Will international creditors say yes again to Greece after today’s meeting in Brussels?
Part of the deal involves selling or leasing whatever the Greek government owns. The proceeds reduce the debt and meanwhile, by building roads and business parks, resuscitating ports and recapitalizing banks, foreign investors pour money into the country.
It has not been quite that easy, though.
A closer look at government-owned beaches that were for sale revealed squatter communities composed of thousands of undocumented houses. In addition, because Greek property registries are woefully inaccurate, land transfers everywhere have been problematic. (If you can’t prove you own the land, then no one will buy it from you.)
The ports? Greek citizens are worried about prime assets being transferred to foreign ownership or worse, to Greek oligarches awaiting a fire sale. In addition, no one appears to be quite sure how much ownership the government should retain. And even if the Greek parliament settles all of that, foreign banks hestitate to finance Greek deals and the Greek banks need recapitalization.
All of these privatization complications made me wonder how many deals could be involved so I went through a month of articles at eKathimerini.com and came up with this random list of government-owned properties that could be partially or entirely sold or leased. They represent only a small proportion of the hundred of deals that might transpire but do provide a picture of the massive task facing the Greek government.
Public Power Corporation
Gaming company, OPAP
State lottery licenses
Public Gas Corporation
Gas transmission operators
Elliniko International Airport
Athens Water Company
Assorted Port Authorities
Buildings that house state agencies
Thessaloniki Water Company
Larco, Europe’s largest ferronickel producer
Finally, where will the money go? Satisfying the bailout “troika,” the IMF, the European Central bank, and the European Commission, the Greek Parliament has issued “decrees” that direct the money to an escrow fund dedicated to paying the Greek debt.
Sources and Resources: I recommend these NY Times articles, here and here, for interesting stories while a Greek perspective is at eKathimerini.
Finally, the following Merle Hazard “Greek Debt Song” is always fun to watch.
For a smile, you might want to watch Merle Hazard’s “Double Dippin’” song. As the Guardian points out, also look for the fun trivia such as a small background picture of mathematician Benoit Mandelbrot.
No one was smiling, though in response to the 1.6% GDP revised growth rate for the second quarter. Thinking of future economic growth, economist Ed Yardeni, suggests three possibilities in a recent newsletter.
1) The contrarian view says the economy will boom. To generate a 3% growth rate, we would need more housing refinancing that would put money in consumer’s pockets and elevate consumer spending. Also, lower mortgage rates coud lead to more housing sales. Add to this solid corporate profits and higher real pay per worker because of productivity gain and you have a robust recovery. Most say the chances of a robust recovery are slim.
2) More and more people are concerned about a bust which takes us to the double dip scenario. The second dip would be caused by unimproved unemployment and plummeting consumer spending.
3) Muddling with ups and downs in different sectors is the third and most likely alternative. Muddling would be characterized by some employment gains, some housng improvement, some consumer spending.
A (trick) question: If the growth rate has moved from 3.7% down to 1.6% between the first and second quarter of 2010, then has the economy contracted? The answer: No. The economy continues to grow but at a slower rate.
The Economic Lesson
Let’s think of a double dip as a “W”. The U.S. has experienced 2 double dips during the past 80 years. Looking between 1930 and 1940, economic activity contracted 1930-1933, expanded 1934-1937, dipped in 1938, and then steadily grew. A much faster double dip happened between 1980 and 1982. 1980/down; 1981/up; 1982/ down.
From assorted sources, I share the following:
1. Poetry on the housing crisis from Karl Case (the Case in Case-Shiller Home Price Index)
Fannie and Fred were always ahead,
Then Countrywide got in the fray.
Then Lehman and Merrill and Goldman Sachs
Couldn’t be kept away.
You can guess that MBS
Helped make the trading brisk.
Investors thought that the paper they bought
Was traunched with well-measured risk.
To that, add leverage and default swaps,
2. From Yoram Bauman (an economist/comedian), some economic humor: