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 Greece
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 Greece
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 Brussels
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. (Romania ,
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
investments.
-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 Greek
Island
-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 Lemnos , Turkish
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 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 Greece .
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.”
May 2012
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου