Thursday, November 25, 2010

Greece: Devoured slowly by lying, bloodsucking, neoliberal vampires

Statement by the EC, ECB, and IMF on the Second Review Mission to Greece

Abstract: IMF / ECB / EC to Greek workers: You're screwed and there's nothing you can do about it. We own your asses.

Selected highlights (blockquotes in italics) with commentary:

The objectives underpinning the program are to restore fiscal sustainability, safeguard financial sector stability, and boost competitiveness—to create the conditions for sustained growth and employment. Maintaining fairness in the program also remains of paramount concern and this will continue to guide the direction of policies in the period ahead.

Translation: The objectives underpinning the program are to promote the German Stupidity Pact at the expense of the taxpayers and working people in particular, promote widespread social instability, poverty and gaping income differentials, and boost competitiveness by squashing already meager wages and salaries in the country to third-world levels. Maintaining fairness in the program is absolutely of no real concern to anyone, although a show of concern is put on for PR purposes just in case anyone in Greece is dense enough to fall for this bullshit or any bleeding hearts in Germany start wondering.

Comment: This is a Grand Canyon's worth of bullshit

Regarding the outlook, the economy is expected to begin turning around in 2011. Wage and price inflation is beginning to moderate, setting the stage for improvements in competitiveness.

Comment: These are the same people who expected inflation to be around 1,9% this year (as opposed to ~5% at least in reality), despite having prescribed the blitzkrieg of indirect tax increases that have played the major role in pulling the inflation rate to numbers not seen in Greece the last 10 years. Inflation from where I am does not seem to moderate. In fact the new batch of VAT increases (in basic foodstuff as well) and other tax hikes (such as toll road fees, bus tickets etc) that they have imposed on our sorry asses, are almost certain to have a positive effect on price inflation.

Wage inflation is certainly beginning to "moderate": in fact wages are in free fall - its like saying of a sinking ship that "its upwards momentum has began to moderate". Public sector wages having been cut by 20-40% this year and private sector wages plummeting as employers take advantage of widespread insecurity and galloping unemployment (suffered even before the "troika" basically destroyed the small and ineffective fig-leaf that was Greek labor laws and collective bargaining system - see below), in a country where "half of Greece’s paid employees [had] net incomes of between €501 and €1000" in 2006. Of course "wage moderation" in the private sector was created by forbidding by law any wage increases in any company regardless of any agreements.

See also previous post, on Greek labor compensation and productivity...

As for competitiveness, coming from their lips this has the sole meaning of more impoverished and desperate workers. The troika is hard at work indeed (along with their henchmen in the Greek government) to increase that sort of competitiveness - yet why would the average Greek worker set to join the working destitute and live in a desert of vanishing social welfare safety nets, give a damn about such "competition" towards penury?

Finally, the laughable prediction of "turning around the economy within 2011" has few outside observers agreeing, as they seem to see the depression in Greece extending to well beyond 2011:

"The Greek Government's 2011 budget should be enough to ensure that it can continue to tap its euro 110bn bailout facility, but it does nothing to improve the medium-term outlook for the economy and public finances," said Ben May, European economist at Capital Economics.

The budget also forecasts a sharper recession next year than originally predicted, with the economy expected to contract by 3 percent compared to the originally forecast 2.6 percent. This follows from a 4.2 percent contraction this year.

"With the economy likely to remain in recession well beyond 2012, we think that the debt to GDP ratio could eventually exceed 170 percent of GDP, implying that a restructuring of government debt is eventually all but inevitable," May said.

In the fiscal area, the deficit reduction by 6 percent of GDP in 2010 is larger than the initially targeted change. At the same time, data revisions for 2009 and weaker-than-projected revenue collection mean that an extra effort will be needed to meet the deficit target of 7.5 percent of GDP in 2011, which the government has reaffirmed.

Translation: Because an acknowledgment of higher than expected deficit reduction would create problems in the legitimization of the implicit goal of thirdwoldization, we had to run the numbers yet again so as to show that the original deficit was in fact higher than originally determined. This allows us to put in effect measures regarding (what will, we hope, become) a path to a sweatshop economy, that will make the "satanic mills" of the 19th century look like the Swedish welfare state. Since it is inconceivable that our, wholly arbitrary but nevertheless sacred, numerical targets might be revised in light of this re-estimation of the 2009 deficit, all else follows inescapably.

Comment: It is indicative as to what passes for logic in the IMF's communiques, that they use as an excuse for the latest series of attacks against working people in Greece the fact that their (totally unrealistic and consciously unrealistic) revenue "projections" have not been met. However even an Athens cabdriver could certainly have guessed that by asphyxiating the economy and creating a depression from this recession, these projections (which were based on assuming little decline in real taxable incomes and an inspection mechanism that was both crooked and inefficient already, before being further defunded by the measures imposed by the troika itself) were ludicrously unrealistic to begin with. Thus as Greece "fails" unavoidably to meet other unrealistic projections one should expect further measures to correct this "underperformance"...

New measures have been agreed to broaden tax bases and eliminate wasteful spending, particularly in the areas of:

• Health spending—which is inefficient relative to other euro zone countries;

• State enterprises—which are a heavy burden on the economy with perennial losses for Greek taxpayers; and

• Tax administration—which has instruments now coming into place to strengthen compliance.

Translation: New measures have been agreed, to rob the working classes of any meager savings they might have retained and to destroy the last vestiges of a (sub-standard even before the IMF plague) social state.

- Truly inefficient health spending is being cut *without* being made more efficient, thus making it *even less efficient* and creating in the medium run a greater economic burden: I.e. as the number of nurses in public hospitals declines (due to the "no new hiring" clause in the troika's mandates) doctors report a marked acceleration in the spread of contagious microbes in hospitals, due to a huge increase in the number of patients each nurse treats (note that due to the overprescription of antibiotics Greece is already a world leader in superbugs), something that will lead to an even greater burden on the public health system and society as it will have to face the consequences of spreading epidemics.

- Greece will be left with practically no train system outside of Athens and Thessaloniki, mass transportation will be priced out of range of the poorest and will be made scarcer. Bus and metro tickets prices (in a country where already before the crisis average wages were half those in Germany and northern Europe, and gas prices are already the highest in Europe due to the indirect taxes on gasoline imposed by the troika) will be increased by 50%. Water services might also be privatized with the well known effects that has on prices...

- Tax administration will be understaffed (as there is a ban, practically, on hiring people in the public sector) and more susceptible to corruption, since the inspectors salaries have been cut severely as well. The ban on public sector hiring
will also result in a less efficient tax collection system.

The government’s fiscal policy remains anchored in reducing the deficit to below 3 percent of GDP by 2014. The government’s medium-term budget strategy paper, to be discussed in the next review, will specify time-bound action plans for crucial structural reforms needed to achieve the remaining fiscal adjustment, and to do so in a socially balanced way.

Translation: The government’s fiscal policy remains anchored in reducing the deficit to a completely outlandish and arbitrary number by a completely outlandish and arbitrary date, which, if achieved will have had the result of reducing the country to third world levels in all sorts of measures of living standards. That this goal is unachievable will allow the ECB and the IMF bastards to claim that Greece failed in its programme, and force an onerous default on the country at some point, on colonial terms.

Structural reforms are needed to secure Greece’s competitiveness, reinvigorate output, and increase employment. While significant progress has been made, with some landmark reforms—including pension reform—the program has now reached a critical juncture.

Translation: We are neolib wingnuts and actually enjoy inflicting pain on the plebs Structural reforms, and by such we mean the many ways we have devised to redistribute wealth to the richest, inside the country, and to the core EU from the periphery, at the EU level, are needed to secure that workers will be so disempowered as to accept working for crumbs... Old people will die before they receive pensions: even if they don't keel over through overwork and disease, they will starve or freeze to death given the minuscule amounts they will receive as what will be laughably called "wages".

Many of the reforms that are necessary to transform Greece into a dynamic and export-driven economy require skillful design and political resolve to overcome entrenched interests.

Translation: First of all some terms: Entrenched interests = The great majority of the population. Then "export driven economy", as trained and skilled labor flees to other countries in order to feed themselves and their families, = a labor intensive export economy... Thus Greek wages will certainly float down to those of their Balkan neighbors and, who knows, if labor flexibility is aggressively pursued, perhaps below that. Of course one could argue that it is impossible to turn a country which has been seriously deindustrialized, as is par for EU policy regarding periphery countries from 10% of GDP exports to a net exporter - exporting what? What would it mean for Greece to become an "export driven economy"? How wise is it to prescribe as a cure something which is by design impossible to implement on a global level and which will be antagonized continuously by the hard Euro policy?

The challenge now is to implement an ambitious schedule for these next-stage reforms:
• Aligning wages more closely with firm-level productivity, including through reform of arbitration and collective bargaining systems.
• Opening up access to services, trades, and professions.
• Unlocking the potential of Greek industries by cutting red tape and barriers to entry, and privatizing state assets.

Let me point out that "aligning wages more closely with firm level productivity" is bullshit. On two counts: One, currently they have forbidden any wage increases at all in Greek companies, even if there is agreement between workers and management, thus the alignment they're referring to is only downward. Second, what they have done by prioritizing "firm level wage agreements" over collective general or even sectoral agreements, isn't aligning "wages to productivity" but aligning them to despair, given that real unemployment in Greece is scheduled to reach at least 20% by next year. Thus firms will be able to coerce workers into working for a pittance regardless of firm profits or "productivity".

All the measures they have imposed have this common denominator: wage depression. To an unprecedented extent. However even Eurobank Research, hardly a paragon of worker advocacy, seems to think that they are overdoing it:

The Greek economy has experienced productivity increases of 2.4% per annum on average over the past decade, compared with 0.8% per annum in the EU-16. If productivity continues to increase at comparable rates in the future, ULCs of Greek exporters will likely decline to their level of 2000 within the next two years without the need for radical wage cuts.

Note also that they are creating with all of this a society of even higher criminality and graft, something that isn't likely to help with "competitiveness in tourism", a cornerstone of the greek economy, obviously...

In summary: the reforms needed to return Greece to robust economic growth are underway, but developments to date also reveal that structural issues must be dealt with to make the adjustment sustainable.

Translation: In summary: the reforms needed to return Greece to third-world status are underway, but developments to date also reveal that structural issues must be dealt with to make the adjustment sustainable, so that the country remains a basketcase for the foreseeable future.

I'll let Jarvis Cocker sum it up, and you all can sing along with him:

A revised and augmented version of this post can be found at the European Tribune

Friday, November 19, 2010

A comment on the alleged lack of productivity of Greek workers

[This was originally a comment at Eurotrib, which I repost here, augmented and edited:]

Let's kill the meme that somehow in Greece workers were benefiting from unreasonable pay-hikes this past decade:
Here we are: real wages have been growing faster than productivity perhaps between 2007-2009 in Greece. Before they were not:
Based on real wage increases during 2007 (3.9%), pay increases in Greece were the highest of the countries of the EU15. Prior to the 2007 increase, there had been four years during which the average annual increase in Greece was around 3%. These big increases, by international standards, in the average real wage in Greece were fully offset by increases in labour productivity, leaving unit labour costs stable in real terms at 2000 levels.

In the private sector during the 2000-2007 period, there was a cumulative decrease of 1.2% in real unit labour costs. Average real wages increased more slowly than average labour productivity, which left companies with leeway to benefit from higher labour productivity. The effect of this development was that at the end of 2007 real wages in the private sector had increased by 27% over the 2000-2007 period, while productivity increased by 36.5%. Thus, there was a benefit to companies of around 7% in unit labour costs in real terms.

For the year 2007, Greece was in second to last place as regards the level of gross wages in € (net wages plus employee contributions). In Greece, average monthly earnings in 2006 amounted to €1,668 for full-time employees, compared to an average of €2,366 in the other countries of the EU15...

... Whereas monthly labour costs in Greece were 83% of the comparable mean costs in the EU15 (in purchasing power parities), labour productivity in Greece stood at 91% of the European average.

In recent years unit labour cost in Greece has become the lowest in the EU15. This development relates to the fact that in Greece labour productivity increased substantially in 1996-2004 and increased in the range of 1.7%-2.7% a year during the four years from 2005 to 2008.

AFAICS the problem with this analysis is that it does not take into account the very high (comparatively speaking) inflation during this period, which means that "real" wages in PP were not what counted. What is relevant in terms of "competitiveness", is absolute wage levels in Euros, and (outside the Eurozone the relative price of the Euro). However high inflation in Greece was due to vast monopolies in many sectors of the economy, that went practically unchecked, hardly the workers' fault. It is unfeasible to have real wages shrink during an expansion. Having said that, since 70% of the GDP was due internal consumption, and speaking of orders of magnitude another 10% was due to tourism and another 10% to shipping, the absolute wages are quite irrelevant. Corporate profits were hugely up during this period, any way you measure them. The OECD data show a huge (>15%) jump in ulc in 2002. The only thing that can possibly explain this (as nothing else spectacular happened at the time during the collective bargaining agreements) is euro adoption. Why this would result in reocketing labour costs is unclear to me... Some sort of data glitch perhaps?

Note also that even during the period 2000-2009 (that is, including the crash in productivity of 2007-2009) unit labor costs in Greece had indeed grown compared to Germany, but in fact fell compared to the EU average, and in manufacturing they were below German ULC as well. I've linked to Erik Jones's article before, but I'll quote him again:

...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...

NB: these alleged pay increases came with increasing hours worked and do not apply to the black or gray economy... And of course the *private* sector was below this average - never mind the precarious workers not included because they were victims of a generalized private and public sector trainee scam to avoid paying social security contributions and allow employers to pay below minimum wage...

However the result of the imposed austerity that is being inflicted with special severity on the lower strata of the working population is to drop wages even further to average purchasing power that Greeks had in 1980 or something (which doesn't describe the depth of the crisis enough: moving from middle to low income, or from low income to poverty is a totally different animal than the steady state, much less improvement. And to push all that through the ECB is demanding inter alia circumvention of collective bargaining and lowering the minimum wage from 700 to 590 Euros (possibly below that in "exceptional cases").

The question on the original thread was about the viability of the Euro. Can Greece leave the Euro: my first reaction was that it would be a disaster. However if this madness is kept up (we're heading for a -4,5% recession at least this year and - -3% next year - and these are a slight negative correction on the IMF's forecast numbers, so they're probably idiotically optimistic - with inflation running at close to 6% this year) such a disaster might turn out to be the lesser evil compared with the ECB / IMF intensive thirdworldization programme.

Thursday, November 18, 2010

Back somewhat

The Return
So I'm back sort of, and we'll see how that goes... I imported here stuff I was writing (basically reposting) at Arachne which I'll re-purpose somehow, I'll see...

Things are getting out of hand here and I think I should lend a hand in reporting Greece's "socialist"-led plunge into ECB/IMF mandated poverty and despair.

I've been posting some sparse reports over at Eurotrib, an oasis of sane people angrily protesting the attempted return of what once was Social Europe to neofeudalism.

So let's see how long I'll keep posting this time...