Given the opportunity derived from the article posted by Mr. Provopoulos, Governor of the Bank of Greece to Financial Times this evening, i had the wish to reply.
My prediction is that the near future will reveal that the views expressed by the governor of the Bank of Greece are unrealistic. Primarily for two simple reasons that are not at all discussed by Mr. Provopoulos.
First, the Government that is implementing the reforms, for a respectable proportion of the Greek public, is perceived as non-legitimate, non-democratically elected and thus non-socially acceptable. Although they have an enormous parliamentarian majority, the ability to make an effective policy change and reform the economy primarily depends upon the perception of how legitimacy the government is. In the Greek current case perhaps the government lacks of that dynamic. Hence, any policy change that is proposed and enacted will fall into the umbrella of the authoritarian decision-making hence will gradually increase the existing tension which will in the end lead to social unrest (at a level that the past will seem idealistic and peaceful compared to what will occur)
Second reason why the government’s attempt to reform and restructure the economy is condemned to a massive failure concerns the issue of the disbelief and uncertainty derived from both domestic entities and foreign institutions and officials on whether the Greek economy can be viable by remaining in the Eurozone. Foreign agents ranging from public officials in the EU, IMF and ECB tend to offer opinions and statements that contradict, thus leading to an increase of the economic uncertainty. That disbelief of the success of the Austerity programme that is currently applied together with alternative scenarios that indicate Greece will not remain in the euro for very long destroy any positive attempt (if such exists) towards the increase of investments and expansion of the economic participation of the private sector. Assuming that today a private agent in Greece or abroad is interested in investing in a project and possesses the required capital to do so, the climate of uncertainty for the currency drives her to a delay and continuous postponement of the investing process. This delay is extremely rational given the enormous devaluation that will occur to a hypothesized new currency. An investor who decides to invest today in that unstable Greek environment is willing to take massive risks due to the immediate losses that will incur from a change in the currency and the devaluation that will follow as a consequence. Thus the potential investor chooses rationally to delay until the environment settles (and there is a political and economic guarantee what the currency will be in the medium-run).
Due to these two reasons my projection and economic forecast differs completely from that of the Governor of the Bank of Greece. I tend to believe that the push for reform and economic restructure will continue to expand while the response on behalf of the society and the private agents will continue to be defensive and negative. As the indicators will be on deficit from the expected ones further pushing for reforms will be required, by a perceived as non-legitimate government which will lead gradually to the perception of an aggressive strategy by the government and the aggression at some point will destroy the remains of the social cohesion within the Greek public with severe and perhaps threatening consequences. The existing economic strategy is condemned to failure due to the public opposition.
Stable Link for the Original Article by Mr. Provopoulos: http://clippings.ft.com/listnavigator/mwgs/1781471
For the past few weeks I have been trying to digitize some data from scanned pdf files. They are part of the monthly statistical bulletins that the Greek statistical agency recently provides online (access the digital library here). To become more specific, i am interested in about 10 variables on social benefits to analyse potential political economic cycles. I am using the monthly bulletins so as to capture any monthly (hence really short-term) variation discover any politically influenced changes before an election. However, a major issue with Greek data is that even when using elementary variables such as CPI it is difficult to find the data digitized and already available to the user in a file that a data processor can use, e.g. CSV. The work becomes more difficult when someone requires monthly data and for years as old as 1970 (as in my case). Thus, the only available option is to sit down and attempt to digitize the data in hand which is a very tedious, time-consuming process that apparently might involve the depreciation of the quality of the data as the human mind is prone to errors regardless of how careful someone is. I have thus been working on that task for about 2 months now. Bear in mind that we are talking about 10 variables times 12 months per year times 41 years which makes a total of 4920 data records!! This has been the manual way of digitizing data.
Yesterday I came across a massive project (massive in terms of its potential strength when is completed) that is under way by the Open Knowledge Foundation (OKF). It is a data digitizer, a software that is intended to automatically digitize data from eg Pdf files and incorporate them into a spreadsheet (CSV) while keeping the format of the cells and columns as much as possible. The initiative seems to be extremely intelligent and impressive. As anyone who has come across the scenario of digitizing data manually could say with comfort, this project when finished and if successful can lead to absolute increase in the numbers of existing and ready to manipulate datasets as many non treatable pdf data will become available for statistical analysis or application development in a matter of machine seconds!
You may view all the details of the project of Data Digitizer HERE
Also there is a small demo displaying some features of the under construction project HERE
Having suffered the process of manually digitizing data I want to thank the minds and the hands behind that project.
Few days ago I came across an article entitled “This Chart is the Holy Grail for Understanding Europe” and signed by Joe Weisenthal. While discussing the recent dramatic developments in the EU with Greece and Italy being at the very edge of economic and social stability and in essence flirting with a “default” which could, especially for the case and magnitude of Italy, propagate the financial crisis towards the core of Europe, Joe mentions that primarily and almost solely Germany is the country that has been influenced positively by the EMU through an incline in exports.
I remembered that i had written an essay (2010) on the issue of intra-EU trade and its connection to the implementation of the common currency. You may read the entire essay here.
My main points were:
1) The basic economic gains from the Economic Monetary Unions and hence the Euro zone were the elimination of the transaction costs, the exchange rate certainty that comes with a single currency, and the price transparency since the consumer can compare national with foreign (within the Euro area) prices more easily. As was explained, all lead to a possible increase in trade since these parameters affect the economic environment in a positive way allowing space for extra trading activity.
2) The prevailing dimension is that Euro does have a positive effect on trade among the Euro zone countries but this is NOT as high as
Rose forecasted (maximum 15 to 20 percent in the long run) and thus the gains from an increase in trade should not be a unique reason for a country to enter the euro area.
3) it was found that entering the euro zone leads to trade creation (not diversion).
4) Lastly, should be noted that although evidence shows a certain increase in trade after the adoption of the Euro among the Euro zone countries, has not been clarified whether this phenomenon is solely caused by the Euro or other policies that led to the establishment of the European Monetary Union.
5) Hence, our main consensus is that Euro should lead to a limited increase in trade among participant countries but is not statistically significant that the main reason for this increase is the introduction of the common currency.
Hence, given the observations that I made on the essay, intra-EU trade seems to be affected slightly positively by the introduction of the European currency while even that is argued by some economists.
The truth about the euro is that only core euro zone states like Germany (and even perhaps only Germany) are expanding exports to the other euro allies. The latter (especially those at the periphery) who tend to be less competitive for the beginning of the euro advventure find themeslves losing exports to other euro states.