Tornado Alley (PROG)

[fuagf]

Dick, notice the mention of the 10 letter word in this one .. rotflmao! .. not "Governance" ..

A More Skeptical View of Greek Reforms
Thursday, September 16, 2010
Posted by Leo Kolivakis at 6:27 AM

Had a chat with a buddy of mine in Athens last night who is responsible for a
major investment project in Greece. He wasn't as optimistic on the country's economic reforms:

* "I am not as optimistic as you and I think your stay in Crete is biasing your views. Crete is better off than the rest of Greece. They've been hit, but nowhere near as hard as the rest of Greece."

* "Unlike elsewhere in Greece, Cretans understand the meaning of service. They take excellent care of their tourists which is why they see repeat tourism every year." (Other places also service their tourists properly, but it's true, Cretan hospitality and generosity is unparalleled).

* "People like your uncle who you wrote about a few days ago, are the exception to the rule. Most businesspeople here do not think long-term." (That's pretty much true of anywhere else. My uncle is investing in solar and he told me in two or three years, the plant's energy costs will be zero. They will produce enough electricity to have some left over, which they can sell to the state's electrical utility organization).

* "The biggest problem Greece has is tax evasion and lack of investments. The corruption among tax collectors is scandalous, and the investment climate is bogged down by bureaucratic red tape. Moreover, the government isn't paying back the VAT tax credit, which is substantial for projects like ours. Also, capital flight is all too common as the Greek elite have parked their money offshore."

* "As far as the austerity measures, they should have fired half the civil service and other measures, like the fuel tax, are killing the economy. Road traffic is down, truck traffic is down, and car sales have plummeted. GDP was down 2% last quarter, and I bet you that figure was padded."

* "I think Papandreou is smart. He will wait till revenues and expenses are balanced before restructuring the debt. Bondholders won't take a severe haircut, but I would't be surprised to see debt maturities being extended from 10 years to 30 years."

* "As far as the banks are concerned, they are well managed, but they don't know what they have in their books in terms of bad loans, and just like the US, they can't foreclose and exercise security. They are basically like Japanese zombie banks"

* "Bankruptcies will soar over the next six months. Things are dire and will get much worse before they get better."

Hardly the good news I was looking for, but my buddy is in the thick of things and even though
I find him way too pessimistic, I listen to his views. Finally, on pensions, he had this to say to me:

* "I agree with you, Greece needs a similar national pension plan run like Canada's Pension Plan Investment Board, but it will never happen. There are too many competing interests among various pension plans for the civil service, doctors, farmers, and bankers (IKA, TEVA, etc.). And corruption is rampant, which is truly the biggest problem here. I can just imagine what would happen if they ever created a large Canadian style pension investment board. Kickbacks will be rampant."

My answer to that is simple: Governance! Take the Canadian pension model and add more transparency and checks and balances. There is simply no reason for Greece not to reform its pension system by consolidating all the various pension plans and adopting world class investment and governance standards.

I am not as cynical on Greece as my friend in Althens. Sure, things are bad, probably will get worse before they get better, but for investors with a long-term investment horizon, Greece offers plenty of opportunities right now.

On that final thought, listen to Petros Christodoulou, the director general of Greece's Public Debt Management Agency, talk about the outlook for Greek bonds. Mr. Christodoulou ruled out restructruring. I know many of you will dismiss his views, but some large funds are starting to back Greek sovereign debt, which is very encouraging.
http://pensionpulse.blogspot.com/2010/09/more-skeptical-view-on-greeces-reforms.html
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One munchie from a Krugman meal .. Debt Is A Political Issue [...]

And this benign view of debt isn’t just hypothetical: countries have, in reality, run
up immense debt/GDP ratios without going insolvent: see the history of Britain, above.

So what’s the problem? Confidence. If bond investors start to lose confidence in a country’s eventual willingness to run even the small primary surpluses needed to service a large debt, they’ll demand higher rates, which requires much larger primary surpluses, and you can go into a death spiral.

So what determines confidence? The actual level of debt has some influence — but it’s not as if there’s a red line, where you cross 90 or 100 percent of GDP and kablooie; see the chart above. Instead, it has a lot to do with the perceived responsibility of the political elite.

What this means is that if you’re worried about the US fiscal position, you should not be focused on this year’s deficit, let alone the 0.07% of GDP in unemployment benefits Bunning tried to stop. You should, instead, worry about when investors will lose confidence in a country where one party insists both that raising taxes is anathema and that trying to rein in Medicare spending means creating death panels. .. more inside ..
http://krugman.blogs.nytimes.com/2010/03/05/debt-is-a-political-issue/

DICK, the ones undermining confidence in the US are in YOUR crowd. Right?
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Also, from page 2 of 6 ..

Like many EU countries, the general retirement age in Greece is 65, although the actual average is about 61 .. from .. http://wap.cbsnews.com/site?sid=cbsnews&pid=sections.detail&catId=WORLD&storyId=6491799&viewFull=null .. from page 5 .. Along with early retirement, Greece has one of Europe's highest longevity rates - with an average life expectancy of 77.1 years for men and 81.9 for women ..
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More perspective on yours .. Ever hear much of Taiwan's debt?

*Taiwan’s pensions outdo Greece .. http://www.taipeitimes.com/News/editorials/archives/2010/06/03/2003474515 .. and ..

*Taiwan’s debt deserves attention.. http://www.taipeitimes.com/News/editorials/archives/2010/01/29/2003464653

SO, you see, AS SURE AS THE GODS ARE FIGMENTS OF HUMAN IMAGINATION, (the word is a symbol which FAIRLY and JUSTLY
could be attached to any HUMAN IDEA) the problem in Greece is NOT .. NOT even nearly .. ALL ABOUT SPENDING .. as YOU said.