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Greece this is THE week


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This week EU and IMF are discussing with Greece to assess whether budget deficit reduction and structural reforms to be implemented are sufficient to release EUR 8 billion of aid in October in order to avoid a default.

This article reviews numerous dysfunctions in Greece.

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Greece this is THE week

  1. 1. Greece: this is THE weekAs reporter by Bloomberg: “European Union and International Monetary Fund inspectorshold a teleconference call today with Finance Minister Evangelos Venizelos, to judgewhether the government is eligible for its next aid payment due next month and on trackfor a second rescue package approved by EU leaders July 21.”So, here we are, finally, decision have to be taken after months of wrangling, (badly)communicating and ignoring reality.To raise EUR 78 billion in 5 years, Greece is to bring additional taxes, including a propertylevy for EUR 2 billion: I am wondering how the Government intends to implement themeasure since the new land registry is not yet finalized and how will they be able toprivatize without a certainty regarding title of assets (real estate is part of the EUR 50billion privatization program); the initial deadline was November 21 and December 302008 depending whether your are Greek resident or non-resident, then postponed to H12010, and now October 31, 2011. The fun is that Greece first launched a project to recordthe use and ownership of land in 1995, with EU subsidies, but it ran into repeated delaysand nobody at EU did react… When the blind leads the blinds…As reported by the English speaking Greek newspaper Ekathimerini: “Greece hopes tocomplete the registration of all its land by 2020. So far, 13.8 million titles have beenrecorded on the cadastre.” 2020!Ekathimerini is an endless source of information on Greece dysfunctions: “The Citizens’Protection Ministry Tuesday rebuffed a report in the Financial Times indicating thatGreece may be temporarily ejected from the passport-free Schengen travel area for itsfailure to keep undocumented immigrants out of the bloc […] It added [the Greek Citizens’Protection Ministry report] that the Commission should support member states“managing the massive burden” of guarding the bloc’s external borders from illegalimmigration.” Oh, yes, give me more money!Do you want more? Yes? Let’s carry on:“Whereas more than 1,000 Greeks were losing their jobs in the private sector every day inAugust, the government was assuring civil servants with lifetime tenure that their jobprivileges were not in danger and the so-called reserve pool was not intended for them butonly for employees in the greater public sector. […] In the meantime, many Greeks weresurprised to hear the government had hired between 15,000 and 20,000 people in thepublic sector in various forms since the start of 2010.” 1
  2. 2. the need to reduce expenditures: “…closing down one or two money-losing stateentities, such as the the Hellenic Railways Organization (OSE)…”This is a topical and typical subject: the Hellenic Railways. A few numbers tell you all; for2009 consolidated accounts:Turnover - EUR 174 millionOperating loss - EUR 359 millionTotal loss – EUR 937 millionAccumulated losses – EUR 2.5 billionLT debt EUR - 7.8 billionInterest paid - EUR 388 million (2x the turnover!)Employees’ compensation - EUR 291 million (more than the turnover)The auditors commented that they could not conduct a tangible asset and inventoriesimpairment test as well as updating the fair value of investment real estate assets.I could not find the same information for 2010. According to data released by the Ministryof Finance, on a non-consolidated basis, for the 5 months to May 2011, the situationhas improved but remained catastrophic, the turnover is 3x less than personnel expenses(EUR 40,000 / employee / year as an average i.e. 4x the minimum wage, quite nice, andexcluding various benefits – EUR 48,000 in 2010), the net loss amounting to EUR 164million.As a whole, during the same period, public entities had revenues of EUR 512 millionpersonal costs of EUR 399 million and losses of EUR 534 millions (more than revenues).This tells you all, and the situation is “better” than in 2010…Greece’s officials are willing to raise taxes and cash via privatizations; good luck! Forexample privatizations raised EUR 400 millions whilst EUR 5 billion was planned for 2011– 3 months left…However, I have no doubt that Greece will get its EUR 8 billion early next month.Hopeless. 2
  3. 3. Investors sought for land registry Land register invites private bids Ministry rebuffs Schengen report Civil servants in the firing line of Finance: Railways Organization: Annual financial statements for 2009 3