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National Reconstruction Program for Growth The Role of State and the Private Sector - Panel discussion

Speakers of the panel:

Kyriakos Mitsotakis, Minister of Administrative Reform and E-Governance of the Hellenic Republic (could not come)

Yannis Maniatis, Minister of the Environment, Energy and Climate Change of the Hellenic Republic

Prof. George Stathakis, Member of the Parliament, SYRIZA Party, Professor of Political Economy, University of Crete

Prof. Christos Pitelis, Director of Centre for International Business and Management, University of Bath; and University of Athens

Michael Massourakis, Chief Economist, Alpha Bank

Vassilis Antoniades, Partner & Managing Director, the Boston Consulting Group, Athens

Chair: Stamatis Zacharos, Managing Editor, Capital.gr/”Kefalaio” Newspaper

 

Kyriakos Mitsotakis, Minister of Administrative Reform and E-Governance of the Hellenic Republic

Yannis Maniatis, Minister of the Environment, Energy and Climate Change of the Hellenic Republic

I am sure that the previous speakers have identified all the problems. Instead I will focus on individuals dealing with environment, energy and climate, and this in conjunction with a new productive model being best described in following words, but in a very general way as a new development pillar. It is being implemented with the aim to attain sustainability.

Greece is a country which has suffered in previous years but which stands again on its own feet. We can do better achieving new jobs. For this we need a new social contract between politicians, financial actors etc. It will have to be a patriotic plan and all ready to see the future of this country.

He is perplexed by the question, whether or not we can have progressive policy in Europe, if at governmental level we have only conservative forces. I am surprised by this. The doubt continues in the form of how can we produce progressive policy, if under the tutelage of the Memorandum of Understanding?

Nowadays we hear words which are pleasant to the ears of our citizens, but how to produce wealth? If someone claims to know the answer, he is lying!

After the war, there was no productive model possible. So how can we produce wealth when faced especially by asymmetrical conditions?

I like to refer to the USA where the have experienced since 2009 reduced energy costs by 50%. As a result the USA is leaving behind Europe which had the ambition through the Lisbon strategy to be more competitive. Why this could not be brought about, for this we must provide clear answers.

In reference to Extreme Right groups growing in many EU countries, it seems as if only aggressive development can be sustainable!

But to come back to the work of my Ministry, three months ago there signed for the first time a Greek minister a first agreement on bio-diversity. There is a great deal of wealth in the environment and especially protected areas which can bring about jobs with huge economic result. Although this is a potential income / asset to the Greek state, when I ask employees at my ministery, what do they know about this wealth, their answers show that no one knows how to handle this asset. We have to develop the environment by using technology and know-how. That is important especially in a country which suffers from brain drain due to its young people immigrating.

Solutions can be found the moment work is shared fairly. We can see the effects if we know how to distribute work to social neglected groups. Development is cyclical. We have to use resources for this purpose, namely to counter the negative cyclical impacts. It is the only way benefits can be derived from this development.

We need to create jobs, thus the policy we have to follow is that of 'national pride'. We have to be able to build on the gift of nature. Greece has taken important steps in this direction.

As a matter of fact the construction of the gas pipe line will help improve the geo-political position of Greece. It will also allow for further development with regards to hydro carbon deposits. To promote this, it is an important European issue due to its dependency upon third countries for energy security. Indeed, we have to ensure that Greece and Europe have an updated energy security and safety.

Given the fact that other countries are more sensitive to geopolitical changes and risks (how major developments influence political thinking), all of this must be taken into account.

Likewise mineral wealth is very important but the usual attitude at local level is that we want it, but elsewhere and not in our own garden. But one has to be clear that in a modern society social solidarity is needed. Hence society should pay back to local society, if willing to allow mineral wealth extraction.

As to the building sector, it was all the time a major pillar but now faces a major challenge. We spend too much energy because buildings are no longer used i.e. overstock of housing. For sure, we cannot afford to build more houses. Rather we need to update buildings with energy savings and therefore help improve the existing building stocks. This will allow us to create jobs combined with energy savings.

To conclude with a few words on environment, whenever citizens or entrepreneurs wish to do something, it does include land use. The latter constitutes a negative factor for investments, if someone wants to build on his property but building permissions are difficult to get.

We need a major reform of public land, and with it goes a new town planning procedure. For we need to reduce the period for review. There are available right now 12 Master Plans. They include important prospects for the period until 2020. Yet the Town and Master planning combined has produced 22 000 studies making proposals for all kinds of activities but then are simply wasted, left in the drawer, where no one takes notice of them. We need to change all that and throughout. Environmental control should be immediate. Right now, the public administrator is not accountable to the citizen for obtaining an environmental permit,  but now we have created a web platform, so that when you make a request, you will have all the information who is not handling the request and thus the person handling the request can be identified immediately. All this enhances accountability.

 

Prof. George Stathakis, Member of the Parliament, SYRIZA Party, Professor of Political Economy, University of Crete

There is a progressive solution: Syriza

There are three problems:

  1. Memorandum is responsible for the collapse of the Greek economy – it prompted a wrong economic policy which has produced the economic problem

  2. does not lead to the reform which the economy needs

  3. puts too much focus on the state and not on what the private sector has to do while relationship between the two remains unclear

What are the consequences?

  1. A recession was enforced in the Greek economy. It has led to a shrinking of the GDP with increase in unemployment to 28%. All of this amounts to the same theme, namely that the Memorandum has failed gloriously. The extent and the time of the fiscal consolidation meant that Greece has a major deficit of 15% and it had to be consolidated within 3 years. In order to have a 30 Billion reduction, there had to be created a huge recession to the economy.
    The Memorandum states the recession will not be so severe but the second part of this programme failed completely since it is tied to a privatization concept which the IMF predicted would bring 50 Billion, In MoU 2 it was down to 20 Billion and now it is to 14 Billion but so far it has brought 2,8 Billion. As a matter of fact, we have nothing to privatize. We had a record privatization since 1968 and now the Memorandum comes and says privatization is the solution – regional airports yes, but not the national one since already privatized. Then the Troika picked on labour relation and stated they are too high a cost. So they brought down wages but instead brought about unemployment. They demanded structural changes and therefore must open up closed shops like the taxi drivers, milk market etc. but which encourages imports where Greece has a strong export record e.g. yoghurt. All this does not produce growth and explains why the economic consolidation does not work. Greece has a higher public debt than when the crisis started despite all reforms.

    Business sector is highly indebted.

    The economy is experiencing a liquidity trap. It shows that the European economy is a black hole. Other economies are on a growth path. It is only the European economy with a very low growth. In both cases, Greece and Europe suffer due to the wrong economic policy being in place.

    2. Administrative reforms are important but also need to heal problems. There is too much political control of the public administration. Rather there is needed to gurantee the autonomy of public administration best done by being protected against politicians and business interests which reproduce merely an imperfect state.

    3. As to all the talk about reforming taxation system and doing away with all the red tape system etc., how come that we still have not a land registrary. We are  still discussing this topic but it not will be reformed by the Memorandum which is imposes merely a restrictive agenda.

There is no way out – the Greek ministries have no sense of reality

Need to change the policy mix – not go on to produce surpluses to service the public debt and at the same time claim that the economy is about to exit the crisis.

Must accommodate changes – reduce tax burdens – do away with social injustices – we from Syriza argue that social justice will help the economic development.

We need to change the agenda of economic growth since based on real estate, tourism etc.; rather we need to improve productivity and turn to new sectors.

Greece needs reform of the state – cannot give everything to the private sector while leaving the state alone.

The new role of the state is clear: a powerful social state (education, security) which controls the entire regulatory framework and which is friendly to growth and investments.

The grey areas are to be found in the intertwine of private and state interests - this is in need of a third major reform.

 

Prof. Christos Pitelis, Director of Centre for International Business and Management, University of Bath; and University of Athens

A short review of theory about what needs to be done – two key terms: development and re-industrialization of Greece

Conclusion: it is time to look at macro level and look at the future in terms of sustainability.

 

Michael Massourakis, Chief Economist, Alpha Bank

In Greece, economic policy was not to maximize productivity, but to maximize living of others and therefore to increase fictional demand. Now we have a shrinking of sectors which could not be commercialized. The problem has been the increase of domestic demand in ratio to income so that profitability was increased for non commercial products. It is done by increasing imports and therefore contributes to a continuous increase of debt and imbalance in payments. Now the surplus has to be produced to service the debt and the demand reduced so that a trade off of between non tradeable goods to tradeable ones regains a healthy balance. Internal devaluation is what happened with the Memorandum. We need to move towards tradeable goods at international level.

Why do we wish to have competition? It is because through productive jobs on a permanent basis, it will lead to higher income.

Economic discontinuity of changes is minimized.

Do not need exogenous actions but need to increase profitability of investments in tradeable goods.

Profits require design, planning, organisational strategies etc. For instance, the high German wages do not prohibit because the salaries remain stable i.e. do not increase over time.

No alternative to such a system.

How can we increase the profitability? We need to deconstruct the non profitability of businesses which are known for tax evasion, etc. which are protected against competition, so that people have profited to the detriment of society. An introverted economy and a highly protective internal sector are a hindrance.

If this is the case, then we need to ask whether in Greece we do have the necessary reforms? The answer is 'yes', but under the restrictive framework of the MoU.

There is an appeal to the magic forces of the state, and indeed the state must undertake everything to make things possible.

That is, however, not enough.

The Greek economy must not be state fed.

Need social protection and channelling of resources into infrastructures. Nothing else is needed. Investors know where to put their money, They only need not so many restrictions.

We are not China and we will not become China, but we have to relate to our comparative advantage due to our location in the world.

There is the underdevelopment of the institutional framework which hinders the primacy of export driven factors in tourism, agriculture, etc.

Need to make Greece into the greatest tourist and transport hub of Europe. Greece can become a high centre of living and entertainment by attracting people of high abilities and knowledge.

Need improvement of the infrastructure in the country.

 

Vassilis Antoniades, Partner & Managing Director, the Boston Consulting Group, Athens

The role of the state: we can talk and complain about the problems, but we should not forget what we achieved.

We do find some things to be quite complex, but through reforms can help the private sector realize what it does best, namely to create development.

It is important to talk in figures: the major achievement is the primary surplus in 2013, and now expected again for 2014.

Chair: Stamatis Zacharos, Managing Editor, Capital.gr/”Kefalaio” Newspaper

Comment:

 

It was not really a panel discussion, since each of the panelist gave a speech and then when the floor was opened to the audience to see if there was any question, no one stood up to pose one. It is remarkable but indicative of a key problem in Greece, namely the very lack of public discussion. Without ascertaining the truth of things stated in public, there is no knowing what corresponds to reality, what not. Since politicians are inclined to do needed footwork, insofar as management of expectations but also pessimism in contrast to optimism can make already a difference in how an economy flourishes or not, the way problems are addressed matters. Above all, it can be observed how problems are put side by side with a claim of achievements so as to off-set any possible impression all is bad, nothing has been accomplished and the policy adopted, supported or pursued is at fault.

Naturally such salesmanship, otherwise called political brinkmanship, reminds what it took Theodore Roosevelt to stand up during the Big Depression, in order to deliver the 'New Deal'. During the past five years, some imitations thereof have found themselves into political debates e.g. the Greens speak about a new Green deal but their proposals have made hardly any impression at EU level, never mind come to bear at all upon the debate in Greece.

Hatto Fischer

17.10.2014

 

 

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