Keynote Address by Nikos Dendias, Minister of Development and Competitiveness of the Hellenic Republic

Speech:

He heard interesting things being said so far.

A Minister of Development has to do specific things:

One prime need is to prepare an action plan to be implemented within a short horizon. This is needed because the Greek economy demands immediate intervention for the past six years of crisis there have materialized themselves several needs.

Ministers of economy spoke about aggregate indicators. We have improved a lot but that by itself, I am afraid, in the daily practice of entrepreneurship is not enough. Although everything is improving, and we are existing the crisis – we can see more tourists, more traffic - by exiting the deficit, it means things are going well, but it is not sufficient. If the exit from the crisis is to be successful, then we have ahead of us a final opportunity to make happen the reforms of things which have led to the crisis. Above all, we need to avoid a relapse. We need to reflect what has led to the crisis.

We have to look at how we handled the Greek economy, and that should include all the social partners. I give you three figures: 1) unemployment – more than 25% especially amongst young people; 2) exports are one third of our imports and this ratio has been reached after only a slight improvement; 3) innovation contributes to the GDP only a negliable 0,7 %. We need to reform.

We need a deep reform even if not welcome by some. Aside from the generalities about what to do in the Ministry, we have to reinforce ideologically entrepreneurship because it has been penalized. If someone wants to start a business, it is being perceived as something negative. Instead people wanted to become civil servants. We have no macro system and no overall framework to promote entrepreneurial ship.

We have taken on board consultants Joss Mass which took the Kibbutz system in Israel to the modern economy which is linked to the Israeli Army, in order to create an innovative state. Likewise we have to give money to the Greek army to be innovative.

We need to reform the licence system set up for the purpose to start business. Today there are needed three licences, an absurd situation, and therefore we will follow recommendations of World Bank by reducing licensing system to three categories: first, zero risk to people has no need for licensing; second, average risk will have a sample check; and only the third with high risk needs license.

Need a new form of entrepreneurship based in logistics. The latter does not exist in the Greek economy. We will introduce this as a law.

Entrepreneurship has risks as well and thus we need to protect the entrepreneurship. Equally we have to realize that mistakes shall be made e.g. bankruptcy. As this has a legal base which goes all the way back to Roman law, it means that in case of bankruptcy, it could lead to denying the political rights of the bankrupt person. But this would make the person from citizen into a slave. In other words, we cannot move in a framework of just one opportunity. If someone fails, he will not get a book check from the banks.

Yet the business man has the Right to be cared for by the state since he can create the many jobs which we need.

It is not the way to go forward, if we adopt the ideological direction of thinking to create a job, it has to be done in the public sector, for that is not the way.

The majority of companies are SMEs. They need access to lending. The government made as a first measure a major effort to support companies by recapitalizing the bank, reforming the social sector and altering social security measures. A second measure are the loans granted to SMEs but if interest rates are around 8%, then companies cannot survive. So then Greece is asking Commission to be able to subsidize the interest rates. So far this cannot be done due to EU law, but we started to change this law. There has been made the Greek request to use structural fund by subsidizing loans which are being serviced to perform. We need to intervene here.

There are quite some visible market failures, hence we try to show case key interventions. Here the Onassis foundation has become involved and other partners as well. They are working towards a 'bank of banks'. The aim is to create a Development bank, in order to cover the risks the market is not prepared to take, and it should be done in order to cover innovative efforts. As start, there is available for the financing of Greek companies 5 billion Euros. Likewise we are exploring other forms of co-operations to be used in the best possible ways. We hope that the EU Commission will allow the front loading of development projects, that is, they do not have to wait for two year, but funding can start right away. This would facilitate greatly exports.

The Greek society needs a reform in real estate but which the Greek state has not utilized so far. Other things have to be dealt with e.g. the flat rate tax of 15% , labour costs, energy costs, completion dates of projects etc.

This government believes that the exit of Greece from the crisis will be made possible by the creation of new enterprises.

Comment:

The use of the structural fund has been a big contention due to many reasons, including the co-financing by the Greek state which has never been adequate. As a result, delay of payments were incurred throughout the lifetime of the project, and even after completion, payments were left outstanding (in some cases even for over two years, if ever paid at all). But this is only the tip of the iceberg of fraudulent use of EU funds at all levels. EU funds are outside any means of control by citizens. As a matter of fact, a special administration besides the normal one has been created all in the pretence to speed up the process of implementation. In fact, the creation of a Europe orientated bureaucracy has led to the imagined own world. It is marked by use of a terminology and deployment of models which normal citizens do not understand. Also one still wonders where all the money has gone to, and this aside from the visible evidence of just more roads, new port facilities and other infrastructural projects. Unfortunately most of them were realized in anything but a satisfactory way.

Precisely the question of sustainability of these projects can be linked to what happens, if an economy is peppered up by state subsidies (whatever their form) since the project will not continue once the EU funds and the life time of the project is over. Consequently many things get distorted till their true nature cannot be recognized any longer.

Linked to the problem of co-financing, there is the matter of a widening gap between fake and real purchasing power of the supposedly to be used for investment purposes. If the total budget is used to calculate what resources are needed to get the job done, but 25% are contributions in kind or else delayed payments, then the purchasing power of the total budget is practically diminished. It is common practice that people will not work fully, if not really paid. The creative accounting used to equate salaries paid for someone working as well for the project means at best the project is perceived as a good opportunity to travel abroad and to enjoy a few days in a good hotel with plenty of food and a chance to go shopping in another city. In terms of investing in a real learning process, that is ever more diminished due to a mere fake participation in the project. Since all projects are work in progress, it would require quite another attitude towards Europe and learning out of experiences made. Instead many end up being self centred and do not contribute the least to any form of European integration. The European Commission makes various efforts to upgrade monitoring and evaluation methodologies but the key problem of financial accountability remains unresolved. There is seldom a real measure applied in terms of real work done and tangible as well as intangible outputs attained. Since intangible outputs entail learning, that then is the key prerequisite to become innovative. This can hardly take place if the cultural dimension is left out and therefore the cognitive aspect of knowledge gained through the project reduced to being merely a clever way to get around the criteria set by the European Commission via the funding programme.

To come back to the speech, the difference between a local authority, or rather a development agency set up to administer EU funds, and a real enterprise operating under conditions of a free market is huge. That difference has been covered up most of the time by such schemes as the PPP (Private Public Partnership), but the truth of the matter is that EU funded projects never relate directly to the market demand. Rather EU projects tend to become pseudo forms of mediation between supply and demand. That happens when any real market orientation is displaced by being solely orientated towards the European Commission and EU funds.

The replacement of the market is made possible through a whole set of fake contracts which stipulate tasks in need to be accomplished before the final end of the project can be reached. A common formula for justifying funding of a project is that a start up of a new enterprise is envisioned. It has practically nothing to do with reality. Already the Economist pointed out in 2003, that the structural fund of the EU shall distort the market and create many fake companies which exist only as long as they are subsidized by the EU.

Consequently this polemic against the state is a fake debate for the sake of hiding the real dependency of companies in Greece upon state support. Once a crisis makes money and resources become rare, all the more the state moves to support banks and enterprises, as if this is the solution to the problem of employment. It should not be forgotten that employment is based on the ability of working together, and this is not only rare in Greece as a cultural trait, but often undermined since it would require quite another theoretical level and intellectual discourse but also an open culture. Instead for a long time 'well being' was used to assert autonomy and to exclude any outside involvement in local, regional and national development. The so called closed shops which the Troika wanted to be eliminated are not the main problem. Rather the Troika and therefore the Greek government never tackled the fact that culture in the form of a new assertiveness of Nationalism - most of the ministers but also Tsipras refers to the Greek people, national unity, our people etc. - has been used consistently to keep out competitors, even though the EU envisions free mobility of workers and professionals. Since all of this has to do with setting standards and work performance, it means that the Greek economy is subject to many more 'unspoken' and hidden agendas all leading to a huge distortion of not only needs but how these needs are perceived independently from any clear market orientation. This then leads on to the grey areas of the economy or those who earn money without giving receipts and therefore do not pay any taxes.

Indicative of the problem being deeper than merely the state-private sector relationship is that Nikos Dendias refers to one key problem, namely the absence of 'logistics'. This is not merely missing in many companies, but it is a general cultural feature. Logistics would require anticipation of the steps ahead, but also when setting premises, anticipate who else shall come to the same place in future. If not care is taken of that future development by anticipating others will require just as much space and time, then the present will be occupied in an one sided fashion, and worse will become an obstacle to change since immobility and inflexibility manifest themselves only in the present.

As for licence and the three categories in relation to risks, that is a copy of the SEVESO II Directive which stipulates what level of control / monitoring companies need according to level of industrial risk they pose for their surrounding environment. It is known, however, that companies in Elefsina, the huge industrial zone near Pireaus with over 160 companies, has many operating without a licence, and in particular two which are responsible for industrial waste disposal. Miriad 21 was a European project which looked into this but the Municipality of Elefsina was approached, in order to bring citizens and experts together to set new safety standards, there was a refusal to join the project. Risk is a concept in need to be understood as well by ordinary citizens, but also by all social partners, so that schools are not built in the vicinity of an industrial plant with high risk of explosions in case of an accident or otherwise. It is naturally a cultural measure what is considered to be a risk and what safety precautions are needed where risks exist.

However, a most startling revelation was made by Nikos Dendias, insofar as he wishes to use a consultancy firm which took apparently the Kibbutz system to the modern economy Israel has become by relying increasingly so on the military as being a special economic-technological sector. Clearly he states the military should get more funds. If that is not state subsidy being handed out in disguise, what is it then? The military is one of the most unproductive sectors of the economy. As a matter of fact, Eisenhower realized after Second World War, the United States must free itself from the military-industrial complex, if any economic progress is to be realized. Contrary to that experience and insight, here is a Greek minister proposing precisely a further step in direction of not only inefficiency since the military is known for its huge waste. Rather if tied in with research, the military can prompt actions designed to experiment new weapons and this without taking into consideration that this is in fact fueling potential conflicts. In a world having become more dangerous than ever before, all these pseudo efforts to upgrade intelligence to gain security while not really addressing the reasons for the outbreak of violent conflicts and outright wars is a sign of highly irresponsible politics. Once Greece would go down that road, and this merely by imitating the apparent successful model of Israel, it would be diverting rare resources from the rest of the economy and even not realize that Israel's economy is not as successful as it seems. For the Israeli economy is being sustained by huge amounts of money coming from the United States, and internally, the Israeli Defence Force has become a confused organization due to playing too many different and at times highly contradictory roles at the same time. This means the high tech orientation does not resolve the social injustices with many in Israeli remaining impoverishered and at the fringe of society, never mind to speak about the unresolved conflict with the Palestinians and all other neighboring states making up a highly volatile region precisely because the unresolved Palestinian question has spilled over to others in the form of permanent injustices and inequalities. So to come back to Greece, the military sector is already a highly privileged one and was like the police largely exempted from measures taken by the state to meet the challenge of the deficit. There is also the high risk of resorting to Neo Fascist methods and ideologies, if all other solutions fail to convince the Greek public at large of the need to limit protest to mere street theatre.

Hatto Fischer

Athens 14.10.2014

CV of Nikos Dendias,

currently Minister of Development and Competitiveness of the Hellenic Republic

was formerly Minister of Justice, Minister of Citizenship and Minister of Development.

He is praised for being able to set priorities.

Graduated from Athens College and studied at Athens University Law School.

Masters of Laws (specialized in Maritime and Insurance Law) at University of London.

Studied as well Criminology at LSE.

He is a Supreme Court lawyer and joined Nea Democratia in 1978.

Comes from Corfu.

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Keynote Address by Nikos Dendias, Minister of Development and Competitiveness of the Hellenic Republic