Everybody speaks of growth – but growth doesn't fall off trees
The past 3 months have proved quite a roller-coaster for my country. A very tense pre-election period resulted in an extremely fragmented election result which yielded no government and resulted in repeat elections due for June 17.
To the non-politicized mind, it is quite clear that the Greek electorate voted not “for” someone but decided to “protest” against the incumbent political parties, blaming them for the financial catastrophe which fell upon their country.
The election results were pretty staggering. Neo-Nazi’s got 8% of the electorate, the fringe SYRIZA leftists a whooping 17%, the Communists got 8% and “Independent Greeks” (a break away from the conservative ND) who’s leader claims that passenger aircraft may spray Greek people into submission (not kidding here) got 10%.
Before passing judgment that my fellow Greeks have completely lost it, keep in mind that the country has been in recession for 4 years in a row, taxes have almost doubled and unemployment jumped from 9% to 21% affecting mainly private sector employees.
The previous governments had decided to take the less painful (for their system of State cronyism) way out. Instead of proceeding with the much needed structural reforms and a reduction in the, sometimes absurd government spending, they decided to flatly diminish incomes across the board and tax the economy to death.
And all that, in an effort to preserve their “party” clientele as intact as possible. The victims? Private sector businesses and employees, pensioners, entrepreneurs. No wonder , the two incumbents suffered such a staggering defeat in the elections.
On the other hand, the electorate became very vulnerable to the populist promises of either fringe leftists (SYRIZA) or the anti European/nationalistic rhetoric of the Neo-Nazis and ‘Independent Greeks”.
The real tragedy of
today, is not the country’s economic performance.
It’s the lack of leadership; of politicians capable to steer the country to calmer waters. Moreover, a confused electorate, which had been brain-washed with populism for 30 years non-stop, makes things harder. Not used to realistic solutions, the electorate loves to hear “myths” and “magical solutions” as if the country’s economic dead-end is not a reality but an “ideological misunderstanding”.
As repeat elections loom, the leading political parties have raised their populistic stakes in an effort to secure a landslide victory – which is very doubtful to come.
Parties from across the political spectrum have put “growth” as their main political punch line in an effort to “lure” voters who are, rightfully, fed up with austerity.
So in every panel, every TV show, MPs or MP wannabees are ranting on how
has to move from “austerity” to “growth”. That “growth” is needed.
The Holy Grail that the previous governments neglected, as if “growth” is something you can order and “take-away”.
However, from all political spectrums, “growth” suggestions remain extremely vague. There seems to be no plan for achieving it. When talking about growth, the discussion goes directly to the EU. As if growth is something that can be “transferred” from
to Greece and
up till now, the EU was holding it back. “Eurobonds” – “Marshall Plan” and the
like, are the arguments presented by most parties, a fact that implies that,
once again, politicians have NO real plans for growth, lest the forthcoming aid
from the EU.
With “election” fervor, they keep polarizing the political scene, increasing uncertainty regarding their actions. Hence, tail events, which were out of the discussion 1-2 years ago, are now on the table. Politicians discuss scenarios regarding a Euro exit without even realizing that the discussion of such a thing dampens ALL potential interest for investments, hence growth.
No entrepreneur / investor will risk his hard earned Euros if there is an imminent chance of a Euro exit. So the pointless ideological discussion must stop now. Unless we wish to erase ourselves into oblivion.
What really is needed before the elections is, for once, a realistic and practical discussion of economic reform programs that each party is thinking to apply if elected. If these programs exist, that is. The theoretical discussion that growth is “good” is pretty useless. And the expectation that growth can come only if the EU wants it, is again providing for a scapegoat in case party economic policies fail.
For growth to come DOMESTIC policies, not EU policies, have to change
And these policies can be in line with the measures needed for the fiscal adjustment required.
Some thoughts in brief. Would love to expand but can discuss individually if requested. Feel free to poke, comment
-Corporate tax of 60% for 2012-2013 for companies with revenues above Eur 200-300m BUT with a promise of a corporate tax of 10% in all new operations coming from Cap-Ex spent and completed within these two years.
This way the State gets the needed cash now and companies are motivated to move their Cap-Ex forward in order to take advantage of the favorable tax regime - it makes great sense for them NPV wise. This would create new investments hence an increase in hiring.
-Announcement of a flat corporate / individual tax of 15% from 2015 onwards. Experience has shown that when tax rates decrease significantly, the amount of tax revenues/ GDP increases. (
Bulgaria, Cyprus). It leads to an increase in disposable incomes and reduction of the “black” economy. If by paying 15% you’re
“level”, incentive to cheat on taxes
diminishes exponentially. Also positive on the “expectations” front for future
-Bank recapitalization at full force with partial write down/ haircut of household debt (according to income levels and delinquencies) to increase the disposable income and consumption of the lowest income citizens. Higher disposable income = higher consumption=growth
-Introduction of specific tax regimes by prefecture and industry to spur investments. Why not have a prefecture (example
Crete) offering a very low corporate
tax for IT/Software start ups and at the same time, link this with the region’s
universities for research.
Same for Finance. Do you think that the world’s financiers/ fund managers would prefer to trade from a shady place in
Central Europe of from a ? Take a guess. These
enterprises are highly mobile. All it takes is a promise of stability and low
-Tourism. Both economic and strategic. Offer cheap land lease for 90+ years to global players, with favourable tax on their cap-ex for high end projects (environmental friendly complexes, marinas, golf courses) and a clause that in return for the cheap lease and low taxes, infrastructure will have to be built by Greek construction companies and that hotel personnel must be at least 70% Greeks. And on a strategic note. Do you think that if (for example ) Four Seasons has huge investment in a 5 star resort in
aggression will remain as it is? Think about it…
-Education. Is there a better place to take a degree in Classical Studies, History, or Shipping? Does that mean that private universities will be set up? Yes. It does. Set up ENGLISH speaking courses, pay the best to come and teach here, introduce HIGH academic/ entry standards, high fees for non-Greeks, lower fees for Greeks and scholarships for Greeks who cant afford but are bright enough to attend. Also make a provision for bright students of
universities to have access for their postgraduate studies. If you manage to pull this, you will have an
influx of brain power, as well as foreign students who will also need lodging,
transport etc Greek State
There are tons of ideas, but people need to take their ideological glasses off.
Right now there are TONS of barrier to entry if you are an entrepreneur in
Red tape, dubious tax regime, obsolete ideologies.
We can talk theories for hours to no avail. We can argue for Keynes or Friedman. At the end of the day these are theories. Let’s discuss practicalities. Not dogma.
Greek politicians and I’m afraid, many of my compatriots, have to remind themselves that:
“Pennies don't fall from heaven – they have to be earned here on earth.”