Sunday, May 29, 2011

All Roads Lead to Athens?

Stephanie Levitz of the Canadian Press reports, Harper uses Greece trip to teach political lesson to his government and theirs:
Prime Minister Stephen Harper brought a message from Canadian politics to his Greek counterpart Saturday.

He said that sometimes, a government needs to act even if the opposition doesn't want to co-operate.

Harper arrived in Greece for his first bilateral visit as the country is being rocked by protests and political turmoil over its debt crisis and the austerity measures required to get the deficit under control.

For the past year, Greece has relied on a $155 billion package of bailout loans from other EU countries and the International Monetary Fund.

But the first round of austerity measures agreed to in return didn't ease market concerns that the Greek economy can be salvaged.

On Friday, Greek Prime Minister George Papandreou failed to get all-party support on new measures, jeopardizing the next round of bailout funds from the European Union and the IMF.

But on Saturday, Harper said he's confident the Greeks will get the situation under control.

"I know from experience that it is not unusual for opposition parties to refuse to co-operate with government," Harper said.

"But governments have a responsibility to act and I certainly honour the determination of Prime Minister Papandreou and the very difficult actions he's had to take in response to problems his government did not create."

Harper said he's using the Greek situation as an example.

Accompanying Harper on the trip is Treasury Board President Tony Clement, who is of Greek heritage. Clement will be in charge of making the $4 billion in cuts to government services next year as Canada pays down it's deficit.

Harper said he wanted Clement to sit in on the meetings to show him "we have nothing like the challenges faced here in Greece. He has a comparatively easy task."

Clement also signed a youth mobility agreement with Greece as part of the trip. The agreement helps facilitate work and tourist trips by young people.

But the challenges facing Greece did hit home for Harper.

He was originally supposed to stay in a hotel fronting the Hellenic Parliament but was moved to another after thousands of protesters had amassed there late Friday.

Harper came to Greece following the G8 meetings in France, where leaders discussed the global economic crisis, including Greece's dilemma.

He had said going into Athens that he was looking forward to hearing about the situation from the Greek perspective. He received a full briefing on Saturday as he visited Papanderou.

He wouldn't comment on what he heard

"We have every confidence that our Greek hosts here and our European friends will continue to deal with the matters so the global economy can continue to grow," Harper said.

There are about 250,000 Canadians with Greek heritage and several within the prime minister's circle, including Clement and newly-elected member of parliament Costas Menegakis. Both are on the trip.

They were part of a business roundtable Harper held earlier in the day with a group of Canadian and Greek executives, including representatives of Coca-Cola and Bombardier.

Harper's director of communications, Dimitri Soudas, is also of Greek origin.

On Sunday, Harper will visit the village of Kalavryta, where members of Soudas' family still live.

Harper will be there to pay his respects at a memorial for the Greek men and boys rounded up and summarily killed by the Nazis during the Second World War. They included Soudas' grandfather.

The prime minister had done very little international travel prior to entering politics, but he said Saturday Greece was one of the countries that had intrigued him.

"I have always been fascinated by your country as a cradle of democracy and this was one of the first places in the world I visited in fact 34 years ago as a young man," Harper told Philippos Petsalnikos, the Speaker of the Hellenic parliament.

"And notwithstanding the challenges that we read about, I have observed the remarkable progress the country has made over the past several decades."

Later in the day, he and his wife Laureen had a chance to take in some of what Greece looked like centuries ago.

They visited the Acropolis museum in Athens and then the Acropolis itself.

As he toured the Greek ruins and posed for photos in front of the Parthenon, Harper pointed to the massive columns behind him and joked: "I should build this."

The next time Prime Minister Harper visits Greece, he should tour the islands, especially the island of Crete where my sister now lives (she used to work at the Canadian embassy in Athens). There, he can visit many historic sites, including the Suda Bay War Cemetry in Crete where Allied and German casualties are buried (this is an incredible site to visit).

As for Treasury Board President Tony Clement, some friendly advice. I just completed a contract at Industry Canada here in Montreal, the ministry which he was previously in charge of. As I stated in my open letter to Prime Minister Harper following the elections, cut the fat across all government departments and Crown corporations. People think I'm a fiscal liberal, but when it comes to the public sector, I think we need to increase the harmonized sales tax (HST) and examine spending at every single government department by evaluating the services they provide and cut all fat out of their budgets. (Hint: Some departments have lots of fat to cut while others are running bare bone operations and are dangerously close to not providing adequate services).

I do like the youth mobility agreement with Greece which helps facilitate work and tourist trips by young people. When we were teenagers, my brother and I went touring all over Greece with other Canadians of Greek origin from across Canada. Apart from being a blast, we also got to visit many important historic sites in northern Greece and the Peloponnese. I recommend such trips for all young Canadians, not just those of Greek origin. I also recommend they bring along and read a copy of Henry Miller's classic, The Colossus of Maroussi, as they tour Greece (this is one of my favorite books).

From my vantage point, the trip to Greece is a little bit pleasure but mostly political. While Canada is definitely in better shape than Greece, there are some eery similarities. In particular, household debt in Canada is at record levels, spurring a Canada bubble of historic proportions, which is also aided and abated by Canada's mortgage monster. When this bubble pops -- and it eventually will -- the economy will get hit hard and our Canadian dollar will tank (still think if CAD reaches 1.10, it's a short!) and our bonds will rally (that's why Canadian bonds are still valuable).

There are a few politicians, senators and senior policymakers in Ottawa who read my blog. They have privately told me they're worried about our debt profile and what will happen to our economy if China slows and unemployment or interest rate rise. Making a pit stop in Greece following the G8 meeting and hinting that we should pay attention to what is going on there because the same can happen here is a bit far-fetched, but you never know. I happen to believe a big slowdown in Canadian real estate lies ahead, and along with it, unemployment will rise and the economy will falter.

As for my ancestral home of Greece, it was last September when I met up with Petros Christodoulou, the new head of the Public Debt Management Agency, in Athens. He told me that "restructuring was not an option," and asked me my thoughts of Greek "diaspora" bonds. Good luck peddling those now that things have gone from bad to worse in Greece, no thanks to what Stiglitz correctly points out to are shortsighted austerity policies which are preventing countries from creating jobs needed to generate economic growth.

In the region of Athens, residential and commercial real estate development are down a whopping 88% and in Crete, where my brother-in-law runs a building materials company, real estate activity is down 85% from last year. He had to fire five employees and he is still trying to collect monies owed to him by hotels that are sending cheques that bounce. The Greek judicial system is bogged down by tons of cases where businesses are owed money, even by the Greek government (I heard of one major tourist operation in Athens that went bankrupt because the government wasn't paying them money they owed).

Too much austerity is killing the Greek economy. People are losing their jobs, and even those that still have them are seeing their wages slashed. There have been savage cuts in the private sector and now the focus is on cuts in the public sector (when the economy is extremely weak!). Banks have all but stopped lending money and consumers are retrenching because they fear the worst is yet to come. It's a disaster.

Having said this, I'll tell you exactly what's going to happen. Greek assets are going to go on sale -- a fire sale to be precise. Big private equity shops across Europe, North America and the Middle East are salivating at the thought of buying state assets in Greece for next to nothing. As in every crisis, some funds will profit in a huge way.

And while restructuring looks all but certain now, don't discount Greek bonds or the National Bank of Greece as dead. Depending on what the ECB and European leaders decide, there may still be opportunities with these investments selling at distressed levels. Below, CCTV reports on the PM's visit to Athens.

No comments:

Post a Comment