Rebooting Greece: how to get its economy going again

[webfact]

Rebooting Greece: how to get its economy going again
MENELAOS HADJICOSTIS, Associated Press

ATHENS, Greece (AP) — After so much pain, Greece must now figure out how to get its economy back on its feet.

The scale of the country's financial problems is mind boggling — a full quarter of the economy evaporated in the past six years and business activity is now plummeting further. Government cuts needed to qualify for a new bailout will hurt incomes for years to come.

The advice to Greece from economists is simple: focus on the basics.

Have a steady government, simplify the rules of doing business, and rather than try to reinvent the economy, zoom in on sectors that can benefit from small investments: tourism and agriculture, for example.

In many cases, that's easier said than done.

Political instability, a hallmark of Greece's crisis, is highly toxic for investors, who need to know that the rules for business won't change unexpectedly.

Greece's current government offers a stark example of the risks. The country had just emerged from recession when the new government, led by the radical left leader Alexis Tsipras, came to power in January with plans to undo a series of reforms and challenge creditors.

Tsipras' intentions were good: to ease the economic burden on the Greek people. But the uncertainty proved immensely painful.

Fears that the political clash with creditors could push the country out of the euro caused investors and Greeks to pull tens of billions of euros out of the country. The economy plunged back into recession. To avoid a bank run, the government was forced to close banks and the stock market for about a month and impose limits on cash withdrawals. The limits are costing Greece an estimated 1.75 billion euros to 2.8 billion euros ($1.9 billion to $3.1 billion) weekly.

Rather than grow this year, the Greek economy is now expected to contract by between 2 and 4 percent this year.

The outlook for government stability is not particularly good, either, as high unemployment of 25 percent and popular resentment against economic reforms are expected to last. Political parties, including Tsipras' Syriza, are in turmoil and there is speculation Greece will head into another general election in November.

That comes on top of years of political infighting in the country, both during the past six years of crisis and before, when officials hid the scale of the government's debts.

"Irresponsibility destroyed this country," said Nicolaos Eriotis, a professor who heads the department of business and finance at the National & Kapodestrian University of Athens.

With so much uncertainty hanging over it, Greece is struggling to attract major foreign investment. Investment last year equaled just 12 percent of economic output — only three of 124 countries ranked by the World Bank invested a lower share.

So, experts say, Greece's best option in the short-term is to target what little money it can get into industries it already has a presence in.

Agriculture last year contributed almost 6 billion euros to the country's 179 billion euro economy but could yield more with some basic modernization and better marketing.

Take olive oil. Although Greece is the third largest olive oil producer in the world, it exported 60 percent of its output to Italy in bulk, giving its neighbor the opportunity to earn 50 percent more on the price of the final packaged product, according to a 2012 report by consulting firm McKinsey & Company.

The fishing industry is another sector that Greece could develop quickly and enjoys a strong competitive advantage in, given its huge shorelines.

"You have the groundwork already laid out and there's no need for large investment," said Panayotis Alexakis, professor of economics at the National & Kapodestrian University of Athens.

Tourism remains king of the Greek economy and could be improved further. When counting wholesale and retail trade, tourism revenue accounts for 23 percent of the nation's annual economic output.

Despite all the turmoil, this year's tourism numbers are forecast to hover around last year's. But experts warn the industry mustn't remain static if it wants to compete against up-and-coming rivals like neighboring Turkey.

Greece could, for example, extend the tourism period into winter by developing more golf courses — a reasonable move in a country blessed with so much sunshine.

Turning Greece's main ports of Piraeus and Thessaloniki into regional cruise ship hubs should be another key target for the tourism sector, said Christos Agiakloglou, professor of economics at Piraeus University.

The ports also hold promise in becoming Europe's gateway to global imports by expanding and upgrading their container terminals. Through Greece, goods can enter the European Union as many as 20 days faster than if they were offloaded in the continent's main container terminal in Rotterdam, in the Netherlands. China's Cosco shipping company manages two container terminals at Piraeus port and is reportedly looking to clinch a majority stake.

Greece's huge cultural endowment can be spun into a money-maker beyond tourism. Alexakis notes that the universities offer a high level of teaching in philosophy and archaeology, yet lag in attracting foreign students because there aren't many courses taught in English.

The McKinsey report identified Greece's pharmaceutical industry as a "rising star" that could boost economic growth. The industry accounts for 18 percent of GDP, second only to tourism. Another sector with potential is the health care industry, which analysts say could cater to a large regional market with hospitals receiving patients from neighboring countries such as Bulgaria.

In the longer-term, Greece's economy needs fundamental reform of the kind that its creditors are demanding.

Above all, that means cutting red tape for companies, streamlining business laws and making the legal system more efficient so that it doesn't take months, even years, to settle a business dispute. It also includes opening up closed professions, such as pharmacies, to greater competition.

The Greek government, meanwhile, needs to bolster the finances of the banking sector so that it can gradually lift the limits on cash withdrawals without risking a bank run.

And it needs to heal its own finances, a process that includes convincing its creditors to ease the terms of its massive debt burden. At around 320 billion euros, or 180 percent of GDP, public debt is considered unsustainable. Even the International Monetary Fund, a key creditor, says so and suggests lowering the interest rates and repayment rates on Greece's bailout loans.

Eriotis said Greece needs to eliminate a culture of tax avoidance and corruption, in which public sector jobs are handed out by politicians in exchange for votes.

He says this has prevented the country from modernizing its businesses, making its political system transparent and creating an environment where honest work pays off.

"Other countries over time have built strong institutions. Greece hasn't done so."
___

Paul Wiseman in Washington contributed to this report.


-- (c) Associated Press 2015-08-04

[JockPieandBeans]

Whilst Greece is under the EU jackboot.

It does not have a snowballs chance in hell of rebooting its economy.

[TheAppletons]

Whilst Greece is under the EU jackboot.

It does not have a snowballs chance in hell of rebooting its economy.

Whilst Greece is under the EU jackboot illusion that everyone else is to blame but themselves

It does not have a snowballs chance in hell of rebooting its economy.

There you go....fixed that for you!

[JockPieandBeans]

Whilst Greece is under the EU jackboot.

It does not have a snowballs chance in hell of rebooting its economy.

Whilst Greece is under the EU jackboot illusion that everyone else is to blame but themselves

It does not have a snowballs chance in hell of rebooting its economy.

There you go....fixed that for you!

Really ? What did you fix ? Adding words that I did not use ?

At no point did I say that the Greeks were not to blame.

I did say that whilst they are under the jackboot of the EU............

2 very different things.

[Gunna]

Whilst Greece is under the EU jackboot.

It does not have a snowballs chance in hell of rebooting its economy.

Nothing to do with EU jackboot.

Greece has to change it's economy as it has had an unsustainable economy for a long time, even before it joined the Euro

As a proportion of GDP, no country in the EU spends as much as Greece’s 17.5% on pensions,

There is a backlog of 400,000 aplications for pensions such as early retirement, on top of 2.65M existing pensioners

One in two households rely on pensions to make ends meet and the country has an old-age dependancy ratio above 30%, which means that for every 100 people of working age in Greece there are 30 people aged 65 or over.

Greeks need to pay personal and company taxes

eg The government’s tax-revenue shortfall in January alone was 23% below its €4.5bn target for the month.

[Scott]

The age may be younger than 65. Can't the Greeks retire earlier than age 65?

[ABCer]

Early retirement is a two end stick.

One end - more room for young unemployed.

Another end - more retirees to support.

IMHO there is a way out, but Greeks do not like it and don't even acknowledge it:

Work for the same money rates but actually pay taxes.

Abolish all laws precluding businesses from sacking unsuitable workers.

Work harder for the ones employed.

Make unemployment benefits smaller and hard to get while reducing with time.

In short, - try Capitalism instead of Socialism... Excuse me, must run for cover...

[MaeJoMTB]

Letting the people have their money, and keeping it out of the hands of the bankers would be a good start.

How can anything work when the bankers don't let the people have their own money to spend?

Can you imagine having 3M baht in a Thai bank, but them only allowing you 300bht a day?

Everything would grind to a halt.

Edited August 4, 2015 by MaeJoMTB

[JingerBen]

Whilst Greece is under the EU jackboot.

It does not have a snowballs chance in hell of rebooting its economy.

Whilst Greece is under the EU jackboot illusion that everyone else is to blame but themselves

It does not have a snowballs chance in hell of rebooting its economy.

There you go....fixed that for you!

Spot on.

"Irresponsibility destroyed this country."

Chisel that onto the ruins of the Parthenon.

[soalbundy]

give it to the Germans for 5 years, they can give it back up and running

[Hayduke]

give it to the Germans for 5 years, they can give it back up and running

Wasn't something like that tried once before?

[soalbundy]

give it to the Germans for 5 years, they can give it back up and running

Wasn't something like that tried once before?

yeah, but it wasn't voluntary so they didn't listen.

[SOUTHERNSTAR]

give it to the Germans for 5 years, they can give it back up and running

Wasn't something like that tried once before?

yeah, but it wasn't voluntary so they didn't listen.

The first time the Germans did it with jack boots this time they used bankers. Not certain which are the worst. Well the truth is Greece cheated to get in the EU with the help of banksters, then Germany sold then stuff they couldnt realy afford, but the Germans financed these purchases and the budget deficits that followed. Today each bailout just pays back the exist debt.

The other truth is that there are so much disinformation in the media but here are a couple of facts:

1. 45% of pensioners in Greece lives under the EU poverty line.

2. the Greeks work more hours than the Germans, but their productivity index is much lower because they produce lower valued products.

3. the Greek health care system is on the verge of collapse.

4. the youth unemployment rate of +- 50% mean that there will be a lost generation in the country that will have nothing to lose which is the perfect breeding ground for a revolusion.

5. Greece is not alone at present it is as bad in Portugal and Spain, which could be the countries to see a shift to the political left. After these two we will see Italy and France come into the default game.

6. the truth is the world today is build on debt and that many countries mathematicaly cant repay their debt (for example Japan at 250% of GDP, Australia's personal debt at 155% of disposable income, the US at $17 tn straight or $70 tn if you include unfunded future liabilities etc etc).

[Lupatria]

Greece will prosper from now on after COSTAS' return.

Edited August 4, 2015 by Lupatria

[soalbundy]

Greece will prosper from now on after COSTAS' return.

Yes, where is Costas ? has he really gone back ?

[KarenBravo]

27% of the workforce work in the public sector.

Sounds like some trimming of government is in order.

[JockPieandBeans]

Whilst Greece is under the EU jackboot.

It does not have a snowballs chance in hell of rebooting its economy.

Whilst Greece is under the EU jackboot illusion that everyone else is to blame but themselves

It does not have a snowballs chance in hell of rebooting its economy.

There you go....fixed that for you!

Spot on.

"Irresponsibility destroyed this country."

Chisel that onto the ruins of the Parthenon.

Spot on ? I don't think so.

Greece debt crisis: IMF attacks EU over bailout terms

http://www.bbc.com/news/business-33531845

Even the IMF have sunk the boot into the EU.

[mihalis]

Only once the politicians and rich decide to stop stealing, avoiding taxes will it ever go forward.... Im also seeing certain political parties, stir the pot, an pay, young fools to start riots, at what should be peaceful demonstrations.... The mindset of needs to change

[SheungWan]

Letting the people have their money, and keeping it out of the hands of the bankers would be a good start.

How can anything work when the bankers don't let the people have their own money to spend?

Can you imagine having 3M baht in a Thai bank, but them only allowing you 300bht a day?

Everything would grind to a halt.

See how your access to your deposits works if there was a run on the banking system, which is exactly the risk of what was going to happen if controls were not put in place.

[SheungWan]

The age may be younger than 65. Can't the Greeks retire earlier than age 65?

Sure they can. The problem is not the retirement age it is the liability for pension payout. Greek public sector and private sector liability is unaffordable, Even Detroit had to learn the hard way.

[ABCer]

Greece will prosper from now on after COSTAS' return.

Greece will prosper from now on after COSTAS' return.

Yes, where is Costas ? has he really gone back ?

Please, pretty please, don't send the man back!

He is not an illegal immigrant and he never claimed a baht from Thailand.

[12DrinkMore]

give it to the Germans for 5 years, they can give it back up and running

Wasn't something like that tried once before?

yeah, but it wasn't voluntary so they didn't listen.

The first time the Germans did it with jack boots this time they used bankers. Not certain which are the worst. Well the truth is Greece cheated to get in the EU with the help of banksters, then Germany sold then stuff they couldnt realy afford, but the Germans financed these purchases and the budget deficits that followed. Today each bailout just pays back the exist debt.

The other truth is that there are so much disinformation in the media but here are a couple of facts:

1. 45% of pensioners in Greece lives under the EU poverty line.

2. the Greeks work more hours than the Germans, but their productivity index is much lower because they produce lower valued products.

3. the Greek health care system is on the verge of collapse.

4. the youth unemployment rate of +- 50% mean that there will be a lost generation in the country that will have nothing to lose which is the perfect breeding ground for a revolusion.

5. Greece is not alone at present it is as bad in Portugal and Spain, which could be the countries to see a shift to the political left. After these two we will see Italy and France come into the default game.

6. the truth is the world today is build on debt and that many countries mathematicaly cant repay their debt (for example Japan at 250% of GDP, Australia's personal debt at 155% of disposable income, the US at $17 tn straight or $70 tn if you include unfunded future liabilities etc etc).

Japan, Australia and the US of A have their debt in their own sovereign currency. This debt will never be paid down, but it doesn't really matter, as the central banks can monetise it. This is exactly what the US, UK have done, and Japan is, the furthest down the road of all, is in a process of continual debt monetisation.

As long as the country can balance its current account, ie forex in = forex out, I reckon they can carry on forever. The US, with the USD, has absoutely no issues. Everybody is happy to accept the USD for trade.

Greece, along with all the Euro-Nations on the other hand, has no way of monetising its debt, and has to rely on productivity and exports.

In the past countries have relied on inflation to reduce the debt pile. It is interesting that globalisation has sent the entire world into deflation and that inflation

[White Christmas13]

So how come Shipping contributes 20% of the Greek economy but it is tax exempt ?

[ozyjon]

Saw an interview regarding this issue the person being interviewed on the BBC must have had used the word

'' PONZI'' about 5 times, wow.

https://en.wikipedia.org/wiki/List_of_Ponzi_schemes

[Ulic]

For me there is one way to show patriotism. (Sorry FOX News fans it has nothing to do with

military service, or public service) It is to pay your taxes. The levels collected in Greece probably

makes Greeks among the worlds least patriotic countries.Pay your taxes, and you are a true

patriot. Greece's financial problems would be solved if people/business paid there taxes, the

numbers of civil servant numbers were brought into line with other European countries, and the

retirement age was raised from as low as 50 to 67.

[sammygood]

greece should become the hub of europe's hot girls destination (copy thailand?)

they don't have much real economy except some olive oil

[soalbundy]

It's never been the same since Alexander the great died

[KarenBravo]

greece should become the hub of europe's hot girls destination (copy thailand?)

Too hairy......

[Rancid]

The Greeks have themselves to blame. At every opportunity to exit and do an Iceland and take the considerable but temporary pain, they refused. They are now an EU slave colony where the usual suspects will end up with all the useful assets for peanuts.

Only question is, whose next?