16.7.2015

Greek crisis: it's a logical outcome

A coup, terrorism, an attack by Germany -- all sorts of wild accusations are now thrown about when discussing the Greek financial crisis. Erkki Tuomioja says the Finnish government line is "repulsive" -- although it is essentially the same as it was when he was a minister: "yes, we here in Finland want to be a nice co-operative partner in the European core, but we do feel the heat from our voters who are asking where their tax money is going to".

But the Greek government, particularly Tsipras and the now resigned Varoufakis, have been reaping what they sowed. Of course, they are also sowing what weeds previous governments in Greece were planting, but their handling of the situation has been particularly arrogant and foolish. There is too much national Greek pride, too much touting the Greek democracy -- at the expense of belittling the democracy and will of voters of other euro nations. The Telegraph cartoon about various life-saving attempts in Greece reflects the European mood very well.

Syriza finds out the hard way that working in government is a very different thing from making a big noise in the opposition and gaining votes with populism. Sadly, they seem to have done great hurt to their nation in this process.

Of course, opposition parties are mostly, well, in opposition. In Finland, particularly the Social Democrats  -- but also Greens and the Left -- are doing a good job in both having their cake and eating it. They criticize the Finns party for giving new money to Greece -- a panic reaction when SDP lost perhaps half of their working-class voting base to The Finns popular party, and they haven't recovered, and apparently never will. At the same time they criticize the government for a too tough line that makes ordinary Greeks  suffer.

Paavo Arhinmäki, head of the Left League, was very good chums with Tsipras -- until now. Now he realized that oh, "I never was a Syriza fan." Hey, you were. You walked like a fan, you talked like a fan. Now you just have noticed that even your voters are finding out it was a bad idea.

The Greeks are suffering

Yes, the Greeks are having a very bad time. And there is no end in sight to the suffering as long as they want to hang on to euro. No amount of bail-out loan packages is going to help, because the structures are broken in Greece and the country does not want to fix them -- or even if it did want to, it takes time and they don't have the money to live while doing it. Forgiving all Greek loans while remaining in euro is not going to help, because then Greece will continue to run things the way it has been running so far.

To me, the crisis and its current climax seem quite logical, given the way Greek politicians talk, and the way German (and Finnish, and other EU countries') citizens think. Lots of opinion writers claim that the German politicians (unelected by the Greek) are exercising power that they are not entitled to: they are sending a control commission to mandate policy in Athens. Dictatorship! Junta!

But the dictating of policy only happens because the Greek politicians have driven their country to immense debt. They wouldn't have to take advice and control from outside if they weren't asking for loans.

And it is inconceivable for a German taxpayer to give away his or her hard-earned tax euro which has been extracted from him or her by the German state, when it is completely unclear what he or she would be getting in return.

This is particularly difficult, when one considers that the Greeks claim their economy is grinding to a halt because of excessive taxation - but the taxes in Greece have been much lower than in many of the euro creditor nations. Proportion of tax revenue to GDP has been around 30 % and has now risen to 33 %. This is bad according to the Greeks. In Finland, tax revenue is 44 % of GDP. Does it not hurt the economy here? Surely it does. You can see it in the price level of Finland, as much of the revenue is collected in VAT and employment taxes.

Blaming Germany for past grievances does not help. Jailing bankers does not help.

It is completely irrelevant that Germany stole the gold reserves of Greece during Second World War. That is past and gone. The very point of the European Community project is to put that kind of things behind, and "make war not only unthinkable but materially impossible" through economic integration. German tourists are no longer even facing the "occupation - no, holiday!" question-answer at the border.

It is completely irrelevant that some of German debt was written down after the War. Also much of Greek debt has already been forgiven:  private debtors wrote down 107 billion euros in the 2012 haircut -- and it only postponed the eventual crisis.

It is completely irrelevant that "75 % of previous bailout money has gone to German and French banks", which is one of the things favourite slogans in the political left (along with the Iceland solution myth) . Hey, those of us who were critical of the first bailout deals told everyone this is going to happen. Risks of these investors were transferred to the EU taxpayers. That was done over 5 years ago, and it is done. The risks are now with the taxpayers, and us taxpayers are not happy to pour more good money after bad.

(The Iceland solution is a myth because Iceland's problems were entirely different from those of Greece: Iceland never had much of public sector deficit; it allowed investment banks to go bust because those banks had not much to do with the Icelandic economy. The problem in Greece is public sector deficit.).

It is also not very relevant for Greeks that Germany and France were also breaking the rules of the monetary union when it was established in early 2000's. Germany and France were able to sort their things out. Well, Germany was, and France is able to get away as with most things in EU; the last time it had a non-deficit budget was in 1974. But the market still trusts France. It is too big to fail. Greece is not.

What is relevant is that the one who needs money cannot dictate policy to others. This is why the Greek national pride bordering on impudence is so infuriating to others, and Germans in particular.

It should also be noted that the much touted idea that Varoufakis is a master of game theory did not really help Greece. To the contrary. Hearing about masters of game theories  is likely to make a frugal taxpayer in other countries wary: are these guys trying some new elaborate theories to fool me?

You cannot democratically vote away your debt

I have been flabbergasted by statements that Tsipras, Varoufakis and other Syriza leaders have made about democracy. They seem to have no idea that there are 19 other democracies in the eurozone besides Greece.

A democratic vote cannot repeal the law of gravity. A democratic vote can change laws in your country, but not in another country. A democratic vote cannot make debts disappear (without consequences and side effects).

A Finnish proverb says "debt is a brother when you take it, it is a nephew when you have to pay it back". This means that the money-lender is nice and polite when he comes your way at good times, but when the debtor comes to collect the debt, he may not be as close and friendly, and the debt may be substantially harder to bear when paying it back. Or just paying the interests.  And that is what Greece is finding out the hard way.

Debt is also something that you can get easily when you are trusted. When you have lost trust, it is much, much harder. The speed at which trust can be lost is remarkably fast. In 2007, Greek government bonds were as solid as any euro government bonds. In 2009, situation was totally different. And no amount of tantrums is going to make money-lenders donate
Insulting Germans and mocking Finns is not a particularly efficient way in convincing them that they should do more to help the Greek government.

Yes, the Greeks are really, really suffering

It's not that the Greeks don't suffer. It's not that ordinary Greeks haven't taken a hit. Or that there has been no change at all. But any change has only happened after extreme coercion. Greece actually reached a situation last year where it did not have a primary deficit - its tax revenues were enough to pay its public expenditure, and even a bit of the interests for its debt. but then came Syriza, with promises of end to austerity that makes everyone suffer. That was a moment when the collapse of trust started, and that is why banks remain closed in Greece and life is becoming more and more impossible.

The Greek politicians, most recently Syriza, have completely destroyed any trust that people had in them. Calling Germans Nazi is stupid. Bringing up the war debt question was stupid; that issue was settled at the latest in 1981 when Greece applied to join an economic community with Germany (like France, another aggrieved neighbour, had done earlier). Calling other people names is generally not a good approach to convince them that they should borrow you more money. Expressing lots of national pride is not a good idea when you are totally broke. Demanding solidarity is not how solidarity works.

The Greek referendum stunt on July 5 was a final straw on the camel's back that made sure that any credibility that Syriza might have had as a new political force was eroded for once and all. Greeks: you guys strongly make your voice heard and reject austerity, and a couple of days after that, your government solemnly promises to do even much more austerity than what you rejected? Nobody is going to believe that.

So what's ahead for Greece? I can see no end to the suffering unless Greece defaults and quits the euro. That will be a hit on the creditors, including taxpayers, but defaulting is the standard way to do this thing. It doesn't happen without consequences. Greece will be a pariah on the international credit market also after this, because lack of trust. But at least the government can print money and pay its bills nationally, and banks can open, and the economy overall can get rolling. Now the Greek government is just holding its population as hostage.

This will of course be a huge embarrassment to federasts who have been trying to convince that integration to a political, fiscal and transfer union within Europe is a historic necessity,  a one-way streets where no movement can be reversed.

From #grexit to #fixit?

The Finnish government is going hugely to debt just like Greece did. The level of debt is not alarming yet, but the speed of accumulating new debt really is. The public finances in Finland are in shambles. And it's not a cyclic recession: all our export markets are in reasonably good shape. The Finnish disease is, like Greek, a structural one.

There is no way ahead until Greece admits the it has to do #grexit . It may well be that Finland is not able to do an internal devaluation so that it could avoid a #fixit . If we don't really change the direction, we'll be talking to our debtors just like Greece is now.

-----

Finally, it feels appropriate to add a newpaper clip from Keski-Suomi, July 13, 1895 who reports the issues of Greece, a member of the Latin Monetary Union. Not much has changed:

- Of the Greek monetary issues. The cabinet of Deligiannis appears to be seriously pursuing an agreement with the debtors of Greece. The Times at least reports that the Greek government, as soon as discussions of financial legal issues have been completed, will be sending special envoys to Paris, London and Berlin to commence negotiations with debtors about "a reasonable and satisfactory agreement".







(Courtesy of Digital National Library in Finland)


28.2.2015

Pardoning, or rehabilitating?

The news has it that Britain is pardoning people who were convicted of sexual crimes that are no longer crimes.

But somehow, pardoning - or actually "rehabilitating"  - people who were convicted long ago, suffered any punishment given at the time, and are already long dead, is reminiscent of Soviet policies. It does not fit my idea of what Britain is, or should be.

Yes, they suffered an injustice, but retroactive changes to convictions are not that meaningful when the convicted is no longer around.

But perhaps I'm too romantic, and Britain is much closer to Ingsoc, the English Socialism of 1984, than I'd like to know.

Anyway, now comes the difficult work of deciding which transgressors to pardon (right now, homosexuality is no longer bad) and which ones to condemn even further (right now, pedophilia is now much worse crime than it used to be).

Would it not be simpler just to admit that our standards change, and any formal legal rehabilitation should be reserved for cases where there was a miscarriage of justice (an innocent man or woman was convicted), not when the law was wrong by our current standards?

4.2.2015

Those horrible housing costs in Finland

I often see people complaining how housing is exceptionally expensive in Finland. And of course, everyone has that feeling. Therefore I was slightly surprised when I started to look at the European statistics regarding housing. A research briefing "HOUSING AFFORDABILITY IN THE EU" by European Social Housing Observatory  puts things into context.

Most Finnish public discourse about housing is about how expensive housing is. For instance:
However, when we look at the research briefing and consider housing costs as percentage of disposable income, Finland is in the lower end of the EU27: 



I find this actually remarkable, because we have rather extreme climate conditions, which means comparatively higher construction costs.

And when we look at the impact of housing costs on the poor, Finland is even more towards the left-end of the statistics:


This means that only in Malta and Portugal there are fewer households overburdened by housing costs (meaning that a household uses more than 40 % of disposable income on housing). So we not only have lower housing costs compared to purchasing power than most EU countries, we also have more transfers of money to the poor households than e.g. Italy, Austria or Luxembourg.

Perhaps we should understand the European reality in more depth before complaining that much.


Economic perceptions vs. reality: things are much better than we think!


European and particularly Finnish economic news is full of doom and gloom. It just occurred to me to actually check up how bad things are. And while a few things are really going badly, very many measurable numbers show that were are actually quite well off when compared to past.

Just look at OECD report at http://www.oecd.org/els/emp/howdoesyourcountrycompare-finland.htm.

What it tells us about Finland is that when we compare year 2000 to 2012, we see that:
  • unemployment has gone down (9.8 % -> 7.8 %)
  • youth unemployment has gone down (20.3 % -> 17.3 %)
  • long-term unemployment has gone down (29.0 % -> 21.7 % of the unemployed)
  • the employment rate of working-age people has gone up (67.5 % -> 69.5 %)
  • women's employment rate has increased (64.5 % -> 68.2 %)
  • employment rate of older workers (55-64) has increased (42.3 % -> 58.5 %)
  • the percentage of temporarily employed has gone down (16.5 % -> 15.7 %)
  • annual working hours have decreased (1751 h -> 1672 h)
  • average wages have gone up by about fifth (31 904 $ -> 39 125 $ in 2012 currency)

Almost everything is better than in 2000! The current growth figures are abysmal, so a good development cannot continue unless we fix that, but on the average, we are not doing badly at all.

Of course, some are more lucky than others, but even the income differences after taxes and transfers, including capital gains, remain rather similar to 2000 (Statistics Finland).



So perhaps we should complain a bit less!

11.10.2014

I feel the urge for some whiskey

Only in Finland...

I don't really like whisky that much, but suddenly I feel the urge to get lots of it. The reason is AVI or "Aluehallintovirasto", the local office of regional administration which has decided that private persons are not allowed to write blog entries about whiskey, or the office will cancel the permit of Beer and Whisky Expo in Helsinki.

The organizers are of course not responsible for private blogs of other people at all. They have no way of enforcing this request. So they are just desperately pleading that people wouldn't talk about them so that they wouldn't lose their permit.

But no, the Finnish public just cannot take this any more. I hope AVI are now learning the meaning of Streisand effect. You'll see a lot of Finns post things like "whiskey whiskey whiskey" in Facebook. Our country even wants to join NATO just because in NATO alphabet, the code for letter W is "whisky". (As it, by the way, also is in the tradition Finnish defense alphabet).

I also hope that in the upcoming downsizing of Finnish government spending, the salary budgets at Aluehallintovirasto are the first one down.  This kind of ridiculous waste underlines how poorly we use our tax money. That needs to stop.

Hey people at AVI, you are useless. If you say you are just upholding the law, now's the time to stand up and say that the law is impossible to uphold, it is unreasonable and it is unconstitutional. It's your duty to ignore it. It's your duty to get fired rather than become complete clowns.

5.2.2014

A winter day

January 14, 2014. It's a nice winter day.


And it's a bit cold. Not extreme, just -12C.
















And this is the status report of the Nordic power market system.

Total electric power consumption in Finland is about 12500 MW. And wind power production is... about 1 MW. It actually oscillates between 0 and 1, so sometimes it rounds down to 0 and sometimes up to 1.

So wind power produces about 0.005 % of our electricity consumption - which in turn is only a part of our total power consumption, as I can attest as I watch the fireplace in my living room.

Yes, it is true that in Denmark there is just now currently quite a good availability of wind power and the electricity we buy from there is wind power. Unfortunately, it seldom works the other way round: we can't really sell wind electricity to Denmark, or anyone. So my point is: why do we subsidize the stuff to such an outrageous extent? I'd rather have us sell some other energy to the Danes when there is no wind either in Denmark or Finland. They are, after all, a producer with large wind energy capacity, which means that they have huge coal power plants, and if we care about CO2 emissions, we should be selling them hydroelectric and nuclear power.

Or we can go the way Germany does: extraordinarily expensive energy, large subsidies, and firms going belly up.


Developing a country

There's only one thing that is worse for people than international capitalism exploiting the workers of a poor country. It's that international capitalism does not exploit the workers of a poor country.

Poor countries can be roughly divided to two classes. One is "developing country", and its main characteristic is that it doesn't develop. The other is "emerging market", and it's the one that develops.

Eventually, that may of course be something that we later start to dislike. At one time, it was every third-world-activist's dream that China, a country with socialist government and hundreds of millions of extremely poor people, would become richer, that people would not be starving any more. That was to be achieved through socialist market economy.

Now that the dream has come true after China adopted capitalistic communism, many of these activists are uncomfortable: they are taking our markets, they are making the workers in formerly rich countries unemployed - because they work harder.