently learned that if weather forecast would simply state “tomorrow’s weather will be like today’s” it will be accurate in about 65% of the cases. The huge spending on meteorology improves the accuracy only marginally to 75% of the cases. My guess is that the same applies to economy. As a former boss of mine used to say: “The soup is being eaten cooler than it is served”. He meant that bold statements and stiff negotiations positions are usually watered down to match reality. In Greece’s case it will probably mean that:
    a) Syriza-led government will find it difficult to negotiate a significantly better deal
    b) The EU will have to write off some of the Greek debt (here a creative solution will be found – they will name it differently to avoid a scandal)
    c) Syriza’s populist promises of higher wages and pensions, expanding the number of government jobs and such are easy to make but impossible to fulfil.

So expect drama in front of the cameras but little dramatic results at the end. The pale reaction of the international stock exchange markets to the elections result is a clear indicator that not much is going to change. Is this good news? No. But its much less bad that it could be.

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Viva la Récession

The economic recession in Europe is refusing to go away, despite (or thanks to) all the efforts of the EU. Economists would say that formally, the recession has ended years ago, but what do they know? If they’re so smart, how come they never saw it coming?

A recession is, however, not only a negative thing. For example, thanks to the recession, the roads are less congested. As transport by trucks goes down, traffic jams are decreasing, so I can actually (sometimes) get to my recession-proof university job by car in less than 25 minutes. A side-effect of the diminished traffic is that less new roads are being constructed, so the already small amount of nature left in small European countries is being demolished at a slower rate. Also, because of the recession, construction of new offices and industrial parks has virtually stopped. Hopefully the planners and architects will use this break to reconsider some of the design and development choices they’re making, like coming up with something truly original and sustainable.

Anther consequence of the recession is that its a buyers market in the housing. Prices have dropped by 20-25% and you can often bargain even further. I’d love to use the opportunity, but unfortunately, I have my own place that I’d have to sell first. With 50 other apartments for sale in the block, I just don’t see it happening any time soon.

The one thing that appears to be recession-proof are the fuel prices in Europe. They just keep going up, rain or shine. If the current trends will continue, in a couple of years when no one will be able to afford the gasoline any more, I will have the empty highways all for myself to cycle on. Good thing I like cycling. It would be a dream come true.

 

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