Monday, September 12, 2011

The Final Chapter of This Greek Tragedy?

Didn't make it to Elounda this weekend as we decided to stop off right before at Agios Nikolaos, which in my opinion is the most beautiful city in Crete. The beaches, food, and view are all a feast for one's senses. It was windy but I swam for over and hour yesterday, as far as possible, losing myself deep in the sea. There were currents and I paid the price today as every muscle in my body is aching. But I needed good old "thalassotherapy" to clear my mind and reflect on my life. Realize my biggest disease isn't MS, it's not letting go of the past and accepting certain realities in my life (MS is a major one but there are others).

What I enjoyed most about this weekend was the company that I had with my nephew, sister, brother-in-law, and their friends and kids. My brother-in-law's buddy is an engineer who has read a lot on economics and finance. We talked about the current crisis and both agree that "terrorism and disaster" sell. He's a documentary junkie and has seen The Obama Deception and the Inside Job. We talked about Naomi Klein's book, The Shock Doctrine, and how ruthless policymakers use "shock and awe" to implement policies they otherwise wouldn't have been able to implement without tapping into the collective fear of the masses. We both dismissed the notion that the US is "heading towards a Greek-style fiscal crisis" as utter nonsense. And we both agreed that the easiest solution to European debt woes is for the ECB to emit eurobonds backed up by all countries, including Germany and France whose banks were foolish enough to lend billions to Greece knowing full well they weren't going to realize on those loans.

We talked about how the world is increasingly becoming bifurcated under class lines, not religious, ethnic or other lines. The few at the top want more and the restless many are struggling to keep up with the demands of today's materialistic society. One thing he mentioned to me, which I fully agree with, is that at the root of the economic crisis there is something more fundamental, a social crisis plaguing modern societies. The irony is that in a world that is increasingly interconnected, we're losing the meaning of life and the values that make up our social fabric. You see it everywhere, including Greece.

I too am a slave to modern technology and lost the meaning of life. That's why I'm glad I came to Greece, to get reconnected with my inner soul. Every year I travel here, I read Henry Miller's book, the Colossus of Marousi, the perfect book to read while traveling in Greece. Just read the first chapter here and you'll understand the genius of this gifted writer. An American who abhored American materialism, Miller understood the essence of Greece and Greeks better than most Greeks. He also understood the human condition and what really counts in life. In my moments of deep reflection, I can't tell you how this little book has helped me put order in my thoughts and in my soul.

This weekend I wondered what Miller would think of the current sad state of our global economy and financial system. He's probably rolling in his grave now as the world succumbs to the tyranny of markets. "CDS and spreads" have become familiar terms on Greek television. What if Greece defaults? I can hear Miller screaming from his grave: "So what?!? Greece will always be a magical place and the Greek spirit will live on." He'd also tell me to stop blogging, trading and tweeting while on vacation, store away my iPod and iPad, forget everything and everyone negative in my life and succumb to the raw beauty of Crete.

I'm desperately trying to enjoy myself but admit I'm doing a lousy job. My mind is on a lot of things, work, health, friends, family and the pathetic state of the Greek economy which is heading towards the abyss real fast. And now politicians have decided to yield to international lenders and introduce more austerity:
Under intense pressure from international lenders, Greece on Sunday announced a new set of austerity measures to meet deficit reduction targets and stamp out speculation that it would be forced out of the European single-currency zone.

The measures, which include a two-year property tax, are intended to make up for revenue shortfalls that come to about $3 billion this year alone.

Though designed to target mainly high earners, the new tariff could further anger the crisis-weary middle class and pose political risks for the socialist government, which repeatedly has pledged to protect Greek households from being hurt by further austerity measures.

"We know that these measures are unbearable," Finance Minister Evangelos Venizelos said after a heated six-hour Cabinet meeting in the northern city of Thessaloniki. "But once more, we all have to rally together in a national effort."

That could prove tricky.

Over the weekend, thousands poured onto the streets of Thessaloniki, the country's second-largest city, to protest austerity policies. In Athens, the Greek capital, youths firebombed a police bus in retaliation for the detention of more than 30 of the protesters in Thessaloniki.

Outside Greece, there are new worries that Athens is dragging its feet on measures it agreed to undertake in exchange for a $159-billion financial lifeline.

This month, the government's talks with inspectors from the European Commission, European Central Bank and International Monetary Fund were abruptly suspended because of differences over Greece's gaping budget shortfalls, its lagging plans to sell off state assets, and its ailing fiscal performance.

It is unclear whether the new measures will ease creditors' concerns.

If not, the next $11-billion tranche of loan aid due this week could be in danger.

Officials predict that Greece's economy will shrink 5.3% this year. With recession biting deeply into the economy and fears about the prospects of the euro currency growing, yields on Greek bonds jumped Friday.

The euro slid to a six-month low against the dollar, and markets fell on reports that Germany, the main bankroller of Athens' multibillion bailouts, was preparing for Greece to default or leave the 17-nation single-currency zone.

"We face a difficult predicament," Venizelos said. "We must silence this speculation and can come out clean with a new and radical drive to implement reforms down to the T."

As part of the new cost-saving measures, Venizelos said, the government would also move to slash the salaries of elected officials, including the president's by 7%, and tap into the deep pockets of wealthy shipowners.

Even so, critics warn, it's unlikely Greece's lenders and markets will breathe easier.

"These new measures are a total disgrace," said former conservative Finance Minister Stefanos Manos, who now leads a political action group. "Rather than go after the bloated public sector, the government has saddled homeowners with more property taxes, for the umpteenth time."

Greece's lenders, he said, "should reject the plan and the government should resign."

Recent polls showed the ruling Socialist party falling further behind conservatives. Nearly 8 in 10 Greeks say they are unable to pay the emergency levies imposed by the government in the last year.
The truth is Greeks can complain all they want about property taxes but they had it easy for years with no property taxes. Of course, their wages were low to begin with and now their discretionary income is shrinking as the economy suffers its worst post-WWII recession. The cuts in the public sector are needed but they are insufficient and will ensure more pain ahead. And I laugh at any attempt to tap into the deep pockets of wealthy shipowners, most of which have their vast fortunes parked offshore in Switzerland, Cyprus and London real estate. The same with other wealthy Greeks who aren't paying their fair share of taxes.

What is going on in Greece right now is a textbook case of why austerity doesn't work when economies are already in a deep recession and can't print their own currency. The only thing austerity has done in Greece is ensure debt deflation: unemployment soars, wages fall, property prices fall, rents fall, stores close, pensions and benefits get cut, and credit is next to impossible to obtain. It's utter madness but I guess Greece and its lenders will have to learn the hard way as we go through the final chapter of this Greek tragedy.

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