Friday, July 29, 2016

The IMF's selective "mea culpa" on Greece (and a repost from 2010)

So the Independent Evaluation Office of the IMF has issued a mea culpa on the handling of the euro crisis. The sub-report on Greece in particular admits to very serious errors in handling the crisis, although it falls short of claiming at least partial ownership of the social and humanitarian disaster inflicted on the mass of the population in Greece. Apparently, and tellingly, it considers its programs in Spain, Portugal and Ireland as various shades of quasi-successful, as far as the IMF goals are concerned, which is probably true, but says more about the nature of IMF goals and what they do not include, given the various levels of social dislocation, hardship, increased suicide rates, increased inequality and migration rates in these austerityland countries. It focuses (rightly) on the lack of serious debt restructuring efforts early on in the crisis (due as we know, and the reports admit, to EU-level political reaction to any such plan), admits to a lack of understanding of the intricacies of the Greek economy (such that it was) and on pre-crisis assessments of it, and recognizes that the "burden-sharing" of the adjustment in Greece was very lopsided. Also and importantly it points out that:
If preventing international contagion was an essential concern, the cost of its prevention should have been borne – at least in part – by the international community as the prime beneficiary
At the same time it ignores the social catastrophe that was produced by its "structural adjustment" pre-conditions in:

  • labor deregulation (in an economy with inter alia disaster-area unemployment rates, a war-time level of GDP reduction, and a massive brain-drain as educated young people left and are still leaving the country to escape a prospect of life-long poverty wages), 
  • privatizations (which they admit had highly inflated revenue goals, but have no problem with the fire-sale of state assets that they contributed in imposing) 
  • the "opening of professions" (which is leading either to a proletarianision of professionals - contributing to the aforementioned brain-drain and the creation of ever-tightening, usually foreign-owned oligopolies), 
  • or most of the rest of the other half-baked neoliberal snake oil they peddle (such as the "liberalization" of market opening hours). 

Interestingly the report focuses on the issue of a more just burden-sharing mostly because the authors apparently imagine that if this "adjustment" was more fair - in terms of taxing the rich a bit more - then the population would have fallen behind and accepted the IMF programme. But although such a redistribution of tax burden and legal proceedings against tax-evaders would admittedly create less rage against the program, it would have marginal at best success in increasing revenues. As the current government, after the July 2015 coup in which the IMF participated, is now focusing on exactly this redistribution and does go after (many) tax-evaders (certainly to a degree not seen in Greece since practically forever), tax arrears keep piling up because what is (or was) the middle class has been taxed out of its safety nets already, property taxes are at an unbelievably high rate (and since something like 80% of Greeks own their homes this affects even people who are truly struggling), small businesses have collapsed and those that survive are mostly fighting for their lives. and troika imposed VAT hikes are hitting everyone and affecting the tourist industry. You cannot receive from those who have nothing left to give. For probably most households and small businesses piling up arrears and tax-evading is a question of economic survival and sustaining a very modest living standard. No amount of fairness can erase this simple fact, which somehow escaped the grasp of the IMF as it still assumes that the increase in arrears is a question of reluctance not inability.

As these reports are published, the IMF is still involved in Greece and is pushing hard for further labor market deregulation, further reductions in the minimum wage and even laxer mass layoff laws. The current Greek government is insisting that not only will it not accept these terms, but will push for restoration of some form of collective bargaining. So this is heading for a multiple stand-off this coming autumn, pitting the IMF against the rest of the lenders on debt reduction and the IMF against the Greek government in terms of labor reforms. It is questionable whether these recent reports will have any effect on IMF policy within the troika, especially since the IMF research teams and various committees have continuously offered critiques of IMF policy in Greece and were practically ignored by its executive.

Still, things are in motion, especially after BRexit and the Spain and Portugal amnesty decisions on their "excessive deficit" that were driven by it, as well as the looming Italian (european?) banking crash / rule bending. This report adds to the argument that turning a blind eye on debt sustainability is a can that can be kicked along no further, a position already gaining ground inside the organization itself and supported apparently by the US government.

As a refresher on the IMF's blunders and misinformation in Greece I am republishing below a diary I posted in the European Tribune in May 25, 2010, titled "Some somewhat more coherent notes on the Greek crisis: debunking IMF propaganda (2)" with updated links, minor edits and restored graphs (part 1 was here), based on an IMF FAQ on the Greek crisis, and its Frequently Wrong Answers:

Some somewhat more coherent notes on the Greek crisis: debunking IMF propaganda (2010, edited and restored, 2016)

I was thinking about how to structure the second installment of the saga of this unfolding disaster (part 1 here) that has been inflicted on the Greek working population, part of the development of the Great Crash of 08. There is a lot to be highlighted, especially bogus data and statistics circulating among world media and organizations, that are then used to "explain" the inevitability of the neoliberal shock therapy which Greece is being subjected to (and which is I am afraid a first test for far wider application of similar shocks throughout the continent ).
The IMF fortunately, I see, has helped me out a bit on this, by issuing a compilation of bad statistical urban legends and hearsay on the Greek crisis and endorsing it as policy background. In its web-site, the Fund has thus created an FAQ section on the Greek crisis. This is a document riddled with outright lies and strategically propagated half-truths and obfuscations, along with wishful thinking and hand-waving serious questions aside, to an extent impressive for an official document, coming from one of the pillars of the world economy. It is the ideal place to start to tackle the (already dwindling in the face of the globalisation of the Euro crisis) moralizing and the lies that have been used to "explain" why working Greeks should suffer the economic equivalent of a nuclear attack. Let's check out some of the claims made to see how credible the IMF's analysis of the statistical and factual reality in Greece is...

1. Right off the bat the IMF starts with a much-repeated, yet misleading, claim:
"Greece is highly indebted and lost about 25 percent of its competitiveness since Euro adoption".
It is far from obvious how the IMF measures competitiveness. The FAQ section is not referenced at all, and it's not clear how this quantification arises or what it means. Erik Jones, writing in Euro Intelligence, was already debunking part of the competitiveness mythology, as pertains to labor costs, in March:
...What matters in terms of a head-to-head competition is how Greece and Germany compare in the cost of labor per unit of output and not the real compensation of employees.  Moreover, we should look at their performance across the European marketplace as a whole.  By that measure, if we set the year 2000 equal to 100, then by 2009 Greece was at 98 while Germany was at 95.  Germany is still doing better than Greece, but only by a little and both have improved against the rest of Europe.
...Using national accounts data for relative real unit labor costs in manufacturing, Greece goes from 100 in the year 2000 to 87 in 2008.  Over the same period, Germany goes from 100 to 90.  It is hard to see how Germany comes off better in the comparison.
...Even if Greece is not suffering in terms of manufacturing, the high real incomes that Greek employers are doling out must surely be hitting the bottom line in the service sector, shouldn't they?  Again, that's hard to see in the data. Total compensation per employee was 53.8 percent in Greece and 57 per cent in Germany...
Furthermore the "since Euro adoption" part is misleading. Greek productivity was surging until 2007. After that year, influenced of course by the global crisis, and affected by real fiscal imbalances (about which more later) productivity (and competitiveness, however defined) fell faster than the Dow Jones average after a computer glitch, but that was surely not a uniquely Greek phenomenon.
In fact Greece was receiving praise by the IMF itself for its improved competitiveness, singled out as the most successful economy in Southern Europe.

"Only Greece has experienced robust per capita growth underpinned by commensurable productivity gains"

Source: IMF
So, much of the decline, in many areas, was a result of Greece not responding successfully to the global crisis. The "joining the Euro" part is thus, I repeat, misleading. And the whole story is repeated elsewhere in the document.
2. Under the same question the IMF then makes a flatly false statement:
In past years, Greece's public sector spending grew, while revenue fell. Then the global recession hit and economic activity slowed and unemployment rose. This exacerbated the fiscal situation.
Well no. The evolution of Greek public sector spending was not growth followed by a dip as the Greek economy was hit by the global recession. In fact between 2002 and 2006 public expenditure shrank and started rising precipitously, only after the global recession hit... but then so it did almost everywhere...

Greece / OECD public revenues as % of GDP. Source: OECD

Greece / Eurozone public expenditure as % of GDP. Source: 

Revenue was pretty much stable at rather low levels until just last year (2009) when indeed, it did drop.

3. Fluffy nonsense:
A significant fiscal adjustment is needed in Greece. The program is designed so that the burden of adjustment is shared across all levels of society, while protecting the most vulnerable groups.
Bollocks. According to most reports in the Greek press, the lower pensions are being lowered still and will then  remain steady (or decline) at below poverty levels for the next few years. The minimum wage is effectively being driven down.  So are disability pensions. At the same time while tax-evasion is being targeted, employers are receiving new-found "freedom" from labor costs.
The government's program also includes pro-growth policies to reform such crucial sectors as tax administration, the labor market, the health sector, and the management of public finances.
None of these is strictly speaking a pro-growth policy. They are trying to clean up parts of the tax collecting system (although with limited resources, a diminishing budget - due to the cuts - no possibility of hiring tax inspectors and public service auditors etc.). The labor market is the one area they have been "pro-growth": its being third-worldized.
These measures will open up the economy to opportunity and make the economy more competitive, transparent, and efficient. This in turn will help restore confidence of investors and the markets. The ultimate goal is more dynamic and durable growth.
... many years from now, by which time the basic salary will be around 100 Euros or so. Hurray! Although it is probably true that investors and markets, will really like the new Greece.
4. And we thus move on to yet another falsehood:
The fiscal measures include: a reduction of public sector wages and pensions--something which is unavoidable given that these two elements alone constitute some 75 percent of total (non-interest) public spending in Greece.
The 75% figure is completely false AFAICS and we've seen why here: These are the Eurostat numbers (p. 15), and this is the Greek Ministry's of Finance planned 2010 budget [in Greek, see p.11, budgetary expenditure]. At most these add up to 45% of total (non-interest) public spending in Greece. So maybe this wasn't really "unavoidable".
5. The response to the "but isn't this the bad ol' IMF doing its destructive work again":
Q. Is the range of conditionality in the Greek program a return to the more traditional IMF "austerity" measures of the past?
No. There are three key differences:
  • This program is focused on Greece' two key problems: high debt and a lack of competitiveness. Conditionality is very much focused on these issues.
  • The Greek authorities have strong ownership and leadership and it is their program.
  • The program includes measures to protect the most vulnerable, which are a critical component to effective implementation.
  1. The Greek authorities claim that they have no such ownership and that they cannot draw "lines in the sand", except with great difficulty, where the measures are concerned. In fact according to the media, the Greek government is under enormous pressure from the IMF/EU Commission to further transform the pensions' system. One party is lying.
  1. I have not noticed any of these "protective" measures being reported. What, they'll bring in UNICEF when child mortality rises?
6. The IMF insists that debt restructuring is not in Greece's interest, and that it will not help "Greece's capacity to grow". I wonder how mass migration of the young and talented will help "Greece's capacity to grow", a trend that existed already but now seems on the verge of reaching tragic proportions, or how is the deepest recession since Nazi occupation, conductive to "Greece's capacity to grow", unless they mean reaching such depths of poverty that Greece can compete with Vietnam in real wages, and Foxconn finds it profitable to move its factories and labor practices from mainland China to Greece. How will deep cuts in education help "Greece's capacity to grow"? How will an organized restructuring not help Greece's capacity to grow, if the alternative is an economic collapse and a recovery prospect based on wishful thinking and a best case scenario regarding world growth? How deep will the recession have to be this year (let alone the next and the one after that) before the IMF "revises" its outlook? Because we certainly are not heading toward a 4% of GDP recession: "market sources", are already whispering double digits.
7. Regarding tax revenues the IMF states that:
Additional specified tax measures amount to about 4 percent of GDP. The government is proposing measures to overhaul the tax system, including a progressive tax scale for all sources of income, taxing luxury goods, higher taxes for the wealthy, and higher taxes on tobacco and alcohol.
That's all fine and well, but we're already seeing the failure of this policy to raise indirect taxes. Consumption has already dropped so much that the new taxes on cigarettes are not expected to raise revenues at all, while enriching cigarette smugglers. The five point increase in the VAT tax will mean less revenue for the government if, as it seems certain, consumption drops by more than 8% this year.  Anyway it seems ironic that the IMF under its explanation for the increase in VAT mentions that "The government has proposed a range of tax measures with the aim of spreading the burden of adjustment more fairly". Obviously huge increases in indirect taxation, do not help in tax fairness, eh? 
8. The IMF explains that the wage and pension cuts the government is proposing
...will bring Greece in line with other, more competitive, economies. The extra two months salaries--the so-called "13th and 14th" payments--are unsustainable and do not exist in many other countries. Nor is the low retirement age that begins around 50 for some groups in line with life expectancy.
This is highly misleading to the point of dishonesty:
  • The 13th and 14th payments are just a particular way to temporarily distribute annual income. The only measure of wages that is meaningful is on a yearly basis. According to the European Economy Statistical Annex of 2007, Greece was second from the bottom in average wage purchasing power in the EU-15.

  • Some people do retire early, as early as 41. These are few. Very few. Mostly in the Armed Forces (where they can retire and then get another job legally, meaning they continue contributing to the system) and the police. Also until recently women working in the public sector with underage children qualified for early retirement at 50+. But the average retirement age in the economy as a whole is 61 years. These reforms pretty much push full retirement for many people at around 67. Mentioning that some retire as early as 50 and stopping at that, is monstrously misleading. This piece of misinformation has been repeated ad nauseam around the global media (i.e.). And it is actually repeated again in the document:

  • The pensionable retirement age for some groups beginning at around 50 is out of line with life expectancy in Greece--and out of line with the rest of the Euro zone countries. Given the aging of the population, such a low age for pensions, coupled with generous coverage ratios to last earned income, has put far too much strain on Greece's public finances.
This in a country where 28% of the over 65-year-olds are living under the official poverty line...

9. The IMF claims that:
The authorities recognize that the public sector in Greece has become too large and costly for the economy. In fact, there is no clear data on exactly how many people are working in the public sector
This is again not really true. The public sector amounts to 40% of GDP, according to the CIA factbook (I couldn't find directly comparable numbers for the rest of the EU), while "The share of public sector GDP in total GDP is about 43 percent in the UK and about 54 percent in France".
The data on how many people work in the Public sector exactly might not be all in, but we do have a rather good ballpark estimate. It is 14% of the workforce, "very close to the OECD average" as the OECD itself notes. The OECD is not including non-permanent seasonal and temporary employees which are between 300.000-500.000 in a given year (mostly underpaid and underinsured), and together both categories add up to something close to 20% of workforce (which is around 5 million). This is hardly a bloated public sector. It is inefficient, corrupt and poorly organized, yet surely its reduction (which is also a Greek government/IMF project), as opposed to its reinvention, reorganization, repair etc will only have the effect of ruining the few crumbs of a social safety net that do exist. That both the IMF and the Papandreou government see this as something desirable, speaks volumes about their ideology. 
10. Handwaving on the most crucial question, is not a good sign that the Fund is seriously concerned about the future of the Greek economy or Greeks in general:
Q. With lower revenue and a stagnating economy, how will Greece begin to grow again?
The government's program recognizes, and takes into consideration, that the difficult fiscal adjustment will initially have a negative effect on growth.
But with effective implementation of the fiscal and structural policies and the support of the Greek people, the economy will be far better placed to generate higher growth and employment than in the past.
Meaning: We know the effect on growth will be somewhere from horrible to catastrophic, yet if we all get together and engage in wishful thinking we will do what has never been done before and get Greece to the neolib fantasy of prosperity, with third world wages and most of its trained youth living somewhere far away. This is based on pretty much the sort of magical thinking that has made the IMF synonymous with disaster. So if our best case scenario regarding the world economy holds up, and if Greece is very, very lucky, it might return to 2009 levels of GDP by 2025 or so. Impressive. 
11. As final proof that the people who wrote the FAQ are kidding, you have their take on unemployment:
Because of the crisis, employment is already high at about 10-11 percent. Initially, there will be an increase in unemployment and the next two years will be difficult - unemployment could rise to about 15 percent. However, as strong medium-term fiscal measures and productivity-boosting reforms kick in, the economy will become more competitive, transparent, and efficient. With confidence returning, Greece will emerge from this experience in better shape than before, growth will return and employment will pick-up.
This 15 percent is utter fiction. The labor minister even before the IMF/Commission demolition combo landed in Athens was projecting unemployment rates around 17% by the end of the year. 15% is laughably low. Already in May unemployment had reached 12,1 percent up from 9,1 last May, and on a steep slope towards the stars. And this is pretty much before the austerity measures kicked in. I'm willing to bet that we will be lucky to have 15% unemployment by the end of this year. Next year we will most probably reach 20% or more. Among young people 18-24 unemployment is already at a staggering 34% this month. 
12. Final question:
Q. Has any country undertaken this level of fiscal adjustment before?
It is an unprecedented adjustment, but it is feasible, and the government is committed to getting the job done.
Feasible if one believes this absolutely speculative and factually false account given by the IMF. But anyway, this is an admission that Greece is the first guinea pig, an experiment to see if any First World country can survive the IMF treatment without joining the Third World. 
Greece in particular will end up having transitioned from a hell of an inefficient and corrupt social model to no social model at all...
The fact that the IMF has been so clumsy in its description of the Greek situation (and so unrealistic on the effects the policies it is imposing will have, or are having), either reveals the quality of the analysis of the Greek economy that has driven the IMF's/EU advice - a bad sign surely, or demonstrates that the IMF is barely covering up for decisions of which it is only an implementation instrument. Alternatively they don't care enough to be serious...

Saturday, November 1, 2014

33 Reasons Why Athens (and Greece) is still in deep depression

...So I came upon this article last night, and it really annoyed me. It claimed to present "33 Reasons Why Athens Is The Next Big Thing". Some of these "reasons" are pre-existing and/or permanent (the food, the views etc), some are questionable (Athens is cheap? Not for the majority of its inhabitants: it is probably the most expensive city in Europe by average purchasing power). Some are misleading and dated (Athens is far less busy at night now than I ever remember it). Some are false (Athens is not laid back anymore except if you are unemployed or rich. Everybody in between is literally running for their lives). 
This is PR, par for the course, possibly part of some marketing strategy. But it isn't harmless and it is creating a false image of success that is 100% non-existent. People outside the country might be led to believe that all is well, that austerity turned out alright. It didn't: things still need to change drastically, and not only in Greece...
What I as an Athenian really resent, is this BS that's being projected by our (far-right, super-corrupt) government, of a city and a country that is "coming out of the crisis", a country that "has pulled itself together and its capital [that] has never been more lively". It hasn't pulled itself together, things are probably the worse they have ever been for a majority of working and unemployed Greeks and Athens is a city in deep depression (compared to its past almost manic vivacity). The only people who can possibly see Athens through such rose-tinted glasses are either detached foreign visitors, assuming they avoid the nastier parts and sides of the city and have no previous experience of Athens; and well-to-do Greeks, the "winners" of this crisis, the ones that project their own personal comfort to the city at large. These are exactly the sort of people, the 1% of the true victors and the 10-30% of "crisis survivors" that form the backbone of the "pro-austerity" parties. They have become fascinatingly adept in turning a blind eye to the persistent humanitarian crisis that the country and the city is suffering, cynically indifferent to the mass of "losers", inhuman in their disdain of the common people. The last image of the article, of a woman in Kifissia, one of the poshest suburbs in Athens, is indicative. The inhabitants of Kifissia are indeed well-placed in not noticing the disaster that has befallen, and is still enveloping the country. The Athens described, is their Athens.

So let me present below 33 reasons why all this hype is plain orwellian...

(1) Projecting the poverty numbers in Greece as a whole to Athens, assuming a population of 4 million people, we can estimate that the city has approximately a million people, below poverty, including (2) a record number of children - more than in any other OECD country. By a similar projection (3) another million and a half are in danger of poverty, as 2/3 of the country in total are near or below the poverty line.
(4) Homelessness is ubiquitous in a city that practically was a stranger to the phenomenon until 2010
(5) Hundreds of thousands are denied even basic health-care and insurance as (6) the national health system crumbles under the burden of austerity.
(7) Around a million Athenians are jobless, (and (8) youth unemployment in the country is at 50%+). (9) Unemployment benefits are meager, last a year and after that, people are (10) pretty much left to fend for themselves.
For those who do work, wages (especially for the young but generally for all) have (11) been dropping continuously and precipitously, often below subsistence levels. In fact most of the jobs that do exist are in the kinds of bars mentioned in the article, and in low-skilled menial work, paying 200-500 Euros, usually uninsured. Greeks are on average 40% poorer than when the crisis began, and falling... This of course leads (12) to levels of inequality (showcased in Athens magnificently if one wants to drive around a bit) not seen in the country since the 1950s (if then), high enough that even the bleeding IMF thinks something should be done about it. The disaster has affected (13) gender equality which is also rapidly declining.
At the same time that incomes are collapsing, (14) Greeks (especially lower and middle class Greeks) are the most heavily taxed citizens in Europe. Often Greeks are literally dying to pay their taxes.... It is small wonder then that (15) Greece comes last in EU Social Justice rankings
(16) A massive migration exodus of the best and brightest has occurred, reducing the size of the Athenian ((17) naturally declining) youth population...
(18) The police presence in Athens is so thick, it is reminiscent of a military dictatorship, while at the same time these same police officers - around (19) half of which vote for the Nazi Golden Dawn Party - are (20) infiltrated by nazis and in (21) collusion with them, have (22) repeatedly attacked any person (tourists included) who looks "suspiciously foreign", or doesn't wear proper clothes, or (23) is fighting the Nazis. Actual undocumented immigrants are (24) treated worse than animals. Police brutality is so out of control, that a majority of Greeks fear they might be tortured in police custody. The Nazis (and 16% of the voters in the municipality of Athens voted for the Nazi candidate) are (25) still a threat, despite the fact that their leadership is now on trial, since they are pretty much given an implicit OK by the police to attack whoever they like, and that includes, say, gay couples (in a series of attacks this summer) and religious minorities. Police too, are often blatantly homophobic.
In line with the authoritarian governing style a couple of years ago, the ministry of health (26) published pictures, personal data and names of 31 HIV-positive women who lived in Athens, accused of prostitution.
(27) A drug epidemic featuring, among other substances, a locally brewed version of crystal meth, is also in full swing. Also of course, (28) prostitution is booming.
Greeks in general are so happy that they (29) are killing themselves in unprecedented numbers, for a country with traditionally low suicide rates. The broader Athens area is leading the country in this tragic statistic. Similarly for (30) mental illness which has increased rapidly these past few years, while at the same time (31) the psychiatric infrastructure of the country is collapsing. This is evident by now in the streets of Athens.
Athenians, as all Greeks are thus (32) deeply pessimistic about the future. And they also have (33) the OECD's lowest life satisfaction score.

The list can actually go well beyond 33. The only way for Athens to return to any kind of European normal is for its citizens to revolt against the criminal austerity policies that are killing it. Otherwise the new normal will be that of a demoralized Third World city.

Monday, October 7, 2013

German election post-mortem: European Love and Harmony; Exhibit I

In June I attended my children's elementary school end-of-the-year feast, a pleasant event with plays, dances and songs, along with displays of the kids' projects and art. Among the exhibitions was one of (selected?) drawings and images, from all grades. The pictures included, apart from the usual children's themes, a not-really-unexpected dose of social and political subjects: the crisis affects and often devastates all families and children are exposed to the worries and discussions of their kin. Most were implicitly political but a few were overtly so. Among them was this:

At the top the drawing reads "Greece will be saved if we could just kill Merkel". Underneath, intended as a title probably: "The Godmother". Angela Merkel's picture (from a magazine obviously) has horns and a Hitleresque mustache, and there is a speech bubble filled with Euro signs. The legend below the image reads: "Merkel revealed ("under the light") [to be] Hitler's granddaughter". It shocked no-one.

This is not something that is significantly divergent from the general zeitgeist concerning the German government in Greece: my 9 year old son informed me one day, that 'Merkel' is used as an insult in his football practice.Which sort of ties in with the fact that last April Angela Merkel's negative ratings in Greece were at 87% (vs 11% positive) up from 64% and 25% respectively, in March 2010.

A wide majority of Greeks has been disenchanted with Germany. Last year Germany's unfavorable rating in Greece was (uniquely in the EU) at 78% negative. But the disenchantment is broader: The latest poll numbers are dismal regarding what used to be a solid backing for the European project:

(blue = positive, red = negative opinion, left slide regarding the EU, right, the Euro)

The general trend has been similar:


The remembrance of past evils

The reality of being a debt colony, in which Merkel's "reforms" are a vehicle for large scale societal destruction, is not conducive to creating an atmosphere of cooperation and unity in the EU. The historical burden of a murderous Nazi occupation adds to the mix the aura of deja-vu. The misunderstanding regarding Merkel and her government being called Nazis in the popular / populist press, derives from this. In Greece the Nazis are first and foremost associated in popular memory (indeed living memory, still) not firstly with the Holocaust, but with famine: The last famine in Europe, created by the occupation, which killed perhaps 300.000 out of a total population of 7 million people. My mother in law remembers her grandmother starving to death to give her meager portions of food to her grandchildren and then being thrown into a cart (like the one pictured below) to be buried with nameless others into mass graves. (The irony of a Nazi party rising up in this context is biting...)

So when starvation rears its ugly head again, this time as well under "German orders", the fact that there is anti-German sentiment in the streets is hardly a surprise. It is indeed surprising that it has not gone overboard yet... Merkel's recent triumph is seen by many in Greece as a popular affirmation of homicidal policies. But of course this is short-sighted: In fact it is a test for the generalized dismantling of the whole European Social contract, which the Dutch King officially announced a few weeks ago...

[I wrote a first quick commentary on the Nazi murder over at the European Tribune. A more complete account is pending - which I will post here as well]

Friday, September 6, 2013

Merkel: Creating a desert and calling it 'reform'

"We base our actions on the principle of quid pro quo," said Ms. Merkel. "No cent for the Greek people as long as the Greek weren't willing to deliver and implement reforms. Otherwise it makes no sense because solidarity would come to nothing."
Ah reforms! I can assure Angela Merkel that these "reforms" she's actively seeking have been implemented for 3 and a half years now. The result?
After six consecutive years of brutal recession, with homeless and unemployment rates skyrocketing, Greek society is experiencing an "unheard-of fragmentation", made worse by fierce austerity measures, experts say...
...this economic crisis has now transformed into a social emergency, according to UN expert on debt and human rights, Cephas Lumina.During a recent visit to the country, Lumina said there had been "an estimated 25 percent increase in the country's homeless population since 2009" and the poverty rate for under-17s was close to 44 percent.
"Adjusted for inflation and using 2009 as the fixed poverty threshold, more than one out of three Greeks (38 percent) had already fallen below the poverty line in 2012," he estimated.
Drastic spending cuts imposed by the country's international creditors in exchange for multi-billion-euro bailouts has made a difficult situation even worse, many believe.
And how about the quid pro quo? Well it turns out that:
...the truth remains that German taxpayers, as well as those in Finland, the Netherlands and elsewhere, are no worse off at all, and their finance ministries have racked up savings.
"As an unintentional consequence of the crisis, Finland has benefited enormously," said Martti Salmi, the head of international and EU affairs at Finland's ministry of finance.
"We have not lost a cent so far," he told Reuters. "The same as for Germany very much holds for Finland."
In fact, German officials are well aware of their stronger financing position, the result of a more than two percentage point fall in borrowing costs, even as politicians continue to lament the risks being piled on German taxpayers.
When giving presentations in Germany, Klaus Regling, the German who heads the euro zone's permanent bailout fund, often cites two studies that show that Berlin has reaped substantial savings as an unintended consequence of the crisis...
It is even worse: we all know at this point that the whole First Memorandum with the troika had as its single goal to give time to EU (mainly) banks, exposed to Greek debt to cover their backsides and get rid of Greek government bonds. Had Greece defaulted on its debt the whole european banking system would totter at the even greater expense of the European and partucularly German taxpayer. What we had was basically a German bank bailout disguised as a Greek state bailout:
...It’s hard to quantify exactly how much Germany has benefited from its European bailout. One indicator would be the amount German banks pulled out of other euro-area countries since the crisis began. According to the BIS, they yanked $353 billion from December 2009 to the end of 2011 (the latest data available). Another would be the increase in the Bundesbank’s claims on other euro-area central banks. That amounts to 466 billion euros ($590 billion) from December 2009 through April 2012, though it would also reflect non-German depositors moving their money into German banks.
By comparison, Greece has received a total of about 340 billion euros [this was written in May 2012 and it seems too large, it was 240 billion Euros at the time] in official loans to recapitalize its banks, replace fleeing capital, restructure its debts and help its government make ends meet. Only about 15 billion euros of that has come directly from Germany. The rest is all from the ECB, the EU and the International Monetary Fund.
But even this is misleading, since "the Greek" aren't getting much of that 240 billion EUuros directly:
The Greek government needed €247 billion in the period from 2010—2012. Of that, a mere 7.7% went to finance the government’s deficit—the rest went for other purposes. Around 15.4% went to pay interest on debt—this money went to both domestic and foreign investors. Another 12.3% went to repay Greek investors who held government bonds that were expiring in that period. A full 24.3%, the largest item, went to repay foreign holders of Greek government bonds—in sum, almost €60 billion. Around 18% went to recapitalize banks, 14% went to support the PSI (such as buying back debt) and 8.6% went for other operations. 
 So: No "cents" for the Greek people. Plenty of cents for the local banksters and oligarchs who are doing quite well.


This whole absurdist narrative about unreformed Greeks is the modern German version of the foreign scapegoat diversion. I have lamented on this blog over the past few years of austerian shock and awe about the ensuing Greek drama, the societal dissolution and destruction, the creation of a country with even more feudal income divides and the annihilation of democracy. I do understand that this inane hate-mongering brings in the vote, but it is shocking that petty electoral posturing, can be so unprincipled as to perpetuate a policy that can only be described as a fiscal crime against humanity, not only in Greece but across the EU South.
Merkel and the CDU policies have created through this "reform" a country in which an increasing minority lives in squalor, where suicides have reached historical records, an already meager number of births have declined precipitously, AIDS infections have soared and infant mortality has increased - at the same time that the (far-right nutcase) Health Minister introduces mandatory HIV testing to the world's astonishment.
They have also created an economy  practically without any labor protections,where obscene levels of unemployment and employee fear and desperation, mix with the rise of temp agency workers with no rights and protections at all, uncertain pay-days and a vast number of undeclared / uninsured jobs, to create a labor market truly of the Third World. The ILO is calling on the Greek government and the troika that manages it to restore universally accepted labor rights, at the same time that child-labor is on the rise. Strikers get conscripted by the government... Privatisations are overseen by idiots, handing over profitable state companies to gangsters amid an orgy of corruption and public goods are on a fire-sale. The remaining industrial capacity in the country is being destroyed. Tax evaders are being protected by prosecuting whistleblowers,
At the same time this social massacre and redistribution is being overseen by the most right-wing- not to mention the most corrupt - government since the junta. A government that peddles to the already rampant xenophobia, sets up concentration camps for immigrants and refugees, uses police to crack down on any kind of protests and terrorize immigrants or youth on a regular basis and then awards them impunity. The governing conservative party is also in cahoots with the Nazi gangs that are now in parliament, increasing in strength. Decisions in government are being made by the PM alone, bills pass either without meaningful debate in parliament, or by decree, and private TV channels are all supporting the government and fighting the Left opposition tooth and claw in a media landscape that feels like a privatized North Korea, since all of them are owned by oligarchs with ties to the ruling parties. Meanwhile, ERT, the public broadcaster was illegally shut down to be replaced by a farcical "Public TV" that is so pro-government that it has absolutely no credibility (and viewers) and opposition parties refuse to participate in discussions it holds...

That is the "reform" Ms. Merkel is pushing for in Greece. If one thinks that this is desirable, or that somehow this has nothing to do with general plans for the post-European-Social-Contract EU, well I can add nothing more. The CDU government is tearing Europe apart, creating across the EU South and the Periphery in general such resentment for Germany and the core countries and such social disruption that it is destroying not only the lives of those swarthy southerners but the European project as a communal goal. It seems probable that the CDU-FDP coalition will prevail in this month's German elections. This will signal the end of the EU as we know it. And Ms Merkel's "solidarity" will be remembered as a bad, German joke.

Thursday, February 14, 2013

The Greek debacle 2013: Of paupers and taxes

Via the Guardian: "Athenians reach out for a bag of oranges during a free distribution of fruit and vegetables by farmers outside the Agriculture Ministry. The farmers are staging the event to protest against high production costs, including rising fuel prices"
It used to be the case that I would need some time and effort to select incidents that would be telling enough and substantially reported in the media enough to give readers a taste of the societal collapse and the democratic decay that is occurring in Greece under the yoke of the troika and its willing executioners among the political elites. These days its simple enough: just check the past few days' headlines.

Social collapse

On the societal collapse side Alex Politaki in the Guardian, states the obvious: Greece is facing a humanitarian crisis, deep and unprecedented during peacetime in the West:
"...There are three more indicators that point to a humanitarian crisis. First, the number of homeless people has risen to unprecedented levels for a European country: unofficial estimates put them at 40,000. Second, the proportion of Greek beneficiaries of NGO medical services in some urban centres was recorded at 60% of the total in 2012. This would have been unthinkable even three years ago, since such services were typically provided to immigrants, not Greeks.
Third, there has been explosive growth in soup kitchens and general food distribution. The levels are not officially recorded, but the Church of Greece distributes approximately 250,000 daily rations, while there are unknown numbers of rations distributed by municipal authorities and NGOs. By recent government order, municipal rations will be expanded further because of rising incidence of children fainting at school due to low calorie intake. There will also be light meals provided to young students..."

A recent survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants [GSEVEE - Warning: Bad English], put some numbers behind this:
  • ...Half the population is in danger of finding themselves economically marginalized (fail to meet tax obligations, owe loans, and buy goods of inferior quality in order to meet their obligations). 
  • 93.1 % of the households have seen their incomes reduced several times during the crisis period.
  • 40% of the households have at least one unemployed member.
  • 72% of the households expect new income reductions during 2013
  • 40% of households delay paying debts in order to meet obligations, while 50% lacks sufficient income to meet their obligations.
  • 42.5% of households search for products and services of lower quality and look for enterprises that are willing to offer such products and services
  • The heavy tax burden on products and services combined with the shrinking and over-taxation of incomes “softens” tax morals thus threatening to reduce public revenues too.  47% of the population, and rising, condones various methods of sales tax and VAT evasion
  • Only 12.6% of households stated as main source of income their businesses. The main income contribution for households comes from pensions (42.6%)
  • 70% of households have cut back on food expenses, while 92% reduced expenses for clothing - footwear
All this is happening against a backdrop of record unemployment along with health indicator reversals previously unheard of in the western world, as after "three years of austerity cuts... life expectancy is dropping, while infant mortality has grown by 4 percent"...

Looting the Poor as Economic Strategy

The collapse of Greek society is evident to all but the elites and their government: After the finance minister Yianis Stournaras blamed the decline of heating oil consumption on citizens having bought heating oil before the new tax hikes - despite the widely documented shutting down of central heating in the majority of Athens flats and houses - and Finance Ministry general secretary Giorgos Mergos statement about 580 Euros (before taxes) being "too high" a minimum salary, one is certain that the people in charge have a rather inaccurate idea of what is happening in Greek streets and homes.

The latest outrage is that the government is threatening to confiscate property, wages and bank accounts of any person owing the tax revenue office more than 300 Euros. This, at a time when the tax burden has become so absurdly high in Greece that half the population does not believe they will be able to pay all of their tax, basic utility and loan obligations in 2013. Keep in mind that these are taxes on last year's incomes - and last year's incomes are significantly higher, 4 years now in a row, for a large majority of Greeks than this year's; new taxes have also been levied either as emergency contributions, or special levies, or on small, non-income bearing property that used to be non-taxable. Indirect taxes have soared. A significant portion of people are "tax-evading" nowadays as the GSEVEE survey shows, simply to be able to survive or because they have literally no money. There are furthermore persistent rumours and leaks from majority MPs that the troika is pressuring the Greek government to withdraw the legal protection against foreclosure of people's residences that has been mandated until the end of the year. This will mean mass evictions.

Thus the ministry of finance is planning to send warning letters to 2.5 million citizens, threatening to take away property (which BTW they can't sell to raise money anyway since the real estate market is dead as a doornail, and any sale is now taxed at a much higher "objective value" than its actual market price) or commandeer bank deposits and salaries, unless their owners come to some sort of settlement with the tax service. Now since the actual tax laws have become ever more regressive, richer folks can and will easily arrive at some such deal. Poorer people, including many pauperized, unemployed or even homeless will most likley not be able to afford any deal and this can lead them, even if they have nothing that the taxman can take, to prison! Even for owing as little as 3000 Euros according to the plan. So the ones most heavily targeted and affected will be the poorest, usually those with the least tax or fine debts and a real difficulty to pay up. The numbers however that the Greek Government is publishing show that cracking down on the least indebted will bring significantly fewer rewards than targetting the big fish: While 2.3 million tax-payers owing each under 3000 Euros have a total debt that adds up to 1.1 billion Euros, the top 6.270 debtors owe the Greek tax office over 35 billion Euros! This at the same time that the Lagarde list of Swiss bank account holders is causing serious trouble to the political and financial elites, despite it being just the tip of the iceberg of chronic millionaire tax-evasion...
To top all this off, the ministry of finance has circulated a proposal to have everyone over 18 file a tax report (including high-school and university students) even if they remain dependents. They, along with every living Greek no matter how destitute, will be taxed based on a fictitious income of 3000 Euros, which the government claims they must be making if they are surviving. This is literally a tax on breathing, and it means that kids living with their parents (and remember, that's a lot of people in Greece, youth unemployment is over 50%) will be taxed 75 Euros unless they can show expenses receipts that add up to 750 Euros for the year. This is in reality a double taxation of their parents incomes. Of course, more poignantly, this means that even the 40.000+ homeless must either show 750 Euros worth of expenses or else face paying 75 Euros in taxes. Insanity.

And guess what? After all this tax revenues are plummeting:
Despite big tax hikes as part of austerity measures demanded by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month.
This is an economic policy leading to a failed state - a debt colony with pauperized natives. And Greece is just the guinea-pig for the rest of the EU South and beyond...

All this is of course not compatible with democracy: my next post will detail recent events in the slide towards undemocracy under the iron fist of a government of right-wing extremists...

[Edited and reposted at the European tribune

Monday, January 21, 2013

The Troika's Smog

Athens has been covered on and off these past couple of months by a thick smog produced by smoke from fireplaces and wood stoves. This is not strictly of course an Athenian phenomenon: all over Greece (and especially Northern Greece) towns and cities are enveloped this winter by an acrid smelling smog consisting of burning wood fumes and ashes, mingled with all sorts of toxic substances. As with most of the societal plagues brought on Greece these past few years, this too is a direct result of troikan austerity gone wild and a Greek government unable to protect its citizens.
The troika demanded and the Greek government acquiesced to, a tax increase on heating oil, the stuff that powers most central heating in Greek buildings, bringing its price at the same level as transportation gas. Already the price of a litre of gas at the pump in Greece was the highest in the EU, thanks to previous rounds of taxes on gas mandated by the troika. Gas prices went up by over 50% in Greece since 2009, mostly due to excise taxes. This, combined with a decline in real average income in the country of around 40-50%, led to a decrease in tax receipts from gas taxes of the order of 1.5 billion Euros.
Now apparently as heating oil has become a luxury that most people cannot afford (and with most of the population living in apartment buildings, if one resident in a block of flats cannot afford it, this means that the whole building does not buy heating oil and everyone is on their own to figure out a way to keep warm) consumption has reportedly dropped by as much as 80%. This means that alternatives to central heating must be found. Thus a lot of people turn to electric, grid powered heaters (your's truly included), that are now cheaper than oil and as many use fireplaces, and old wood stoves, occasionally with tragic consequences.
We are now discovering that picturesque and traditional methods of heating seen in villages don't scale. In fact I just realized how darn environmentally friendly heating oil is compared to burning things in a fireplace or a stove. And I do mean things: "People are burning furniture, plastic, construction materials and even their slippers" to heat themselves when it does get cold. This makes the toxic mix of deleterious fumes covering major cities, even more unhealthy:

"A group of scientists from seven research centres are taking smog readings in several cities through February 10th to assess the environmental impact from the increased use of fireplaces and wood-burning stoves, the Athens network SKAI TV reported.
The scientists, together with the Centre for Disease Control and Prevention, have warned that burning wood in the home releases 30 times more air pollution than using a well-maintained heating oil or gas-burning boiler.
They found that concentrations of particulates in the atmosphere from wood smoke increased 200 percent from December 2010 to the same period in 2012, stressing that the problem is especially acute at night, when demand for heating increases. The centre warned an increase in air pollution can lead to respiratory problems as well as aggravating allergies and disturb the neurological and reproductive systems.

The price of firewood has, naturally, doubled since last year, so the incentive to chop down trees in forests and parks is great. In fact both parks and national forests have suffered great losses:

As winter temperatures bite, that trend is dealing a serious blow to the environment, as hillsides are denuded of timber and smog from fires clouds the air in Athens and other cities, posing risks to public health.
The number of illegal logging cases jumped in 2012, said forestry groups, while the environment ministry has lodged more than 3,000 lawsuits and seized more than 13,000 tons of illegally cut trees.
Such woodcutting was last common in Greece during Germany's brutal occupation in the 1940s, underscoring how five years of recession and waves of austerity measures have spawned drastic measures
As one could have easily imagined in the first place, the measure flopped revenue-wise:

Oil suppliers claim of a 75-80% sales decrease for the period October-November-December 2012, when compared to the same period of 2011. Greek Fuel Suppliers Association estimates that the black hole in the state pockets are 400 million euro due to the sharp decrease in heating oil sales.
The Finance Minister, Yiannis Stournaras, an Economics Professor, Banker and former head of the Greek Industrialists' Economic Think Tank IOBE, was however adamant, having the perfect economics background to help him deny what is palpably (indeed chillingly) evident to every bloody citizen in the country: He has refused any extra aid to poor families, advising the freezing to "to be patient for another year" and wait out the cold. Really. And he also attributed the collapse of heating-oil revenues to "people having stockpiled heating oil from last year" despite the fact that it is consumption of heating oil that has declined by 80%. Obviously the economic cult he belongs to is loathe to price-in "externalities" such as health effects, fire hazards and illegal wood-cutting. The troika however seems happy with the results - and who are the victims of its policies to disagree? (although allegedly the troika demanded leveling the tax on heating and transport oil, to fight smuggling, but didn't state to what level - it was Stournaras who chose the highest of the two prices). Since people are turning to the power grid for heating BTW, a pinch of "energy liberalization" will see that this too becomes untenable, as electricity consumers will see a 9% hike on their bills (higher for smaller consumptions, smaller for larger ones!), pending a rumoured 20% increase spread over 2013. Already the Public Power Corporation is cutting off power to customers that can't pay at a rate of 30.000 connections a month! This means that ~300-500.000 households in Greece are living without electricity - literally powerless. Truly an achievement worthy of a Nobel Peace Prize...

The heating debacle is the perfect example of austerian madness as misanthrope feast. It has no point, it doesn't achieve its stated goals, and it has tremendously disastrous side-effects. It adds one more in the troika's long list of crimes against humanity in the European South and serves to demonstrate the imbecility of the current government and its experts...

Saturday, September 29, 2012

Greece: Class warfare, banksters and money laundering

Instead of an analysis of what kind of "austerity measures" and for whom the troika and its vassals in the Greek government have been preparing, I'll just show you a table of taxes before and after the the new tax system, that is part of the latest austerity package, is implemented, by income category. This is income tax only, it does not include social security taxes... The really fun part is at the bottom of the table [from, I took the liberty of translating the labels]

A fair tax system
This comes on top of a new tax system for freelancers / professionals, which imposes a flat tax (somewhere at the 25-35% range as government sources are leaking) from the first Euro earned, on all such non-wage earners, on top of a 500 Euro per annum fee. Now it is true that a mass of tax-evaders are such "free professionals" as they are called here (doctors, lawyers, engineers, but also designers, translators etc), included though in this category are precarious and part-time workers, young people with under minimum wage employment, second jobs etc.The number of the underpaid young, and not only, professionals that are in this category is perhaps over 250.000. So these people will be asked to be some obscene amount of their income in taxes (include another 500 - 5000 Euro on social security tax, depending on seniority - again not depending income) and ~300.000 professionals have zero or negative income this year after taxes. On the other hand if you are making over 100k per year, you have just moved the part over 100k, from a 45%, and everything between 60k and 100k from a 40% income bracket to the 25-35% rate.  Bizarrely this is sold as "taxing the tax-evading professionals", because the government has stopped even trying to make some sort of mathematical sense and hopes that soundbites substitute for arithmetic for enough people....

A cash injection for corruption

This new series of destructive measures estimated to be upwards of 14 billion Euros (that's like 7% of GDP and rising) would be enough to kill the economy if it weren't dead already. That this is demanded by the troika despite the fact that unemployment is climbing toward 30%, about a million and a half Greeks are living in households with no income at all, and that, if things go as planned, by the end of next year we will be well beyond a Great Depression scale slump, at a projected GDP decline of 30% over 5 years, does not seem to bother anyone that "matters". The new coalition government, elected on a platform of renegotiating the terms of the memorandum or at least lightening up the burden of austerity, is sending its electoral program to the dust-bin, proceeding with measures such as a reduction of farmers' pensions (from 330 Euros to 300 euros per month). Greek society is near unanimous in condemning this policy as unfair , but Samaras is adamant that he will honor none of his pre-election pledges and has been running around Europe playing the role of the good and obedient vassal.

What's at stake is the loan installment of 40 billion euros that will be used among other things to recapitalize already bankrupt and bailed-out private banks. This recapitalization was supposed to have occurred in the first half of 2012, following the successful completion of the PSI deal, yet the troika has unilaterally and against all signed agreements, held the loan back... Preparations are being made: the publicly owned banks, although arguably in better shape than the private ones, were exempt from the PSI recapitalization deal, (as were the pension funds with truly murderous consequences) are being given to bankrupt private banks, surviving only due to loans shouldered by the Greek taxpayer. ATE, owner of mortgages of half the farming land in the country was given away to Piraeus bank recently, but only the healthy parts: the bad parts will still be shouldered by the taxpayers. Piraeus bank incidentally, apart from being the recipient of successive bailout funds, was involved in a scandal recently, something exceptional as news, only because banks are almost fully protected from media scrutiny in Greece... Since the Greek banking system is the at the heart of clientilism and cronyism and since there are media magnates and other oligarchs in dire need of a liquidity transfusion, the whole corrupt banker - oligarch - political complex, is in urgent need of this loan. Public contractors and state suppliers will acquire liquidity, political parties in the verge of bankruptcy (ND and PASOK, especially PASOK) might avoid it, and the cientilist system can be set in motion again, albeit at a much lower rate of return for the troikan parties' bought voters.

10 billion euros laundered

Meanwhile, one of the few remaining relatively independent, if right-leaning newspapers in Greece published an amazing story, that if confirmed might offer a view of the scale of plunder that the country has been subjected to by the elites. Real News published last Sunday details of an investigation on money laundering involving over 10 billion Euros, the current Speaker of parliament, Vangelis Meimarakis, and at least two more conservative former ministers:

...Meimarakis is one of more than 30 politicians and public figures who have come under the microscope following a probe by the Financial Crimes Squad (SDOE) into corruption in public life.
Prosecutor Popi Papandreou, who has taken over the probe from SDOE, is expected to focus on claims against Meimarakis, former Transport Minister Michalis Liapis and former Public Order Minister Giorgos Voulgarakis.
All three were implicated in a multi-billion-euro money-laundering network in a Real News report last Sunday. Before summoning the three politicians, Papandreou is expected to call two contractors -- Iosif Livanos and Giorgos Zografakis -- who allegedly accused the three ex-ministers of involvement in money laundering with rival contractor Yiannis Carouzos.
This investigation was under wraps and going nowhere for at least a year and a half. The Speaker of the House maintains his innocence and has definitely lost his cool, although this sort of macho - hoodlum behavior is par for the course in today's New Democracy...

This is BTW why the Greek elites and their media are in complete terror that a party like SYRIZA, with no ties to this pyramid of corruption, might eventually win an election. In point of fact SYRIZA's immediate economic program is not much to the left of Paul Krugman. What is destabilizing however is the threat of local elites losing control of the web of graft that they cling on to since their grandfathers emerged after the war, as nazi-friendly black-marketeers who bought a suit and became businessmen. That EU elites chose to support the parties that nurtured this system, is probably telling as to where their interests lie...

Postscript: Athens. Social Meltdown

Finally, this is a very good brief recap of Greece's turmoil and destruction these past two years, from the ground:

Athens: Social Meltdown from Ross Domoney on Vimeo.

Cross-posted at Eurotrib

Monday, September 10, 2012

Comical Welt: All's well in the austerity front. No, really!

This has to be read to be believed "Die Welt: Happy Days Ahead? Euro Zone Austerity Measures Starting To Work" [Original in German]:

If the numbers are right, the European crisis countries are apparently healing faster than the markets have realized -- or want to realize.

An astonishingly positive total picture emerges from the various statistics. The economies of the euro zone's periphery nations are more competitive than they were just a few months ago; their industries are selling more abroad, and trade deficits are narrowing.

"Blood, sweat and tears -- everything people in these economies have been through is paying off," says Bert Colijn, a jobs market expert with Conference Board, a private economic research institute." The competitivity of the crisis countries is improving, and these first signs of improvement are encouraging. The periphery countries are moving in the right direction."

What is this right direction that brings PIIGS singing out in joy at the good effects of austerity? Well people there are working for pennies now! And doesn't that make everybody happy?

One particularly salutary development is cheaper labor costs. In Ireland, Spain and even Greece, unit labor costs have fallen significantly over the past few years. Conference Board economist Colijn and his colleague Bart van Ark researched that development, and report that of all the euro zone countries, the one that has increased its competitivity most is Ireland. Unit labor costs in Irish industry have fallen by 41.5 percent since 2008, which means that labor costs in Ireland are lower than they are in Poland and other middle and eastern European countries.

So we're there? Ordoliberal austerity's Land of Canaan has been reached? Herbert Hoover has been vindicated? Well not quite yet... it remains for the Archons of Investment to take heed of the redemption of the sinners, and in, a not quite adequately determined time-frame, we will have some sort of Growth and Jobs:

It will take time before lower unit labor costs produce full effects, but already they have made goods from those countries cheaper. In the long run, it will make them more interesting to investors.

At the moment, however, uncertainty about the future of the monetary union is keeping companies from investing. Only when they start investing again can the results of lowered costs bear its real fruit in creating growth and jobs.

Yes. At last! We're talking low paying jobs of course. And no welfare state - goes without saying. Possibly a large spike at infant mortality. And those pensions? Well the good thing about a reduced life expectancy is that fewer will feel their absence...

But let's try to confirm the "competitivity" improvement under austerity for most of the PIIGS countries from 2008 to 2012. We'll be using The Global Competitiveness Report, a composite index that has more to do with an investor's take on how they would like a country to be, rather than anything else. As investor sentiment seems to be the driving argument in the quoted article it seems useful to check the related rankings... So:

  • In the Global Competitiveness Index rankings for 2007-2008, Portugal was ranked 43d, yet this year it is ranked 49th...

  • Ireland was ranked 22d in 2007-2008, and 27th this year (despite or probably because of the >40% drop in unit labor values there I wonder?)

  • Italy was the only one of the PIIGS countries to improve from 49th (2007) to 42d, possibly because it was the country least inflicted with austerity of the five

  • Greece has dived from 67th place to 96th, as its economy was destroyed by unprecedented turbo austerity

  • Spain dropped from 29th to 36th.

Is that an improvement or what?

The whole propagandistic tenor of the piece (fox news on weed) is breathtaking since it is running counter to pretty much every published assessment of the situation. For example Bloomberg recently wrote about Spain that:

"We fear that things are likely to get worse before they get better," said Martin van Vliet, an economist at ING Bank in Amsterdam, who expects Spain will seek additional financial aid as early as next month. "With much more fiscal austerity in the pipeline and unemployment at astronomic highs, the risks are clearly tilted toward a more protracted recession."

Separate data today from the ECB showed that private-sector deposits at Spanish banks fell by a record in July, dropping 74.2 billion euros ($93 billion), or 4.7 percent, to 1.51 trillion euros. That's the biggest decline since at least 1997, when the ECB's data series started.

As Migeru pointed out in an f/b conversation, this is running counter to Die Welt's other coverage ("Spain on the brink of bankruptcy" on Sept 7, just five days after the posted article).

Could it be some sort of sarcasm that is being missed in translation? Is it part of a propaganda effort to create a more positive atmosphere toward the south in German public opinion? What? I don't know but is sure reads funny in a dark and obscene way... Cross-posted in the European Tribune