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Economic consequences of a Cyprus Euro exit

Posted by (Guest Contributor) on March 30th, 2013 - 34 Comments
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 Obvious strategic reasons dictate that Cyprus should wait-it-out and stay in the Eurozone. An exit from the Euro and return to the pound amounts to strategic suicide. It will leave Cyprus alone and vulnerable, without friends, at the mercy of Turkey. It will amplify both geopolitical and economic risks for Cyprus at the present very unstable juncture.

On purely economic grounds, suggestions for Cyprus’s exit from the Euro (the latest by Krugman) are misguided. The main argument is that return to the local currency (the Cyprus pound) would allow devaluation, and presumably allow the country to become more competitive globally. This might be a valid argument if the effected economy is primarily driven by exports. In that case, local goods and services (e.g., tourism) might become relatively cheaper compared to global alternatives and enable the nation, theory goes, to gradually climb up into competitiveness and economic recovery.

But Cyprus’s economy is primarily driven by imports and suffers from severe structural inefficiencies that make it unlikely to return to competitiveness from a mere currency switch.  A 30% devaluation, for example, would mean that salaries and wealth in (local currency) would be roughly 30% lower. But the cost of all sorts of imported goods, from petrol and gas, to pharmaceuticals, all the way to shoes and clothes, would go up as they would still need to be paid in Euro or other international currencies. In the midst of an ongoing economic contraction and dangerous loss of confidence, leaving the Euro and the prolonged uncertainty at all levels it would create would have severe adverse consequences on consumption, savings, investment and growth. Moreover, defaulting on Cyprus’ debt (denominated in Euro) will severely damage its credibility, economic and political relations with the EU, damage trade for decades and lock out Cyprus from international markets even in case of proven gas discoveries.

Would Cyprus’s national competitiveness in the global arena go up to offset this additional loss of real income, wealth, credibility and growth prospects? This is a most doubtful and shaky proposition. Cyprus’ financial and related professional services sector has been dealt a deadly blow regardless. A lot of export services linked to banking and off shore business have taken a big hit. The financial sector will not likely recover simply by switching from an international currency to a tiny, local currency. Even a more than 30% reduction in professional services costs would not entice the Russian or other international businesses to hang around. And the extra costs of conversion from the pound to an international currency would not help. Neither would the loss of confidence.

How is the tourism sector going to fair out? Is a cheaper Cyprus pound going to attract enough international tourists to Aphrodite’s shores to make up for the loss of wealth? This is not likely to be the case. Cyprus hotels face large energy bills, labor costs, loans (in Euro), and deteriorating facilities. A 30% shadow price drop is not enough. Quality of service is lacking relative to nearby alternative destinations, such as Egypt, Turkey or Dubai, and price packages are still not competitive (even at 30% lower prices). Especially when tourists realize that they may have to pay as much for taking a taxi within Cyprus as was the cost of the airfare to fly there. The cost of a taxi in Egypt and Turkey is much lower. Taxis are owned by the state in Dubai and the costs are strictly regulated and among the lowest in the world. If the (low-paid) Pakistani taxi driver attempts to cheat a tourist, he is thrown out of the country.

Cyprus’s semi-governmental agencies, such as the electricity authority, are grossly inefficient operations that make positive excess profits on the back of Cyprus’s consumers and businesses. Employees are paid allowances for driving the car to work and enjoy an automatic lunch allowance. Employees are paid significant salaries (plus the above allowances) for cutting tree branches above the electric poles that could be outsourced to professional gardening services at a fraction of the cost. They have enjoyed interest-free loans to send their children to college.  As a result, a household pays €300-400 in electricity bills rather than €100. Not only they charge for electricity 3-4 times more than what should be in a global competitive environment, indirectly taxing the poorest layers of Cyprus society, but they contribute to ensuring that Cyprus’s tourism and other industries remain globally uncompetitive. All the political parties in Cyprus are against privatization. Effectively, this is the same as being in favor of exploitation of the people by these agencies and pulling down the long-term competitiveness of the country. How can families, hotels and businesses survive with such high electricity prices? In the name of protecting future generations, politicians are keeping local monopolies in place while digging the grave of national competitiveness, whether within or outside the Euro.

No financial gimmicks, like switching currency, will solve any real budgetary or competitiveness problems for Cyprus. There are no such magic solutions in real-world economics.

Structural inefficiencies in Cyprus’s economy should be rooted out, not preserved through easy sounding round-about solutions like exiting the Euro. Much structural change involving privatization of semi-public entities, governmental institutions and services and banks is needed. These structural improvements would not take place without the political pressure (and guidance) of the troika. It would actually be desirable if the troika extends its reach beyond the Central Bank and into the headquarters of all Cypriot political parties. A lot of restructuring and cleaning up is needed.

The above presumed benefit of 30% currency devaluation and improved competitiveness from exiting the Euro and switching to the pound could simply be achieved more directly. Cypriots could simply voluntarily accept a 30% cut on public employee payroll (the private sector will voluntarily adjust) and drop tourism services prices (including taxis) by 30%. Those prices could come down as effectively as devaluing, and better to do it once by opening up various protected semi-governmental agencies (e.g., the electricity authority, telecom) or closed professions (e.g., taxis, pharmacists etc.) to competition rather than rely on devaluations every 10 years. For example, if the taxi association does not agree to voluntarily drop prices by 30% as a contribution to national competitiveness, it is not hard for the state to regulate that a taxi service from Nicosia to Larnaca airport should be 30 (rather than 45 or 50) Euro. After two complaints by tourists, the license is revoked. Further, there is no economic reason why a bank, pharmacy or a university secretary should not work on Wednesday afternoon. The government or the troika should look into these areas as well if certain professions cannot constrain themselves. Structural reform is needed to enhance long-term competitiveness no matter what monetary options are followed.

The above internal measures could replicate, more cheaply, the main purported benefit of exiting the euro, while avoiding its many drawbacks. The more serious drawback from exiting the Euro is self-cancellation of European insurance policy offered to Cyprus from being part of the Eurozone against potential future machinations by Turkey.

Cyprus should play the game it voluntarily entered (by inviting the troika) until the end, or at least play another couple of rounds and see. Perhaps after the elections in Germany and some luck with evaluation drilling results in June, with some deeper strategic thinking by its leaders after recent experiences, it might be able to persuade EU leaders that maybe they have overdone it with Cyprus and that their long-term strategic energy interests lie with keeping Cyprus’s economy and its gas prospects alive and kicking as an alternative to Moscow’s energy chocking.

Perhaps the timeframe in the last weeks was extremely narrow and the pressures too intense on everyone for thoughtful strategic decisions. Greece was under the gun of the Troika with a deep liquidity crisis of its own and 300 suicides. Israel has been under clear pressure from the US to coordinate with Turkey on Syria. Perhaps Russia had to reflect on a set of conflicting interests regarding Cyprus and may simply have found it easier to just wait-it-out. Potential strategic alliances for Cyprus have been dealt a blow but perhaps might be resurrected with determined, clear and smart strategic thinking by Cypriots. Staying in the Euro might buy time to enable strategic rethinking and regrouping strategies. If Cyprus is able to stabilize its economic problem within the Eurozone, it will gain time to test the limits of key players such as Russia and Israel. Perhaps Israel and the EU leadership, after the German elections, might reconsider the possibility of a permanent dependence on a Turkish pipeline or of continued monopolistic dependence on Russian gas. Economics, politics and strategy are intertwined.

 Regardless of the path chosen, Cyprus requires internal reforms which will make its public sector and its economy more flexible and globally competitive.

 Lenos Trigeorgis holds a PhD (DBA) from Harvard University and is the Bank of Cyprus Chair Professor of Finance at the University of Cyprus and President of the Real Options Group. He has been a Visiting Professor of Finance at the London Business School. He is the author of Real Options (MIT Press, 1996), Strategic Investment (Princeton University Press, 2004) and Competitive Strategy (MIT Press, 2011).

Categories → Οικονομία

34 Comments
  1. avatar
    Sophocles Michaelides on March 30, 2013 - (permalink)

    Well said. I will second by paraphrasing Henry Kissinger’s famous dictum ”For those without purpose, all roads lead nowhere”.

  2. avatar
    Ndrag on March 30, 2013 - (permalink)

    Although I agree with the analysis presented in this article, I can’t help but feel that you’re missing an important element of Cyprus politics.

    I understand your main point is that a sharp decrease of payrolls, opening professions and making semi-government organisations more efficient is a much better solution than leaving the Euro.

    But! What if I could foresee the future, and predicted that we would spend the next 1.5 years negotiating with Troika and more importantly the Unions about getting a 30% reduction in payrolls and other unnecessary costs. Instead at the end of those 1.5 years, what passes is only a 5% reduction in salaries, together with a 30% increase in all taxes. I also predict that there will not be any reductions in salaries or staff numbers in any banks – not even Laiki.

    What I’m trying to say is that even if the best approach is what you recommend, I would like to hear from someone argue against leaving the Euro, but without using naïve counter-arguments like: instead lets lower costs.

  3. avatar
    Ashamed on March 30, 2013 - (permalink)

    Dear Leno
    I very much enjoy reading your thoughts.

    I want to add that by staying in eurozone will also cost us a great deal with unknown consequences.

    Examples i can think of: loss on deposits, significant loss of jobs, fears for lost generation, fears for GDP declines of more than 20%, domino effect from sme defaults, reduction in salaries and deflation, no freedom to pursue expansionary plans, no monetary policy and potentially never be able to repay our debts (in which case our gas assets would likely be given away much below their true value).

    I do not disagree with your arguments, however, we should also be concerned of the consequences by staying in the euro. A 20-30% permanent drop in our GDP and no monetary policy are at least equivalent to a potential devaluation of the pound.

  4. avatar
    T on March 30, 2013 - (permalink)

    Excellent analysis well done.

  5. avatar
    Γιώργος Π. on March 30, 2013 - (permalink)

    Totally agree.

    For the past years no major sector was working efficiently (government, semi-government, banks etc). There was a parasitic symbiosis of politicians, unions, bankers, employers and other players creating an unbalanced situation. It was a matter of time for the structure to collapse.

    The parasitic symbiosis is still there (same people, same mentality, same relationships). If we leave the euro the situation will get worse because the currency is not the issue.

    Unfortunately for us Cypriots we were unable to make the necessary improvements (step by step) in the way our society functioned (politicians are always thinking of the “political cost”). Our only hope is that Troika pushes for reforms.

  6. avatar
    Savvakis Savvides on March 30, 2013 - (permalink)

    Bravo Lenos! Excellent, and in my view exactly the type of useful advice that should be coming out of our competent academics! These are the real issues confronting us as a country. As the public feeling is skilfully turned by politicians and special interests groups against the Germans and Troika, we forget that it us who brought this catastrophe upon ourselves.

    I do congratulate you because it is about the first time I read a clear article from the academia putting the blame where it belongs and sketching out what we need to fix to get our house in order. The structural reforms to make our economy efficient and competitive is something we should have had the wisdom to understand ourselves without a need to be imposed upon us.

    As you very well point out, we close our eyes to the fact that we impose restrictions on professions (through licensing), we maintain inefficient state monopolies in place despite that these, not only are costly to the consumer, but also as they are key for the overall competitiveness of other sectors of the economy (such as tourism and industry). We even restrict trade by controlling “sales campaigns” or the totally ridiculous and absurd law that makes it illegal for an enterprise to be open for work on Wednesdays!

    The only thing I would add to your list of actions are measures to boost development. It is imperative that we negotiate development funds from Europe and other sources and start creating the professional institutions to channel these funds into the economy in a manner that will accelerate economic development (a crucial role that in previous major potential depression situations was executed well by the Cyprus Development Bank). It is for this reason that I propose the creation of a National Development Finance Agency which will be staffed by expert professionals in project finance and development banking in the mould of the model successfully employed in Ireland.

  7. avatar
    Boumboulina on March 30, 2013 - (permalink)

    Before I join in this, I d like to say that I am glad I was sent this link. The best news these last weeks, as far as I am concerned, is that people of substance and knowledge appear from everywhere.It took a ‘prisoner to walk to his death row’ for media to shed some of their light on such persons. The second best thing that happened is that all these ‘dreadful secrets’ were revealed to everyone including dormant citizens like me.

    Dear Sir,
    I am happy I found your column.
    I mention I was a ‘dormant citizen’ and I admit that a few years after the Turkish invasion I lost hope for my country.I stopped reading the newspapers and follow news altogether.I don’t believe I missed much.
    Specially when the frontiers opened up.I completely shut down.

    Unfortunately the historic events of the last days are of outmost importance and a turning point to our history.

    I have worked for 20 years in the tourism and hotel industry(up until 2000), undertaking a heavy personal investment in time and money. What i have to say in addition to the above is that what sabotaged tourism development further in this half island , was the monopole of the today-bankrupt national airline which suffocated the tourist inflow and the collective agreements of the hotel industry.In fact, it was(is) another monopole for labour – at least Cypriot labour at the time. If these rates and the way they are calculated today(I have not seen any recent one), there is no way the hotel industry is making any money no wonder they are all indebted to euro loans.This is just for information. No beds are available in towns like Limassol as all hotel apartments and small (3 star) hotels were transformed into ‘luxury properties’ for foreigners to buy.The fourth problem was (I don t know if it still is) our insistence that the ONLY tourism we wanted for our lovely island is the five star, casino, marina and golf tourism, in general, the rich and very rich only and not the family type or budget tourist.WHY?

    It takes more than Some Ideas to stay or exit the Euro or the Zone.

    I cannot agree more with the ‘structural inefficiencies …should be rooted out” and many parts of your article.
    It takes collective Vision, Strategy, Discipline, Diplomacy(to some extend in order to gain time for plans to mature) and leadership for a new Cyprus to be born.I see people coming out from the shadow and if more come out then we shall be able to do it.It may take a long time it may be for our children but we hold too many information in our hands to let go and let others move us around on the chess board. Since the beginning of our history we have been a geo strategic spot that attracted many invators through the years but we have been able to chase them out sooner or later .
    It takes humbleness, bravery to accept our mistakes, roll up the sleeves an work.I have seen the people of Cyprus ,the simple people, the older ones, being decent while being ‘robbed’ of their savings, future and safety and I was particularly interested in that they all said ‘roll up the sleeves and work’.We CAN rebuilt a country on new , sane foundations and continue to fly the flag of independance.This country has been ‘built’ by the people, by entrepreneurs who invested in ideas, time and personal money, in order to ‘feed’ the state who was managing it all, and it was through controversies and obstacles (if one was not lobbying political parties, to get his job done), that they have achieved what we had until today. I don’t think the motivation can be to rebuilt everything, to repay debts incurred by others.This is no motivation at all. Unless we see a clear message and a vision, a target, I find it difficult for anyone to start all over again.

    • avatar
      Savvakis Savvides on March 30, 2013 - (permalink)

      You raise some interesting points.

      What we need most of all is really a change of mentality and the gradual adoption of a learning culture. Cyprus usually boasts to have one of the highest percentage of graduates. But what they fail to say is that once we finish University we forget the first thing that we should have learned while studying. That learning is a perpetual process, that true education is a way of thinking and a thirst for knowledge. That learning should be pursued for its own sake, not for just getting a piece of paper that we frame and put on a wall or because it enables us to secure a cushy job. The most important exam is continuous and it should be with us every day for the rest of lives. And that comes after graduating from University.

      As a result of a this mentality and the fact that the young do not feel that they can make a real difference, we tend to stereotype everything. We put any ideas in a box or in an over-simplistic frame and label these as good or bad. We very rarely analyse further (or I should say, very few people do). It is in this frame of mind that we had decided (without any thinking really) that we should only be financing 5* or 4* hotels! Competitiveness in tourism is not stereo-typed. That mentality was however adopted by all our politicians not realizing that it has nothing to do with much money you spent on building a hotel but rather how much customer benefits (or value) you generate for one’s targeted clients. We did not even allowed for the possibility of having a good but customized to the needs of its customers 3* be really competitive and economically more important for its owners and the country.

      This sort of mentality is still here with us today, I am afraid. Everything is black and white. One has to be one side or the other, not allowing for the fact the truth is always somewhere in the middle. We need to shake this attitude and open ourselves to new ideas.

  8. avatar
    Neophytos Chiras on March 30, 2013 - (permalink)

    Dear Dr Trigeorgis,
    I have been following this blog for four years now and I find it difficult today to refrain from responding to your article. I refer to your analysis of the problems related to the main Electricity provider in the island (EAC). I assert that your analysis is full of arbitrary suggestions, it serves as misinformation on one of the most important economy-related topics (that of the energy industry) and is a blow to the blogs credibility. Please consider the following:
    1. ‘Cyprus’s semi-governmental agencies, such as the electricity authority, are grossly inefficient operations’. This is probably correct. And we all know that politicians have the main responsibility for this. The question arises, if the private sector can be more efficient in managing EAC. Right now we should be reflecting mostly to how the private sector has managed the organisations that all our citizens are bailing out.
    2. ‘Employees are paid allowances for driving the car to work and enjoy an automatic lunch allowance’. This is grossly misleading. This is only true to a number of employees that work in remote areas and has to do with the nature of the electricity business.
    3. ‘They (the Employees) have enjoyed interest-free loans to send their children to college’. Again another point that is grossly misleading, and contributes to nothing other than social hatred in my opinion. Low interest education loans are given to employees from their pension fund and not from the customer pockets.
    4. ‘As a result, a household pays €300-400 in electricity bills rather than €100’. Here, you are suggesting that the electricity price increases 2-3 times due to the benefits enjoyed by the EAC employees. I wonder where you get these data. 70-80% of EAC’s costs is due to the fuel oil used to generate electrical energy. The prices of Heavy Fuel Oil and Diesel are decided by international markets. Are you suggesting that the EAC payroll that contributes around 10-15% on the electricity bill is the main factor for the expensive electricity bills?.
    5. ‘Not only they charge for electricity 3-4 times more than what should be in a global competitive environment, indirectly taxing the poorest layers of Cyprus society, but they contribute to ensuring that Cyprus’s tourism and other industries remain globally uncompetitive’. I find this offensive, and I refer you to the actions of the EAC after the blast in 2011, and the subsequent support of OEB and their realisation that a private producer of electricity will increase the electricity bills.
    6. ‘Cypriots could simply voluntarily accept a 30% cut on public employee payroll (the private sector will voluntarily adjust)’. I have to inform you here that as an EAC employee I have a 20% salary cut in the last 18 months as almost all public sector employees. Can you tell me the salary cut percentage in the private banking sector during the same period? (Note that the loss of ATA is not a salary cut).
    7. ‘Those prices could come down as effectively as devaluing, and better to do it once by opening up various protected semi-governmental agencies (e.g., the electricity authority, telecom).’ The electricity sector as well as the telecoms sector are open since 2004. No private organisation has been able to compete with EAC since then, not because we are the most efficient organisation. The answer to that can be found by performing a more detail analysis of the electricity market in Cyprus, which I am not going to discuss here. Unfortunately it is evident from your article that you have not performed such an analysis.
    Dear friends, it is unfortunate that our academic community writing in the stockwatch blog has failed so far to provide a useful discussion on the issue of the electricity market in Cyprus. It is evident that misinformation, and other motives (such as certain parts of the population taking the bill in the place of the real culprits) have prevailed.

    Neophytos Chiras holds a PhD and works as an engineer in the Electricity Authority of Cyprus. He is the author of a book on gas turbines and several other publications. The above ‘credentials’ do not imply that he knows everything about the electricity sector in Cyprus, he therefore invites the readers to research the data presented to his reply.

    • avatar
      Γνωστης on April 1, 2013 - (permalink)

      Αγαπητέ κύριε Χοίρα,
      Και εγώ πρωτη φορά γράφω στο μπλογκ αλλά με αναγκασατε. Γιατί είναι καλό να απαντούμε με επιχειρήματα αλλά όχι επιλεκτικα και όχι με τρόπο που να αποφεύγουμε την ουσία.
      Διαφωνώ και εγώ με τη θέση του καθηγητή, ότι κάποιος λογαριασμός 300-400 ευρω θα μπορούσε να ήταν 100 ευρω.
      Εγω σας ρωτώ ευθέως. Υπάρχει κακοδιαχείριση και σπαταλη στην ΑΗΚ? Απολαμβάνει υπερπρονόμια το προσωπικό της ΑΗΚ?
      Στο θέμα σπατάλη θα δώσω δύο παραδείγματα κατανοητά απο τον οποιοδήποτε και που δείχουν ότι είμαι γνώστης καταστάσεων.
      Την Παρασκευή 29/3/3013 μετέβη συνεργείο της αρχής στην οδό Βουλιαγμένης στη Λεμεσό για να κλαδέψει κλαδιά δέντρου, που αν μεγάλωναν και άλλο θα ήταν επικίνδυνα για το δίκτυο. Δεν ήταν πρόβλημα μεγάλου βαθμού ώστε να χρειαστεί διακοπή ρεύματος.Η δουλειά έγινε απο ένα μόνο άτομο. Λεπρομέρεια. Η Αρχη έστειλε γι’αυτή τη δουλειά 3 οχήματα ( το ένα με πλατφόρμα) και τέσσερα άτομα!!
      Αντιλαμβάνεστε ότι τα 3 άτομα απλά παρακολουθούσαν τον εργαζόμενο!
      Δε νομίζω να χρειάζεται η παράθεση αριθμών κυκλοφοριας οχημάτων και ονομάτων.
      Η ΑΗΚ διαθέτει (και πολυ καλά κάνει) στους τεχνίτες της ειδικά μποτάκια ασφαλείας που είναι μονωτικά, και έχουν μέταλλο στο ΄μετωπο’ τους για προστασία του ποδιού απο πτώση βαριών αντικειμένων. Πράγματι είναι εξαιρετικά και πολύ ανθεκτικά. Πρέπει να κοστίζουν πολύ ακριβά. Ξέρετε πόσα ζευγάρια δικαιούται κάθε άτομο? Δύο το χρόνο!! Ξέρετε πόση είναι η μέση διάρκεια ζωής τους? Δύο χρονια για το καθένα. Εγω λέω εντάξει ας τους παραχωρούνται όσα τους χρειάζονται, νοουμένου ότι θα επιστρέφουν τα φθαρμένα.
      Στο θέμα υπερπρονόμια. Είναι λογικο υπάλληλος απόφοιτος λυκείου ή τεχνικής (ή ακόμα και χωρίς απολυτήριο) να αμοίβεται με 50.000+ το χρόνο συν ωφελήματα?
      Σας προκαλώ να μας παρσουσιάσετε α) κατάσταση των μισθών και ΩΦΕΛΗΜΑΤΩΝ (μη ξεχασετε τη διαμονή σε εξοχικα) των υπαλλήλων της Αρχής σε σύγκριση με ανάλογων προσόντω υπαλληλων του ιδιωτικού τομέα. Για τις κατοικίες αν μου απαντήσετε περί ταμείων και συντεχνιών να μου πείτε και πόσα λεφτά συνεισέφερε η ΑΗΚ και β)Σύγκριση με άλλες παρόμοιες επιχειρήσεις τριων άλων χωρών που εσέις θα επιλέξετε που να περιλαμβάνει τα πιο κάτω στοιχεία.
      1) Αριθμό καταναλωτών ανα υπάλληλο.
      2) Αριθμό καταναλωτών ανα μηχανικό
      3) Αριθμό προσωπικου ανα παραγόμενη μονάδα
      4) Αριθμό κατώτερου προσωπικού ανα μηχανικό
      5) Αρθμό μηχανικών ανα παραγόμενη μονάδα.
      6) Απολαβές και ΩΦΕΛΗΜΑΤΑ προσωπικου κτά θέση.

      Περιμένω την απαντηση σας και ανάλογα θα επανέλθω με πολλές άλλες λεπτομέρειες.

      • avatar
        Neophytos Chiras on April 1, 2013 - (permalink)

        Αγαπητέ κύριε Γνώστη,
        Σκοπός μου, ήταν να απαντήσω στην επιλεκτικότητα του αρθρογράφου να στοχοποιήσει την Αρχή Ηλεκτρισμού χρησιμοποιώντας λανθασμένα και κατά την άποψη μου παραπλανητικά στοιχεία. Ως εκ τούτου επικεντρώθηκα στο να αντιπαραβάλω επιλεκτικά επιχειρήματα απαντώντας στα επιχειρήματα του αρθρογράφου. Θα διαφωνήσω με τον ισχυρισμό σας ότι προσπάθησα να αποφύγω την ουσία. Μάλλον δεν επικεντρώθηκα στην δική σας ουσία. Θα προσπαθήσω να το κάνω τώρα.
        1. ‘Υπάρχει κακοδιαχείριση και σπατάλη στην ΑΗΚ?’ Ναι, υπήρχε και μπορεί να υπάρχει. Αυτή είναι η ουσία για εσάς? Για μένα, είναι μόνο ένα μέρος της ουσίας. Η ουσία είναι αν η τυχόν κακοδιαχείριση είναι επιζήμια για τον κοινωνικό ρόλο της ΑΗΚ, και αν ναι, τότε ποιες λύσεις είναι καλύτερες. Για μένα προσωπικά η κακοδιαχείριση και η σπατάλη είναι κατακριτέα. Θα ήθελα να σας υποβάλω όμως, ότι ενώ εσείς παρουσιάζετε ότι η ‘κακοδιαχείριση και η σπατάλη’ είναι αποκλειστικό προνόμιο της ΑΗΚ, εγώ πιστεύω ότι η ‘κακοδιαχείριση και η σπατάλη’ είναι χαρακτηριστικό της Κυπριακής οικονομίας, της δομής του Κυπριακού κράτους και της βαθύτερης (underlying) κουλτούρας.
        2. ‘Απολαμβάνει υπερπρονόμια το προσωπικό της ΑΗΚ?’. Ε τώρα ποιος είναι επιλεκτικός? Αγαπητέ κύριε Γνώστη, η οικονομία μας είναι δυστυχώς γεμάτη στρεβλώσεις. Θα μείνω ως εδώ γιατί δεν θα ήθελα να αναφερθώ ειδικά σε κάποιους. Θα ήθελα μόνο να σας πω ότι κάτι που εσείς θεωρείται υπερπρονόμιο άλλοι θεωρούν δικαίωμα (π.χ ασφάλεια εργασίας). Αν είναι λογικό ‘υπάλληλος απόφοιτος λυκείου ή τεχνικής (ή ακόμα και χωρίς απολυτήριο) να αμοίβεται με 50.000+ το χρόνο συν ωφελήματα’, αυτό νομίζω εξαρτάται από το είδος της εργασίας που επιτελεί. Εγώ προσωπικά ισχυρίζομαι ότι οι κύριοι υπεύθυνοι της χρεοκοπίας μας είναι άνθρωποι με δοκτοράτα και μπόνους εκατομμυρίων.
        3. Με προκαλείται να σας παρουσιάσω ένα σορό στοιχεία. Αγαπητέ κύριε, αυτά τα στοιχεία είναι διαθέσιμα στον καθένα, εφόσον η ΑΗΚ είναι ημικρατικός οργανισμός. Ο καθένας έχει πρόσβαση, σε αντίθεση με τι συμβαίνει σε ιδιωτικές επιχειρήσεις. Νομίζω δεν υπάρχει χώρος εδώ για να παραθέσω όλα αυτά τα στοιχεία, αλλά επειδή εσείς υπονοείτε ότι η σύγκριση των στοιχείων αυτών με άλλες παρόμοιες επιχειρήσεις άλλων χωρών θα αποκαλύψει την ουσία σας όπως εσείς την επιθυμείτε, σας υποβάλλω ότι σε οποιαδήποτε σύγκριση πρέπει να συγκρίνουμε like with like, άρα να λάβουμε υπόψη τα ακόλουθα:
        I. Η Κύπρος είναι απομονωμένο (ηλεκτρικά) νησί. Ώς εκ τούτου βασικοί δείκτες αναφοράς διαφοροποιούνται.
        II. Εξαρτόμαστε από πετρέλαιο. Αυτό μας αναγκάζει να χρησιμοποιούμε τεχνολογίες που διαφοροποιούν τους δείκτες αποδοτικότητας κλπ.
        III. Σας υπενθυμίζω τον κοινωνικό ρόλο της ΑΗΚ. (βλέπε ενέργειες ΑΗΚ μετά το ατύχημα στο Μαρί).

        Αγαπητέ, οι συζητήσεις επί τέτοιων σοβαρών θεμάτων δεν πρέπει να επικεντρώνονται σε αποσπασματικές αναφορές. Και εγώ είμαι ‘γνώστης καταστάσεων’ και γνωρίζω πολύ καλά τι συμβαίνει στο νησί αλλά προσπάθησα να μην κάνω χρήση των γνώσεων αυτών και να προβάλλω επιχειρήματα. Επίσης, θα ήθελα να σας πω ότι εγώ δεν είμαι δημόσιο πρόσωπο, αλλά και ότι δεν είμαι διατεθειμένος να προβώ σε οποιαδήποτε διασυρμό συναδέλφων οι συνανθρώπων μέσα από αυτό το μπλοκ είτε αλλού, και ούτε να παρασυρθώ από την πρόθεσή σας να επανέλθετε ‘με πολλές άλλες λεπτομέρειες’ εάν αυτές είναι αποσπασματικές και στοχοποιούν άλλους εργαζόμενους.

  9. avatar
    Boumboulina on March 30, 2013 - (permalink)

    To add , I would like to stress that I am among the skeptics on the Europe alliance and concept.I was not happy when Cyprus joined, maybe I was the only one and I foresee that in the future it will ‘change’ structure and will dissolve in a way.I read behind lines and apparent motives and yes, when Cyprus unroots all long rotten ideas and undergoes major reforms, should withdraw.Other alliances will be made available when cleaning up is done.We should hurry.

  10. avatar
    Παναγιώτης Σαββίδης on March 31, 2013 - (permalink)

    Ο καθηγητής βάζει την μια πλευρά του επιχειρήματος τους αγνοώντας την άλλη. Π.χ. θα μειωθεί η αγοραστική δύναμη των Κυπρίων σε περίπτωση που πάμε στην Λίρα αλλά δεν αναφέρει ότι θα μειωθούν και τα δάνεια. Τι είναι καλύτερο; Να μειωθεί ο μισθός κατά 30% και να σου μείνει το δάνειο στο 100% αν μείνουμε στο ευρώ; Ειδικά όταν χρωστούμε 54 δις και οι καταθέσεις μας είναι 43 δις.

    Ίσως να υπάρχει αύξηση του κόστους των καυσίμων και φαρμάκων. Αλλά τα αναγκαία είδη είναι το 50% των εισαγωγών μας ενώ το ισοζύγιο πληρωμών μας είναι στο 14% περισσότερες πληρωμές στο εξωτερικό. Όσον αφορά παπούτσια και ρούχα,ο καθένας θα κάνει τις δικές του επιλογές.

    Γιατί ο αρθρογράφος αγνοεί τα 50,000 αδιάθετα διαμερίσματα και σπίτια στην Κύπρο; Η επιστροφή στην Λίρα θα τα καταστήσει ελκυστικά για ξένους και μια τεράστια πηγή εσόδων για το κράτος.

    Είναι αφελής η προσέγγιση ότι έξοδος από το Ευρώ θα βλάψει τις πολιτικές σχέσεις με την ΕΕ. Η συμπεριφορά της ΕΕ είναι που έχει κάνει την ζημιά.

  11. avatar
    Andreas Philaniotis on March 31, 2013 - (permalink)

    Dear Sir,

    This is the most complete, concise and brilliant article I have read the last 2 weeks. An article full of excellent arguments, and ideas.
    I really hope your views and suggestions have been forwarded to those that take decisions and lead this country.
    I consider it essential that you put yourself forward to join the “economic forum” lead by Mr. Pissarides.
    Cyprus urgently needs people like you to assist getting us out of this mess

  12. avatar
    Politis on April 1, 2013 - (permalink)

    Εσύ καλα την εχεις κύριε επιστήμονα καθηγητή.
    Ρώτα και τον κόσμο που έχει καταστραφεί και δεν έχει να φάει.

  13. avatar
    Επιλήσμων on April 1, 2013 - (permalink)

    Many Europeans, especially the Germans, Austrians and Finnish, accuse us (the Greek Cypriots) of systematic overspending, and living a life-style beyond our means,- on borrowed/fictitious money-.
    I say that in many respects this is true. It is bad economics and of course cannot be sustained over a long period.

    Suddenly the working class in Cyprus almost but disappear.They became (or behaved as if they were) middle class. Middle class became Upper middle class and even High class! (Class distinction according to english terminology).
    This is one reason dear Dr Trigeorgis, why the taxi driver charges you 50 or even 60 euro to take you to Larnaca airport.
    But we should not single out Taxi drivers. The problem is widespread, from Civil Service/Gov.employees, State owned Organisations (EAC, CYTA, etc), most Bank employees ( and those with reasonable salary there is still the problem of low productivity, with short and unsuitable working hours for serving the public and business sector and I blame the myopic behaviour and psychology of their Trade Union), Hotel employees – again with problematic Trade Union, etc.
    As a result, we have driven ourselves in a state of uncompetitiveness that is beyond reason.
    What is needed is a new “Social Contract”.
    I do not propose a return to slavery BUT a return to reason. Μέτρον άριστον.

    I have read the comment of Mr Neophytos Chiras, and what I say to him is the same that I have written to another of my comments a few days ago:
    “Neatly argued and almost convincing. Don’t you wish, Dr Chiras, that you could believe it?”
    The figures, as given by Dr Chiras, are possibly correct, but the underlying truth is missing.

    To-day I want to argue and bring to your attention the fact that in our case the damage was not only economic but because wealth and spending power was so sudden for most individuals, it brought out their worst nature, destroying and damaging the norms and culture of our nation. “The cost of things which really interest human beings has nothing to do whatever with their quality. A pleasant woman costs no more than an unpleasant one, in fact, she probably costs infinitely less. It costs no more to cook a dinner well than to cook it badly” – E.Pound.

    What bothers most is not that we have spent all those billion euros, but we have wasted them and we have nothing of real value and quality to show.
    In 5th BC century Athens, they spent a huge amount of their GDP in building the Parthenon and Acropolis in general, the gold and ivory statue of Olympian Zeus and Goddess Athens and a lot more.
    Laiki Bank has constructed a huge glass structure in front of its headquarters. Both (structure and building) suitable for immediate demolition. Bank of Cyprus has nothing worth mentioning. Our Republic and local councils, the same.

    Let us consider the following poem by Constantinos Cavafy, inspired by Apollonius of Tyanea.

    APOLLONIUS OF TYANA AT RHODES

    Apollonius was talking about proper
    education and upbringing with a young man who was building a large luxury
    house in Rhodes. “As for me” said Apollonius at last, “when I enter a temple, however small it may be, I very much prefer to see a statue of ivory and gold
    than find in a large temple
    a vulgar statue of common clay.

    The “common clay” and “vulgar”, the detestable:
    yet some people (who have not adequate training)
    are taken in by what’s bogus. The common clay and vulgar.

    Το αποδίδω και στο πρωτότυπο διότι πιστεύω όσο καλή και εάν είναι η μετάφραση, είναι όπως ένα χαλί που το βλέπεις από την κάτω όψη.

    ΑΠΟΛΛΩΝΙΟΣ Ο ΤΥΑΝΕΥΣ ΕΝ ΡΟΔΩ

    Γιά την αρμόζουσα παίδευσι κι αγωγή
    ο Απολλώνιος ομιλούσε μ’ έναν
    νέον που έκτιζε πολυτελή
    οικίαν εν Ρόδω. “Εγώ δε ες ιερόν”
    είπεν ο Τυανεύς στο τέλος “παρελθών
    πολλώ αν ήδιον εν αυτώ μικρώ
    όντι άγαλμα ελέφαντος τε και χρυσού
    ίδοιμι ή εν μεγάλω κεραμεούν και φαύλον.”

    Το “κεραμεούν” και “φαύλον”, το σιχαμερό:
    που κιόλας μερικούς (χωρίς προπόνησι αρκετή)
    αγυρτικώς εξαπατά. Το κεραμεούν και φαύλον.

    Κ.Π.Καβάφης [1925]

    • avatar
      Neophytos Chiras on April 1, 2013 - (permalink)

      Dear Επιλήσμων,

      What is the underlying truth? Although, I agree with most of your writings, (except from your assertion that the Trade Unions are the main culprits, which I think is completely wrong), I believe that there must be a number of underlying truths (to complete and not compete to one another). I want to believe that my assertions in my reply to Mr Trigeorgis article, attempt to highlight one of the required underlying truths.
      On a different note, I want take the chance and include in this reply, my congratulations to your very insightful contribution to these blogs.

      • avatar
        Επιλήσμων on April 2, 2013 - (permalink)

        Dear Dr Chiras,

        I am sorry if I gave the impression that Trade Unions are the main or sole culprits. I believe it is a synergy of many independent as well as interconected factors that have led Cyprus and our society to this state of affairs and dead end.
        I do believe, however, that Trade Unions have been protagonists (together with others) in this affair, and responsible for the result.
        If I am asked which others, I would say the Political Parties, the Parliament, all our ex-Presidents of the Republic, and last but not least our own mentality, as has been cultivated after 1960 until to-day.
        A spark of hope that was born after the Turkish invasion of 1974, was unfortunately quickly extinguished.
        I wish and hope that to-day’s events and economic upheaval will act as an alarm-clock to the society as a whole.

        I am indebted for your good words.

  14. avatar
    Ashamed on April 1, 2013 - (permalink)

    Since this blog has attracted some criticism for the electricity authority of Cyprus (ECA), I wanted to mention that ECA transferred 19.3 mln abroad a few days before euro groups decision. Check the lists announced today. If am wrong please do let me know.

    No further comment on the benefits that we may have from troika. We are “sick” in Cyprus and we need a doctor with a sharp knife.

    Perhaps a kind reminder to stay focus on the mail question: should we stay or should we go.

    • avatar
      ΓιάννηςΠ on April 1, 2013 - (permalink)

      Δεν θέλω να παραστήσω το δικηγόρο της ΑΗΚ, αλλά δεν θα παραξενευτώ αν αυτή η μεταφορά αφορούσε την πληρωμή καυσίμων.

  15. avatar
    Anonymous on April 1, 2013 - (permalink)

    Very interesting article. In my opinion you should analyze how economy will be affected by the troica’s measures and then compare the two scenarios.

    The best scenario would be the one the will drive us in the recovery sooner.

    As regards as the EU – Cyprus relationship, it has been already affected. There is no solicidarity and we do not trust EU.

  16. avatar
    Christine on April 1, 2013 - (permalink)

    Based on the above article and comments I would like to add some of my thoughts too.

    1) This article is not a bible. It contains some of the thoughts of the writer and could be a tool for discussion the possible prons and cons of exiting Euro.

    2) It contains though some logical arguments about some of the problems Cyprus faces. Further analysis for each one is needed (e.g. for EAC which he was I guess too harsh on them, even though their employees are well paid and not productive.)

    3) No one ever left Euro. There is no presedence to that. So if Cy decides eventually to leave, all possible prons and cons should be examined, evaluated and possible preparations to take place. I don’t know about internal loans/deposits, I guess they will be translated into Cy pounds, and as the income of Cypriots will also be in Cyprus pounds, there is no benefit to that. Unless money are deposited outside Cyprus or to other currencies or the deposits/loans will not be translated at all. Who knows. But Government’s loans will still be in euros. So could be more difficult to repay them.

    4) Potential relations with Euro-countries should also be considered. After all we joined EU to help us with the Cypriot issue. If we defy them, then we should expect an even less support (not that they are doing a good job so far).

    What is more important is that educated people come and put down their ideas, suggestions, thoughts etc. All these should be considered. Together wtih the academics, business men should also participate. Sometimes theory and practice does not work the same time, so we need the combination of both to predict more accurate potential results of any action.

    It is the duty of the Government to gather all these opinions and carry out a big think-tank procedure in order to put down all possible consequences of any decision and explore all possible alternatives.

    No-one knows what will happen in the future. No-one should gample with our future. When others take a whole bunch of experts with them, our politicians take their wifes for leisure. We need to act for once in our lives, with due care and after we do our homework.

  17. avatar
    An opposite view on April 2, 2013 - (permalink)

    Economically, staying in the eurozone or not is a question between choosing some more short term suffering of Cyprus and Cypriot people for better mid term and long term future for all of us and in both cases some kind of disaster is inevitable, so if we stay in the eurozone we are denying the inevitable. Which is both collapse of those banks but also of eurozone collapse but not by Cyprus, in which case it might happen at a time with perharps 40% unemployment and very high GDP to debt levels.

    I also think that pointing on the structural inefficiencies of the Cypriot economy is kind of fallacious arguement because the eurozone, troika solutions create more structural and other inefficiencies or are highly inefficient organisations themselves. They are not providing economically literate solutions, if Cypriots governing cypriot economy are bad, these people are even worse in both motives, logic, and results.

    Let’s mention a series of examples.

    1) Monetary pollicy.

    The euro currency creates harsher boom bust crises, and reduces the monetary tools at handling their effects or liguidity traps without even combination pollicies like monetary, financial combinations like some financial austerity and looser monetary pollicy to mention one example. You can’t print money either. It is a system that is all about the ECB aka German controlled european central bank which does not have the interests of the cypriot economy at heart.

    2) Financial pollicy of the eurozone and troika.

    Big fish eat the small fish and economical illiteracy.

    Haircut of greek bonds gurunteed by eurozone authorities are extra safe prior to that, and then there is the troika measures. The complete disaster of a bail in that will destroy our economy in so many ways. A) Bank runs (slower or faster it is happening) B) Capital controls C) a lot of money has just disappeared from Cypriot economy causing companies to close D) and even from the remaining money in bank IIRC depositors are compelled to pay their debt further limiting available money for any transactions. E) This gives enormous incentive to immigrate to a country ruled by sane people and deposit your money in those banks and will cause a brain drain.

    Then there are the general tax increases. These are going to harm our economy with no benefit whatsoever. Especially the po

    Now, I do believe in some austerity having beneficial effects although more on cutting spending side. Raising taxes during a recession, and after asking some spending cuts keep asking spending cuts and tax incrases is just terrible pollicy that will have inevitable result of more unemployment, more debt, brain and money drain from the economy. BTW in the case of spending cuts there is the issue of wasteful spending but still during a recession it can have an adverse effect and more of an issue for the long term. Well cutting too much spending can also be bad on the long term. This comes from a suporter of downsizing our public sector in wages and even in size at even good times, and with of course less wage increases too.

    Some austerity might make some sense, especially at certain times, constant austerity is really bad financial pollicy that will result in continually shrinking economy. Desptite this being clearly bad pollicy we know enough to expect ahead of us are more measures that bleed the economy more and more each few months when asked to take our next loan package. The result would be more unemployment, debt, less income, more expenses, and less competiveness in a shrinking economy facing a lot of problems of shrinking demand although the measures hitted towards the supply part of the equation too.

    But now I will mention certain specific tax rates, the above was about other tax increases and spending cuts that are going to be harmful in the ways I described. That’s it the corporation tax rate.

    Again there is no reason to expect the certain perceived limits to a bad unreasonable pollicy. They could ask perceiving a worsening of the economy worse than when they originally suggested it an even higher tax increase from 10% to 12%. This tax will make our economy much less competive and strike another lethal blow towards Cypriot employees, acountants and lawyers and others who will also be affected by the worsening of the situation of this sector of our economy.

    And before putting our hopes on tourism and the hotel sector let us be reminded that Hotels will sink under debt, an economy that is suffering in many ways and a new tax rate that will happen. Troika might not do something immediately but it never forgets or relents, the proposed tax rate that was not voted for our parliament I expect to be something that will come up. Other tax rates increases are going to also badly affect our economy.

    The tax rate increases, spending reductions and uncertainty over even higher economically illiterate austerity will drive out foreign companies which drop of demand makes cyprus less competive and the result is more unemployment, even more drop of demand, more unemployment expenses for the state and less income for the state. Which killing the private economy engine is counterproductive.

    3) Faster ‘devaluation’ by financial pollicy in the eurozone is extremely unrealistic. I have to respectfully disagree with the view that a decision will come out cutting wages of public sector and that is all and that will happen swiftly. That is now how it happened elsewhere and how it will happen. It will be a long process with new measures coming each few months. Of course promises from politicians are not to be believed although it is true that more politically protected groups like public employees are going to have it better than the private sector.

    The structural inefficiencies of our economy are less severe than the pollicies supported by troika, eurozone creditor members. We should follow an Argentina path which is going to be harmful but there is only a choice between lesser evils here and nothing else.

    As for why there is such an economical illiteracy with the measures proposed, I wager that it is more of political goals and different economic interests over genuine interest of how a country’s economy would do the best. The conclusion that the measures are economically illiterate does not really change. More limited and more on cutting spending side austerity would had been more wise.

    If one worries about the structural inefficiency of too highly paid public workers, which I agree with, then we can’t turn a blind eye on the enormous number of money land economic activity that will be lost and enormous suffering too out of inefficient pollicies that we Cypriots would never have chosen ourselves.

    To not give the impression that I paint Cypriots as saints lets just say that Cypriot politicians are sub par at managing Cyprus and european politicians and IMF combination are so terrible at it, that is quite astounding.

    In our world democratic nation states rule themselves better than foreign powers with no solidarity towards them do, and that has to do more with interests and unwillingness to help and provide the best future for your ‘colony’ or protectorate.

    4) There is the issue of laws and democracy compromised in our country which is also an incentive for less investment and migration outside and radicalization of our society. Look at Greece and the rise of golden dawn for example.

    Now unlike Greece, I like Cypriot society more, I think we are generally less economically radical and believing in more correct pollicies. I don’t want this society harmed and the rise of viewpoints that will give much worse inefficiencies that what already here.

    Now, whatever happens with what we do, I consider eurozone a goner as the other countries in the death spiral will have one of them eventually having its people so fed up that we will be getting a leadership in that country that will have it leave the eurozone. I am thinking Italy as most likely.

    You might disagree with me or think I am completly wrong but if you don’t agree with any of the above at least listen to one recommendation of me. Please read Bernard Connolly’s book The rotten heart of europe, the dirty war for europe’s money. Written in 1996 and describing ERM (european exchange rate mechanism), the road to european monetary union, and european politics that were back then also dirty and all about national interests. It had amazingly predicted what followed with astounding precision. How a small nation like Cyprus should follow pollicy to adapt to the dirty world of eurozone and powerful countries that comprise of it, might be up to debate, the dirtyness of the eurozone however is more of something that is a fact and less up to debate. Confronting the opposite viewpoint is never hurtful so again I ask that people that disagree with the euroskepticist viewpoint in regards to the european monetary or fiscal union as it has historically happened and its consequences to read that book.

    In regards to the much advertised fiscal and political union future, to have a succesful european state you need a european nation. Else you will have a common authority that acts on behalf of non common interests but the interests of say the biggest power block.

  18. avatar
    Nick on April 2, 2013 - (permalink)

    Miracles don’t just happen. Moving to Cy pound will not be the magical solution that will instantly solve the economic problem. I wish it was as easy as that.

    Cyprus has been economically cornered and any solution will be painful. Staying in the Eurozone and trying to recover will be painful. Getting out of the euro and trying to recover will also be painful. The question therefore is not the over-simplified ‘stay in or go out’. The real question is can we restructure the economy to become competitive again?

    Trying to improve competitiveness at a time of high unemployment and recession sounds like anathema to many people. It means more suffering. But there is no escaping it. We opted to over borrow and reduce our competitiveness over time. now it’s time to do the right thing. We need to walk the competitiveness road and we will have to suffer as a result. All of us. Those who were to blame for where we are today and those who were innocent victims.

    An excellent article, perhaps a little carried away on the cost of electricity but all points very valid and the road ahead clearly mapped out. We can either start the journey or sit back and find excuses why we shouldn’t, our favourite pastime.

  19. avatar
    Nick on April 2, 2013 - (permalink)

    On the other popular pastime of the day, the list of who took money out of the country. The haircut discussion was going on for weeks prior to Eurogroup meeting. We were being told we would be allowed to borrow only €10bn and needed to find the rest from ‘other sources’. Otherwise our debt would rise above an unsustainable 120%.

    So perhaps some people decided this meant a haircut and moved funds abroad. They did not believe the Government which insisted (and I think believed it) that no haircut would be imposed. What’s so wrong with that? I did not think a haircut was on the cards. On hindsight, I was naive. It was obvious. Go back and read the papers of early March and you will understand.

    2 points: First, there was no ‘inside information’, it was there for all of us to see. Second, let’s drop this unnecessary and irrelevant discussion and focus on the real issue at hand, to start the slow and painful process of recovery.

  20. avatar
    Kyriacos Englezou on April 2, 2013 - (permalink)

    Under the guise and fallacy of a single European currency, a political consolidation of power in the hands of unelected psychopaths has been propagated during the past few years. Who in my view, do not, I repeat, do not serve the interests of the peoples of Europe, Germans included. The European Commission, Eurogroup and what have yous are mere puppets in the hands of shady centres of power. Bankers, who have been intelligently coined ¨Banksters¨, are the first in the list of manipulators.

    I have yet to see a holder of a PhD in anything mention, let alone question, the proprietary status of most Central Banks in the world. Including of course the ECB. Privately owned, privately run and most certainly beholden to no audit by anyone, ever. Institutions which should, by definition, belong to the people and work for the people, facilitating true economic growth, have been turned
    into financial warfare hubs. Turning money into a weapon of mass destruction. Also, through all the other financial market tools and instruments that have been developed to serve the casino, bubble ¨economy¨.

    What is money but a facilitator of transactions of any kind, to which we, the people, attribute value by our trust and readiness to accept is as a means of financial settlements.

    I think it is time to return to basics. To return to the natural order of things. Because nature itself, if you like, does not and will not accept indefinitely the imbalances that derive from the injustice and criminality of such state of affairs as described above. The way forward, is the just way, the principled way. I know it sounds too philosophical, but excuse me, that´s the way it is. That is what our humanity demands, yearns and aspires to, knowingly or unknowingly.

    As a matter of principle, sovereignty should reside with the state, not with some riff raff based in Bruxells or anywhere else. May I remind you that the three main pillars of sovereignty are the right to coin money, the right
    to tax and the right to declare war. Reclaiming those is the dignified way. It´s the natural way.

    I think it should be obvious to all by now where things are going in Cyprus. Not without the treasonous collaboration of people in positions of power here in our country. Troika, with its so called technocrats, to whom no sane true businessman would give a job even if his life depended on it, are already trumbling all over behaving like little kids in kindergarten. They have their agenda. They should be happy.

    But this is a STATE! It´s not a company called Fuckidoll Ltd! Get it!

    • avatar
      ARGYRIA on April 2, 2013 - (permalink)

      THANK YOU!!!!!!!!!!!! WELL SAID!!!!!!!!

  21. avatar
    Stelios Stylianakis on April 2, 2013 - (permalink)

    Great analysis. Must be forwarded to president Anastasiades. The Professor is so right on everything he says. People like him should have been leading the Ministry of Finance, not people like Georgiades. Just read the respective CVs…

  22. avatar
    Michael Pillos on April 2, 2013 - (permalink)

    Finally a concrete and substantiated voice of wisdom regarding the foolish and unpatriotic notion of “returning” to the illusion of Pound!

    Thank you Lenos!!

    • avatar
      Anonymous on April 3, 2013 - (permalink)

      What lenos hasnt argued is the illusion of economic growth with in the EU . Somebody please tell us how we can get out of this mess using the euro.

  23. avatar
    ARGYRIA on April 2, 2013 - (permalink)

    Paul Krugman: The IMF on the Austerity Trap
    Posted on March 11, 2013
    http://mgptpt.wordpress.com/2013/03/11/paul-krugman-the-imf-on-the-austerity-trap/

    The IMF has just released a new paper on austerity that is kind of heavy going (unnecessarily, I think), but ends up making a simple but important point.

    Suppose that a government imposes fiscal austerity in a realistic fashion, with spending cuts getting steadily deeper relative to baseline over a period of several years. If the negative impact of these cuts is fairly large — which all the evidence coming in suggests is the case under current liquidity-trap conditions — and if the country starts from a fairly high level of debt — as the austerity countries do — something alarming is likely to happen. Instead of falling, the ratio of debt to GDP is likely to rise for years.

    In part this is because a weaker economy shrinks revenues, offsetting a large part of the direct austerity. What pushes it over the top is the weakening of GDP, which increases the ratio.

    I ran my own version of their simulations for a hypothetical country — call it Osbornia — which starts with debt at 100 percent of GDP and a budget deficit that would, left to itself, be consistent with a stable debt ratio thanks to 2 percent growth and 2 percent inflation. On this economy I impose 5 years of tightening at the rate of 1 percent of potential GDP each year, with a multiplier of 1.3 (which is about where recent estimates have been converging). Output ends up 6.5 percent below the baseline; debt looks like this:

    Why does this matter? As the paper says,

    Although this effect is not long-lasting and debt eventually declines, it could be an issue if financial markets focus on the short-term behavior of the debt ratio, or if country authorities engage in repeated rounds of tightening in an effort to get the debt ratio to converge to the official target.

    (My emphasis).

    And, of course, this destructive behavior is especially likely if said country authorities are firm believers in the notion that austerity does not depress output; they’ll see the weak performance either as “structural” or as showing the need for more confidence. Either way, they’ll see it as a reason to tighten even more.

    Sound like anyone you know?

  24. avatar
    Σάββας Τταντής on April 2, 2013 - (permalink)

    Είχα προειδοποιήσει να μήν έρθουν στην Κύπρο ξένοι οικοι αξιολόγησης. Εγινε ακριβώς αυτο που φοβόμουνα, φέραμε την Πιμκο. . Ο δοιηκητής ξεροκέφαλος. Ακαδημαικός. Κύριε Δημητριάδη τα έκανες θάλασσα. Διαφωνήσαμε για την ιδέα καλης/κακής τράπεζας. Εσύ το διάβασες σε ένα βιβλιο, το έβαλες εδώ στο stockwatch πριν γίνεις διοικητής και το εφάρμοσες μολις ΄εγινες δοιηκητης. Τώρα μαξεψε τα συντρίμια. Κατάστρεψες μια οικονομία. Μάζευε τους άνεργους και τις επειχηρήσεις που θα κλείσεις. Νομισες οτι η πραγματική οικονομία είναι θεωριες που διδάσκεις σε 19 χρονους. Διάλυσες συστημική τράπεζα. Κατάστρεψες χιλιάδες μετοχους τραπεζών, κατάστρεψες χιλιάδες καταθέτες και επειχηρήσεις και τώρα τρέχεις να ισοζυγίσεις τον ισολογισμό της Κύπρου (εσύ ξέρεις-δέν μπορώ να γράψω άλλα) με διάφορες παρανομίες και τεχνάσματα.

    Θα βάλεις την Κύπρο σε νομικές περιπέτειες. Νομισες οτι οι δικηγόροι και τα δικαστήρια θα ανεκτούν τις παρανομίες σου??

    Που ξαναείδες γραμμένο μια μετοχή να δικαιούται και Τοκο και μέρισμα?? που ξαναείδες να μπαίνει εκκαθαριστής σε εταιρεία που δέν πτώχευσε και να πιάνουν άλλοι την περιουσία των αρχικών μετόχων??

    τι είναι όλες αυτές οι παρανομίες? που οδηγάς τις τράπεζες ? που οδηγας το κράτος οταν θα βγαίνουν διατάγματα απζημιώσεων για μετόχους και καταθέτες,? Που θα βρούμε λεφτά να τα πληρώσουμε ολα αυτά??

    Βάλαμε ένα διοικητή ακαδημαικό και άπειρο. Η καταστροφή που ερχεται είναι μεγάλη. 2 Χρόνια προειδοποιούσα και ΄΄εγραφα για αυτην την κρίση. Ο δοιηκητής είναι μόνον πειράματα. Ο θεος να μας λυπηθεί , παίζουν με την φωτία η οποία θα κάψει την οικονομία μας, 1 άπειρος διοικητής και 3 άπειροι τεχνοκράτες της Τροικας.

    Κύριοι Stockwatch. Το πιό πάνω είναι πολύ σοβαρά και παρακαλώ οπως τα δημοσιευσετε . Τα έγραψα επώνυμα και η ευθύνη είναι δική μου. Η Κύπρος βρίσκεται σε μεγάλο κίνδυνο . Πιθανόν να υπάρξει ατύχημα……

    Πέμπτη, 17 Μαΐου 2012

    Η Blackrock να μήν έρθει στην Κύπρο
    Αναφέρθηκε απο πολλούς οτι η Πλακροκ , πρέπει να έρθει και στην Κύπρο να ελέγξει τις Κυπριακές τράπεζες. Αυτό δεν πρέπει να γίνει αυτήν την περίοδο ουτε και στο σύντομο μέλλον. Εάν Η Πλακροκ ελεγξει τις Κυπριακές τράπεζες τόσο στην Κύπρο όσο και στην Ελλάδα είναι πολύ πιθανόν να εισηγηθεί και άλλες αυξήσεις κεφαλαίων. Μια τέτοια εξέλιξη θα είναι οτι χειρότερο για μια οικονομία η οποία είναι ίδη σε ύφεση. Οι τράπεζες θα έχουν πρόβλημα στο να αντλήσουν και άλλα κεφάλαια και θα αναγκαστεί το κράτος να τις στηρίξει(και πάλι). Το Κυπριακό κράτος βρίσκετε εκτός αγορών , έχει τα δικά του σοβαρά προβλήματα. Σύντομα το κράτος πρέπει να στηρίξει την Λαική τράπεζα. Το δημόσιο χρέος σε σχέση με το ΑΕΠ θα πλησιάσει το 80% . Μεγαλύτερο χρέος για το κράτος ισοδυναμεί με περισσότερους πληρωτέους φόρους, ένας φαυλος κύκλος για το ίδιο το κράτος απο τον οποίο δύσκολα βγεί……

    Σάββας Τταντής

  25. avatar
    Επιλήσμων on April 3, 2013 - (permalink)

    Εκτός θέματος, αλλά κάπως επίκαιρο.

    Μερικές ώρες πριν τον διορισμό του κ.Μιχάλη Σαρρή στο Υπουργείο Οικονομικών, έγραψα εδώ στο blog τους λόγους διά τους οποίους θα ήταν λάθος εκ μέρους του Προέδρου Αναστασιάδη να τον διορίσει ως Υπ.Οικ. Ένας από τους λόγους που ανάφερα ήταν και το γεγονός ότι διετέλεσε Πρόεδρος της Λαϊκής κατά την επίμαχον περίοδο. Πρότεινα μάλιστα, να αναβάλει τον διορισμό του κ.Σαρρή γιά περίοδο 12 μηνών και στη θέση του να διορίσει, προσωρινά, κάποιον άλλον, πχ είπα, τον κ.Πισσαρίδη ή τον καθηγητή κ.Ζένιον. Μετά μπορούσε εάν το επιθυμούσε να διορίσει τον κ.Σαρρή.
    Τώρα τι έγινε? Εξαναγκάσθη ο κ.Σαρρής να υποβάλει παραίτηση.
    Ο κ.Μιχάλης Σαρρής σίγουρα δεν είναι τυχαίο πρόσωπο και πιστεύω δεν άξιζε τέτοιου χειρισμού.

    Σήμερα, σε λίγες ώρες, ο Πρόεδρος Αναστασιάδης θα διορίσει Υπ.Οικ. τον κ.Χάρη Γεωργιάδη. Ένα καταξιωμένο ρήτορα και στέλεχος του ΔΗΣΥ.
    Δυστυχώς όμως, κατά την δική μου κρίση, πάλιν ακατάλληλο άτομο διά το “πόστο” του Υπ.Οικονομικών.
    Υπό τις παρούσες περιστάσεις ο Υπ.Οικ. της Κύπρου πρέπει να διαθέτει πάρα πολλά προσόντα και ιδιαίτερες αρετές.
    Παρά τα πολλά προσόντα που σίγουρα διαθέτει ο κ.Χάρης Γεωργιάδης, θα αποδειχθεί στο εγγύς μέλλον ότι στερείται τις αναγκαίες αρετές γιά την συγκεκριμένη θέση.
    Δεν αναμένω όμως να έχει την τύχη του κ.Σαρρή, καθ’ ότι τα θεμέλια του κ.Γεωργιάδη είναι βαθειά και γερά στερεωμένα, ικανά να αντέξουν μεγάλους κραδασμούς – (ας πούμεν μεχρι και 9 Ρίχτερ).

    Γιά την νέα υπουργό Εργασίας κα Ζέτα Αιμιλιανίδου, εάν είμουν νεώτερος πιθανό να έλεγα (ή να αναφωνούσα) “ου νέμεσις” (όπως οι Τρώες όταν πρωτοαντίκρυσαν την Ωραία Ελένη). Της εύχομαι καλή επιτυχία στα νέα της καθήκοντα τα οποία είμαι σίγουρος θα επιτελέσει στο ακέραιον.

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