April 1, 2023

News Cymru

Two sides to every headline

Kathimerini is one of the biggest newspapers in Greece.

Today “the editors” have come out with an article dealing with the Greek currency “issue” ie, should Greece stay in the Euro or return to the Drachma.

As I have mentioned before, the mainstream media and politicians, hyping up the possibility of a return to the Dracham is simple propaganda in order to pass immoral austerity measures.

The currency is not the issue but having said that, I will deal with the article and show how it’s authors misunderstand fundamental economics.

This is the article in Kathimerini website, ekathimerini.com

Here are the main paragraphs which show “the editors” lack of understanding


Suppose Greece somehow resolves its short-term debt problems through default or other means and brings its budget deficits back under control. It will still have to deal with a crippling lack of competitiveness.

This one sentence shows a fundamental ignorance with regards to how economies operate.

If Greece were to default it would not only largely cure Greece’s short-term debt problems, it would also largely resolve all of Greece’s debt problems.

A default would not only affect debts due in the next 1-5 years it would affect all of Greek debt including 30 year bonds.

A Greek default would have massive positive effects on Greece’s short and long-term debt problems.

To say a Greek default would only help short-term debt problems is plain wrong.

With regards to Greece bringing it’s deficits back under control.

A default would force the Greek government to immediately bring the deficit under control because the government would not be able to borrow on the money markets.

Anything which stops the Greek government from running up debts which Greek taxpayers have to pay back is a good thing.

About the crippling lack of competitiveness.

A Greek default would immediately wipe nearly 10% of the government’s expenses as 10% of the government expenses goes to servicing a debt which would longer exist if Greece were to default.

The default may not cut 10% from the government expenses but it would cut at least 5% in any meaningful government default.

This 5% saving is something that can be directly funneled back to the Greek taxpayer in the form of reduced taxes, if the government were serious about restoring competitiveness.

A Greek government default would immediately make all government contracts null and void making it much easier for the government to carry out the reforms it is struggling to pass at the moment.

A government default would massively speed up the reforms the Troika claim is required to make Greece competitive.

Labor costs in Greece have risen much faster in recent years than in Germany and the rest of the euro core, making its exports expensive and imports cheap. The result is chronic trade deficits, which must be financed through continued borrowing.

“The Editors” fail to mention what has made the cost of labour in Greece to rise so quickly.

Labour costs in Greece have risen so quickly because the Greek government was able to borrow at a completely unrealistic interest rate.

The Euro was a new currency and the vast majority of people did not appreciate the full consequences. People have now learned their lesson which means the Greek government will not be able to make the same mistakes again.

Given that most of this money found its way into the pockets of the Greek people, a government default should have very little effect on the Greek people. (Short of the government stealing the money back, which indirectly it has been doing for the past 3 years with huge taxes).

The Editors say the trade deficit “must be financed through continued borrowing”.

Again, another completely misleading statement. Of course borrowing is one option, although not a viable option given that the government will only be able to borrow small amount after a default.

The 500kg elephant in the room is the other, realistic option, and that is reducing the regulations and taxes in Greece to make the country more competitive.

The Troika claim they want to cut regulations and a default would certainly speed that process up, with regards to lower taxes, that depends on if the government is committed to Greek prosperity of if the politicians are simply happy to be in office and to hell with everyone else.

On balance, debt restructuring plus “internal” or “fiscal” devaluation — difficult as it may be — looks preferable. Explicit wage cuts, and the recession needed to induce them, don’t have to carry the whole burden of cost adjustment. A combination of increased value-added tax and lower payroll tax (Greece could easily do both) mimics a currency devaluation by raising the price of imports relative to the price of exports, lowering real wage costs by stealth. They should be part of the mix.

A paragraph which neatly sums up the childish socialist attitude of the Greek media.

The Greek government is what has led the Greek economy into today’s position. Why does Kathimerini believe the government has the solution (by manipulating peoples wages and redistributing money by taking money from one person to another).

The government has zero track record that it can help Greece, it would be foolish to think the government could get a country of a recession.

The best solution is to give Greeks control over their own finances, let every Greek take the decisions which are right for them with minimal interference from government. That is the only true solution and with the claimed levels of tax “evasion” in Greece, it would seem to be the solution Greeks want.

On the whole the Kathimerini article is extremely disjointed, it makes massive claims but makes no effort to explain the reasoning behind these claims.

But the article is typical of the Greek media. The Greek media, for no apparent reason believe government has the solution to the problems the government created. And at the same time the Greek media are more than happy to call politicians corrupt and inept.

This desire to want solutions from the same people they call corrupt is the height of hypocrisy, or perhaps stupidity.

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