Congratulations on your work - here and in general, from what I'm able to see.
But here is where you go awry. Talking abt the pre-crisis "profligacy":
"...Constant borrowing on a national level, extremely high public sector salaries handed out to partisan ‘clients’ by the Greek political system, as well as various other terrible habits created an unequivocal recipe for disaster."
This is incorrect. When you borrow as a state in your own currency, you cannot default on your state debt unless you want to (for whatever suicidal reason). And Greece, up until 2000, owed in Drachmas, mostly. Now, you are, of course, totally correct about nepotism, corruption, partisanship, etc. Unfortunately, and as it happens, I experienced all that first hand.
But even so, this kind of bad economic policy leads to missing opportunities (to achieve a proper, productive growth, by giving birth to extensive corruption, etc). BUT NOT TO A DEBT CRISIS! Because as a state you owe in the nat'l currency. The solid fact here is that if we, in 2000, had not abandoned our fiscal & monetary independence, i.e. if we had not adopted the Euro as our national currency and bound ourselves by the insane Maastricht limits, we would not have experienced a debt crisis at all.
But even if we assume that was not the case, I believe that a crisis would be unavoidable. Sure (1) it would not have the same characteristics as the one we experienced and (2) having your own currency would allow for more flexibility of maneuvring (which we did not have in 2008-2012). But a suicidal default (as you well put it) would carry deep reputational risks and most probably keep us outside the global markets for a very long time.
Our problem was never the choice of currency. It was the deeply flawed underlying edifice that we had built our artificial and short-lived extravagance on.
Regardless of that, I very much agree that *missed opportunities* are perhaps the greatest loss we can suffer. We definitely missed many chances before and during the crisis. This has made us lose considerable ground to EU/OECD averages.
We can no longer afford any more missed chances. Time to grow up!
You are correct in that ever since Greece's independence, our state was borrowing in either gold or in a major foreign currency, i.e. pounds sterling and then dollars. (Even when such denomination was not necessary, e.g. when it was used to pay the fees of the warlords that had participated in the struggle for independence.) But at the crucial moment, when we at the gates of the Eurozone, our state debt, if my data is/are correct, was denominated mostly in Drachma.
Let's not forget that, especially in countries such as ours and such as those in the EZ "periphery" whose foreign account is chronically in deficit, i.e. we import more in value than we export, almost any percentage of our state debt being in the nat'l currency is preferable to a debt denominated 100% in a foreign currency, such as the Euro.
Of course, the Greek state, after the debt crisis exploded in our face, made a series of significant errors in its negotiations. But the major trap was the loss of economic independence.
Great post! Quite interesting to see how the pre-crisis inflated numbers create this "illusion" (or so to speak) when compared with today's numbers. I actually didn't know that the numbers were inflated by that much.
Comparatively, we're not doing tooooo bad after all. Quick question - with the government's goal of reaching around 950 euros min wage by 2027, do you reckon that's a good rate of growth or will we still be significantly lagging behind other non-eastern EU countries (compared to where we stand today)?
Yes, our pre-crisis peak was not built on a "sturdy" foundation. It is not a coincidence that many Greeks refer to the years right before the start of the crisis as "the period of the fat cows" (η περίοδος των παχιών αγελάδων). Greece was borrowing insatiately from the future of its children to fund an unsustainable national lifestyle in the short-term. At some point, the country ended up having to foot the bill - with extra interest.
You are right to point out that while we are not doing well, we are not doing thaaaaaat bad. If anything, there is clear progress that needs to be accounted for and improved upon. I think the government must focus on creating growth-enhancing, pro-business and market-friendly policies and not fixate on specific targets. It also needs to ensure that the market conditions are those of a properly functioning free economy and reign down on the various cartels roaming wild today.
If the economy becomes more competitive (on both a national and global level), job prospects and salary levels will naturally improve faster too.
Sour-coating everything is a recipe for disaster. Only looking at the glass as half empty -- much like most of us in Greece do -- will take us nowhere. I've written about this before: https://greekanalyst.substack.com/p/how-to-change-greece
There is real and substantive progress, especially since 2018/19. The numbers and data clearly attest to that. Progress can be measured both against your previous state of being as well as comparatively, which is why the article is full of both kinds of charts. Progress does not mean that everything is fixed, no mistakes are being made or that we have reached the promise land; we are very far from that. But it does mean we are moving forward.
I will never get tired of sounding like a broken record: Greece suffered the *greatest depression* in history. It is amazing how easily people disregard this simple yet undeniable fact. Greeks lost an enormous chunk of economic activity at the same time that other countries were marching ahead thanks to cheap borrowing and the QE bazooka.
You cannot recover such vast lost ground in a heartbeat. And yet, we see that the macro picture in Greece has not just improved but has also consistently shown better signs than other countries in the EU/EZ in recent years. It will take years for us to get back to EU average across a number of metrics, including the average wage. But that does not mean we are not making progress.
There has always been a large shadow economy in Greece, this is nothing new. Greeks did not start turning to it recently. If anything, with the rise of digital and card payments everywhere, as well as new regulation, it became harder to tax evade in certain jobs.
Taking ownership of our mistakes and confronting the truth does not mean whipping ourselves in the back for every single thing that is wrong in this country. It also means accepting that the Greek economy just a few years after its crisis is neither in a black nor a white state. We are still in the gray zone. The progress is actual, but there is still so much to be done.
Congratulations on your work - here and in general, from what I'm able to see.
But here is where you go awry. Talking abt the pre-crisis "profligacy":
"...Constant borrowing on a national level, extremely high public sector salaries handed out to partisan ‘clients’ by the Greek political system, as well as various other terrible habits created an unequivocal recipe for disaster."
This is incorrect. When you borrow as a state in your own currency, you cannot default on your state debt unless you want to (for whatever suicidal reason). And Greece, up until 2000, owed in Drachmas, mostly. Now, you are, of course, totally correct about nepotism, corruption, partisanship, etc. Unfortunately, and as it happens, I experienced all that first hand.
But even so, this kind of bad economic policy leads to missing opportunities (to achieve a proper, productive growth, by giving birth to extensive corruption, etc). BUT NOT TO A DEBT CRISIS! Because as a state you owe in the nat'l currency. The solid fact here is that if we, in 2000, had not abandoned our fiscal & monetary independence, i.e. if we had not adopted the Euro as our national currency and bound ourselves by the insane Maastricht limits, we would not have experienced a debt crisis at all.
Thank you for your kind words and the extensive comment.
I might need to brush up on my knowledge of Greece's economic history, but if I am not mistaken the vast majority of our loans were in foreign currencies (francs, liras and of course dollars). https://el.wikipedia.org/wiki/%CE%99%CF%83%CF%84%CE%BF%CF%81%CE%AF%CE%B1_%CF%84%CE%B7%CF%82_%CE%BF%CE%B9%CE%BA%CE%BF%CE%BD%CE%BF%CE%BC%CE%AF%CE%B1%CF%82_%CF%84%CE%B7%CF%82_%CE%95%CE%BB%CE%BB%CE%AC%CE%B4%CE%B1%CF%82
But even if we assume that was not the case, I believe that a crisis would be unavoidable. Sure (1) it would not have the same characteristics as the one we experienced and (2) having your own currency would allow for more flexibility of maneuvring (which we did not have in 2008-2012). But a suicidal default (as you well put it) would carry deep reputational risks and most probably keep us outside the global markets for a very long time.
Our problem was never the choice of currency. It was the deeply flawed underlying edifice that we had built our artificial and short-lived extravagance on.
Regardless of that, I very much agree that *missed opportunities* are perhaps the greatest loss we can suffer. We definitely missed many chances before and during the crisis. This has made us lose considerable ground to EU/OECD averages.
We can no longer afford any more missed chances. Time to grow up!
You are correct in that ever since Greece's independence, our state was borrowing in either gold or in a major foreign currency, i.e. pounds sterling and then dollars. (Even when such denomination was not necessary, e.g. when it was used to pay the fees of the warlords that had participated in the struggle for independence.) But at the crucial moment, when we at the gates of the Eurozone, our state debt, if my data is/are correct, was denominated mostly in Drachma.
Let's not forget that, especially in countries such as ours and such as those in the EZ "periphery" whose foreign account is chronically in deficit, i.e. we import more in value than we export, almost any percentage of our state debt being in the nat'l currency is preferable to a debt denominated 100% in a foreign currency, such as the Euro.
Of course, the Greek state, after the debt crisis exploded in our face, made a series of significant errors in its negotiations. But the major trap was the loss of economic independence.
Great post! Quite interesting to see how the pre-crisis inflated numbers create this "illusion" (or so to speak) when compared with today's numbers. I actually didn't know that the numbers were inflated by that much.
Comparatively, we're not doing tooooo bad after all. Quick question - with the government's goal of reaching around 950 euros min wage by 2027, do you reckon that's a good rate of growth or will we still be significantly lagging behind other non-eastern EU countries (compared to where we stand today)?
Hey Peter, appreciate the comment!
Yes, our pre-crisis peak was not built on a "sturdy" foundation. It is not a coincidence that many Greeks refer to the years right before the start of the crisis as "the period of the fat cows" (η περίοδος των παχιών αγελάδων). Greece was borrowing insatiately from the future of its children to fund an unsustainable national lifestyle in the short-term. At some point, the country ended up having to foot the bill - with extra interest.
You are right to point out that while we are not doing well, we are not doing thaaaaaat bad. If anything, there is clear progress that needs to be accounted for and improved upon. I think the government must focus on creating growth-enhancing, pro-business and market-friendly policies and not fixate on specific targets. It also needs to ensure that the market conditions are those of a properly functioning free economy and reign down on the various cartels roaming wild today.
If the economy becomes more competitive (on both a national and global level), job prospects and salary levels will naturally improve faster too.
Sour-coating everything is a recipe for disaster. Only looking at the glass as half empty -- much like most of us in Greece do -- will take us nowhere. I've written about this before: https://greekanalyst.substack.com/p/how-to-change-greece
There is real and substantive progress, especially since 2018/19. The numbers and data clearly attest to that. Progress can be measured both against your previous state of being as well as comparatively, which is why the article is full of both kinds of charts. Progress does not mean that everything is fixed, no mistakes are being made or that we have reached the promise land; we are very far from that. But it does mean we are moving forward.
I will never get tired of sounding like a broken record: Greece suffered the *greatest depression* in history. It is amazing how easily people disregard this simple yet undeniable fact. Greeks lost an enormous chunk of economic activity at the same time that other countries were marching ahead thanks to cheap borrowing and the QE bazooka.
You cannot recover such vast lost ground in a heartbeat. And yet, we see that the macro picture in Greece has not just improved but has also consistently shown better signs than other countries in the EU/EZ in recent years. It will take years for us to get back to EU average across a number of metrics, including the average wage. But that does not mean we are not making progress.
There has always been a large shadow economy in Greece, this is nothing new. Greeks did not start turning to it recently. If anything, with the rise of digital and card payments everywhere, as well as new regulation, it became harder to tax evade in certain jobs.
Taking ownership of our mistakes and confronting the truth does not mean whipping ourselves in the back for every single thing that is wrong in this country. It also means accepting that the Greek economy just a few years after its crisis is neither in a black nor a white state. We are still in the gray zone. The progress is actual, but there is still so much to be done.