The content of these pages is not intended as guidance towards financial decisions because such decisions need to take into account the short and medium term. Here we look at the long term.

ATHENS 2021

... and The Eastern Mediterranean

Apart from Covid, common to the world, what issue will dominate Athens this year is Turkey, its increasing intrusions into the Aegean, into Greek air space, including Turkish fighter jets over Greek populated areas, its harassment of Greek shipping and of aircraft inside Greek territory, and Erdogan's drive to carve out the Eastern Mediterranean as it pleases him.

If you are lying in hospital and cannot breathe, you would not give this a second thought - for you it's all about Covid. If you are struggling to pay bills, it's all about the money and putting food on the table. But if you look at the long term for Greece as a whole, 2021 will be key as to whether conflict can be avoided.

And I fear the worst.

The old Ottoman Empire occupied Greece for 400 years (1453-1828), Turkey now occupies north Cyprus, sends troops into Syria, Iraq and Libya, despite requests to leave, and gave military support to Azerbaijan against Armenia. Decades of mini-invasions of Greece by its fighter jets were followed by Turkey prospecting Cyprus's territorial waters.

The EU, and the world, protested but took no punitive action - yet another lesson that appeasement makes things worse. So things got worse. There is nothing new under the sun.

More to the point, Greece is not just another Cyprus. Greece is re-arming and will fight and will inflict damage, both strategic, political and economic. Greece is the second biggest defence spender per GDP behind the US - well above the UK. The question is not whether there will be fighting, but if war will last. Plus, of course, what will follow after that and for how long.

In our Europe 2020 editorial we discussed how sometimes bullies and dictators need to be given a bloody nose for their own good, or at least the good of their people. Germany and Japan were quoted as examples, both of them crushed to re-emerge better.

It is not surprising Joe Biden was the first US President to declare (on 24/4/2021) the slaughter of one and a half million Armenians by the Ottomans a genocide, to Turkey's fury. Right now, Turkey under Erdogan is throwing punches at all and sundry, including its supposed NATO allies France, the USA, and of course Greece. With relations between America and Turkey at their lowest, Biden had nothing to fear and much more to gain for the sake of the West, by doing something US Presidents had been promising for years but never did. And it does matter. What victims of crime want and deserve first and foremost is recognition, and the US has joined a host of other countries in speaking out: Yes, it was genocide.

This at a time the EU is divided. Agreed EU threats to impose sanctions on Turkey for its activities in both Greek and Cyprus waters could have been more effective, if they did not disguise a split, which eventually led to non-enforcement and then withdrawal of the threat. France has come out unequivocally in support of Greece and Cyprus, while Germany's approach, at least under Angela Merkel, is almost pro-Turkey. France takes a principled view, while Germany puts economic considerations first, not to mention that 5% of the German population are Turkish immigrants, against only 0.5% of Greeks. And there is the issue of mainly Syrian refugees which needs Turkish co-operation (as well as EU/German money) to stop them from flooding Europe.

In October 2020, when shots looked certain to be fired between Greece and Turkish warships, German Foreign Minister Heiko Maas criticised Turkey. "It is up to Turkey to create the conditions for talks [with Greece]." You could say, he was forced to; Merkel would not want to see a fellow member state, Greece, at war, which would be costly to the EU, but Merkel has always been timid in dealing with aggression. She showed timid in dealing with Russia's Putin and does the same with Turkey. We could be tempted to be grateful for that, given Germany's history, but the irony is, appeasement will fail just as badly now as it did against Hitler then.

French President Macron also urged Turkey to halt oil and gas exploration in "disputed" waters in the area. But he went further. In August 2020 he sent an aircraft carrier and the frigate La Fayette on exercises with the Greek navy and it stayed in the area where Turkey had sailed.

The United States demanded that Turkey pull back its energy research ship, calling the move a "calculated provocation".

Russia also confirmed it backs Greece's view of maritime law.

Quite separately, both the EU and the USA have criticised Turkey for recently occupying the ghost town of Varosha in Cyprus against UN Security Council resolutions. This was after June 2019 when the EU had warned Turkey of sanctions for "illegal drilling" in Cyprus waters (an EU member state) but did nothing.

Even the Pope became involved when he joined world cultural organisations and countries around the world pleading that Hagia Sophia in Istanbul (Constantinople) not be turned into a mosque - to no avail. Hagia Sophia is as significant to the whole world as the Parthenon in Athens, not so much as a Byzantine church but as a 500 year old monument to humanity.

The Athens response to this complex geopolitical jigsaw has been many-pronged. It has re-armed, it has exercised restraint to avoid a costly war, its Foreign Minister has engaged in direct talks by visiting Turkey, it has formed extensive alliances with, not only France, but also Israel, the UAE, Saudi Arabia, and Egypt, all having an interest in the Eastern Mediterranean. Being a NATO member would not help much in war because so is Turkey, and having a seat with other EU foreign ministers has proved ineffective so far, in the background set out above, hence Greece's reaching out to its other neighbours.

Both Greece and Egypt are in a maritime boundary dispute with Turkey. Greece has refrained from extending its maritime zone from to 6 to 12 miles around its Aegean islands as it has a right according to international law (UNCLOS 1982). It has declared the equivalent on its western side, its Ionian islands, without complaint from Italy, that being the quickest and most uneventful accord, followed by an equally amicable accord with Egypt. But Turkey claims that Greek islands do not have a maritime zone and threatens that any such declaration by Greece would be a cause for war. As we say in England, nice! Greece, of course, would not extend where 12 miles overlap with Turkish territory. What happens internationally in this situation is that a line is drawn half-way by negotiation and compromise. Threats of war, together with a denial of the Greek islands' very jurisdiction, is more reminiscent of medieval times.

Greece and Cyprus carried out joint naval exercises with Israel and France (March this year). This came after several steps of co-operation between Greece and Israel last November when they agreed to increase military collaboration. Greece's military co-operation with the United Arab Emirates (UAE) comes in the context of Israel's own rapprochement with its Arab neighbours, creating a pattern of intricate interconnections of which Greece is a part, while Turkey is increasingly isolated under Erdogan.

In March 2021 the US agreed to sell F-35 fighter jets and frigates to Greece, F-35s having been withheld from Turkey as punishment for buying Russian S-400 missiles incompatible with NATO systems, and the US also imposed sanctions on Turkey. France is selling frigates and 18 Rafale fighter jets to Greece, giving Greece a range well into mainland Turkey and, in theory at least, aerial superiority. The combination of Rafales and F-35s gives Greece a technical advantage in the air - together with a little known secret that Greek fighter pilots are regarded as the best in NATO, recognised as such twice, in 2019 and 2020.

In February 2021 Greece and the US conducted joint military exercises south of Crete in waters Turkey is trying to claim for itself. Turkey had signed an illegal agreement with the Libyan government - Libya under duress due to the presence of Turkish troops on its land, plus the fact that, as a devastated country, it relies on Turkish trade to feed itself.

Therefore, Libya apart and notwithstanding EU indecision, the sum total of the above leaves Turkey looking more like a pariah state, isolated from its NATO allies as well as its neighbours. The purchase of Russian S-400 air defence systems shows a schizophrenic Turkey desperate to dominate the region and throw its weight around in the context of extracting oil and gas, while at odds with the US, at odds with the EU, not least for its human rights record, at odds with Russia over Syria and Libya, yet also a member of NATO and buying weapons from Russia, while the Turkish economy is crippled. Turkey has the second biggest army in NATO after the US but has declared war on its own people, not only through crazy economics but also by stamping out democratic dissent, imprisoning all and sundry, often in mass trials of military officers, academics, opposition figures and others. War on its citizens, war on democracy, it is not surprising it threatens war on Greece as well and is picking fights with the USA.

Only Germany, or mainly Germany, stood between Turkey and EU economic sanctions which would have dealt the final blow to Turkey's economy. Germany also builds six type-214 submarines for the Turkish navy. But Merkel is being replaced by a new Chancellor. And three days after the EU failed to impose sanctions, the US did (for buying Russian S-400s), sending a signal to Berlin to contain Turkish aggression. So the new German Chancellor may develop different views.

In the meantime, Greece is right to play a containment game, as in shadowing Turkey's exploration vessels in its waters without firing a shot. In the recent (April) visit by the Greek Foreign Minister to Turkey, this policy was echoed in the non-aggressive but very assertive public exchange between him and his counterpart.

Turkey's claim that Greek islands do not have economic zones goes much further, questioning World War I treaties regarding borders, always a bad omen when coming from dictators (the Italian PM Mario Draghi's description of Erdogan) with big armies. Erdogan is reported to have asked his generals to sink a Greek ship or shoot down a plane, which reportedly they refused. He threatens to 'throw the Greeks into the sea' and worse, in daily rhetoric reminiscent of Hitler. This at the same time as protesting at the USA for calling the 'genocide' of the Armenians.

I have known ordinary Turkish people and they are no different to any other nationality, including Greeks, a mixture of wonderful individuals and very inferior human beings. You cannot make generalisations about people. But Erdogan, under pressure also from ultra-nationalists, seems to represent a group with a visceral hatred of Greeks which, in children, would be called pathological jealousy. He resents and wants to claim islands which have been Greek since antiquity - for three thousand years - forgetting that parts of Turkey used to be Greek, if you go back far enough. He looks almost in pain when disparaging Greek people. Why? Probably because, apart from its islands, Greece has a cultural heritage unsurpassed and admired throughout the world - the cradle of western art, science, democracy and civilisation. Other countries are not jealous of Greece for that but Turkey is right next door and this invites comparison; it is like jealousy of a more illustrious brother.

Surprisingly, this may be what ultimately saves the bacon for both Greece and Turkey. Erdogan knows exactly where the world's sympathies would lie in the event of war. I said earlier that I feared the worst, but there are possible escape routes to open conflict. My prediction is that Erdogan's days as Turkish President are numbered. He relies on the religious based section of his electorate but is unpopular with all others inside his country, and that includes the Turkish army who are likely to attempt a much bloodier coup at some point. Far too many Turkish officers were jailed after the previous failed coup, plus too many teachers, intellectuals and journalists, so the climate now is different, even though hidden under the tight control of free speech by the state.

The longer Erdogan survives, the greater the chance of a serious miscalculation, and his more moderate opponents within Turkey know that. They, as well as he, know that attacking Greece would be costly and would bring the whole world against them, as happened in 1828 when the Ottomans tried to hold on to their occupation of Greece and had their entire fleet destroyed by British, French and Russian firepower. Greece is known as a peaceable country even among the Moslems of Arab nations, most of whom are friendly with Greece, traditionally in the past as well as now.

Athens feels the pressure but, as always with deep waters, there is much more pressure on Turkey and Erdogan underneath.

ATHENS 2019

SMALL VEHICLE FOR DEMOCRACY

The first thing that struck me on my recent arrival back in Athens was the near-complete uniformity of cars in the streets: almost all were small cars - plus a plethora of noisy motorbikes; medium size cars were rare, and not a single luxury car to be seen - I say luxury but I mean the type of large family saloon very common on London roads; I did not see one.

I never get used to this. Athens used to look so much richer, even though the roads are better now and drivers have become polite, sensible and composed, with the old competitive aggression gone. Have the Greeks become so friendly, co-operative and pleasant due to the suffering of the recent crisis? It can have that effect on people, but Greeks had always, if not all, been helpful and civilised.

In the age of environmental concerns, all this is welcome news. Athens had become as famous for pollution as for the Acropolis. But the real causes hidden underneath still raise questions. A new tax regime now has forced a different outlook upon everyone, hence the smaller cars and, perhaps, the economical driving.

As originally Greek myself, I hardly took my first breath of the Athens air and hardly landed a foot on Athens soil before I was confronted by the everlasting Greek state bureaucracy. Still after all these years? Oh, yes, for ever, Amen.

Take this example. You need a Greek passport, and so you think best go there - that's how you get things done in Greece. And what a helpful, approachable bunch of staff. All you have to do, you would think, is hand over the necessary documents, pay, and, in a few days, go back to collect. And this is exactly what happens, including a helpful printout with the advisory details of what is required.

Just two glitches. The first, perhaps, understandable: After years of rife tax evasion and government overspending, one of the documents required for a passport is one showing your tax status. Fine, the country was bankrupt and the tax regime had to change, at least temporarily. We will talk later about how badly the Greek economy needs taxes to be low (taxes which must get paid), the state to become small, and legislation simplified to encourage the natural entrepreneurial spirit of all Greeks to flourish.

But the second 'glitch' is not just baffling, it is maddening, and typical of an undesirable Greece. You cannot just pay the passport fee along with your other documents. What you need to do is go to a local KEP (Centre for Citizens Assistance), queue up, obtain a demand for paying the appropriate fee, then go to a bank, queue up again, pay there, then take the receipt back to the passport office with everything else. Then a fourth visit to collect your passport, of course, if nothing wrong with your papers, otherwise a further round of going… round to various offices.

I laughed, literally, and yet, nobody else blinks, nobody smiles, nobody pulls their hair out and, to my knowledge, nobody ever jumped off a cliff at the sheer stupidity of such absurd, communist-like bureaucracy. The Greeks, the most freedom-loving people who ever lived, the one and only people who gifted both intellectual and literal freedom (with democracy) to the rest of the world, have come to accept such meaninglessness with sheepish compliance as part of life. 'Oh, is this what I need to do? Thank you very much. Thank you, thank you.'

And this is just an example. Think what it does to businesses that should be busy creating wealth for the Greek economy. No wonder the country had gone bust; if people spend their lives running around government agencies and queuing, instead of working, this was part of the reason.

Ever since ancient times, when they sailed the seven seas and traded with the entire world, the Greeks have been natural entrepreneurs. Even now, it is astonishing how many shops you find in every tiny residential back street. And the people inside are so willing to serve, keen to help, so hard working and generally keen on high standards.

But how can this wonderful country with such wonderful people ever produce the wealth it needs and deserves, when everyone, yes everyone, is working for the state, directly or indirectly, either as paid employees (civil servants) or as its clients? I have to spend a working day just to hand over my money? The customer has to work for the service provider, instead of the other way round? Do you know how many working days are lost to the country's coffers with millions of people running around from place to place to do virtually nothing, just a simple act which should have taken just seconds with a credit or debit card, let alone cash?

Unless and until the ordinary man in the street rises up and demands big changes to such insane bureaucracy, the blame will go, wrongly, to the government - the unchanging scapegoat of all life's ills. Yes, Greeks do protest, almost permanently in the streets, but for the wrong things. They demand the state does more for them, e.g. gives out more money, whey they should be demanding to be left alone to create more, earn more, create wealth, do things they can do for themselves, if only the stupid state got out of their way.

When the dust settles and the recent crisis becomes memory, the two biggest changes all Greeks must demand from whoever wants to govern them are 1) bureaucracy must be cut down to the bone, and the number of civil servants reduced drastically, so that more people produce wealth, and 2) taxes must be slashed, while also ensuring they get paid.

Though understandable in the circumstances, a tax regime which punishes everyone severely just for breathing God's air and standing on His good earth must be done away with as soon as possible. For example, annual property taxes just for owning a tiny flat, possibly inherited from their parents, whether they have an income or not, are taxes which create a climate of fear and uncertainty which stifles entrepreneurial risk, and forces Greeks to think negatively and seek the security of a minimal existence rather than the risk of creating opportunities for themselves and others. Where else can they go and live? If they cannot pay, they are homeless. This is reminiscent of Maoist China. Likewise, property taxes for owning a tiny plot of land of zero sale value, (common in Greece still emerging from a largely agricultural past now inherited by the young whether they wanted it or not), or taxes simply for owning a small car, whether you use it or not, and more endless taxes punishing ownership of all kinds, can be seen as a necessary correction to a flawed taxation system of old centuries, but only if it is indeed temporary and ends soon.

None of this depends on the government. It has to come from the ordinary long-suffering citizen in the street. If voters demand more and more from the state, the state can only take the money from them - directly, if they have money, or indirectly if they just hold a job or simply visit the shops - because, trust me, indirect taxes, on goods and services, hit the poorest a lot harder than those who can afford almost anything they want.

Counterintuitive as it seems, it is the poorest, the most ordinary who must demand that the state gets off their backs, off everyone's backs, so the economy can boom with freedom and riches and choices and, yes, creates more wealthy businesses and wealthy people who will pay more taxes, lawfully collected, to help the neediest. Because it has been proven in every developed country, that the lower the rates of tax, the more the total amount of tax collected by the state. It seems paradoxical, but it is true. People are not stupid. Nobody wants to work more or harder, risk more capital and employ more staff, if they end up paying all their profits to the government. We tried that in every way possible for seventy years in the old Soviet Union and everyone stopped working. People would much rather stop working, or do shabby work, and would rather stop risking, rather than see their efforts go unrewarded. Conversely, if you lower the percentage rates of the taxation regime, everything thrives, and people prosper, and more taxes come into the coffers to provide basic state services.

Did we really have to say all that? Again? After all these years? Is it still falling on deaf ears?

For now, beware of any dealings with the authorities in Greece. Hold off until well after the next general election, due by October 2019**. Perhaps something may have changed by then. You never know.

** Footnote: Our readers will be aware that an early general election took place in Greece on 7th July 2019.

DISCLAIMER

The content of these pages does not constitute professional advice, as it does not take account of individual circumstances.

ATHENS 2015 - Analysis

CONGRATULATIONS. IT'S A BOISTEROUS BOUNCING BABY BOY

Two seats short of an overall majority after the January 25th general election, the most leftist party to come into power in Europe has formed a coalition government in Greece. Europe, and the world, called it a political earthquake that such a radical party should get 36% of the vote anywhere in the developed world. The vast majority of Greeks own property. People in such places are not supposed to vote Marxists into power. In Greece they have.

But how will this shape Europe, shape Greece, and who will be the long-term winners as a result of this election?

The answer is complex and this is our comprehensive analysis.

WHY IT IS IMPOSSIBLE TO PREDICT WHAT SYRIZA WILL DO IN POWER

Syriza had declared certain socio-economic policies, such as its intention to renegotiate the national debt and increase public spending. But government is never about basic policies. Syriza will find soon that buying a house and running a home are two very different things. The first involves a simple declared policy - I want to buy this house to live in it - simple. The second involves a million different daily decisions, from when to put the rubbish out, how to clean the curtains, whether to call the plumber and which plumber, paying the bills and settling neighbourly disputes, plus one million other chores on a daily basis, day after day. And this is not so simple.

Prime Minister Tsipras will discover he alone cannot make policy up as he goes along. Quite apart from his right wing coalition partners, his own Syriza party is a conglomerate of many different ideologies, from Greens to communists of various shades, Trotskyites, Maoists and Marxists - five of his cabinet ministers are Marxists. Those with an academic background, the economists and university professors, have no political, let alone government, experience. This will show quite soon.

Syriza does not know how bank depositors will react to its decisions. If there is a run on the banks, the whole banking system will be under threat. This will constrain Syriza's policies.

Syriza does not know how the markets will react.

It does not know how other European governments will react to its actions.

Above all, Syriza does not know how the people of Greece will react to what it does on the ground, including many who voted for Syriza, once they see the consequences. It has no historical roots in the population, so all it stands for is the voice of those who suffered the most under Greek austerity and some of those with a lifelong emotional attachment to the left.

To give one example, a deeply religious Orthodox society for the most part, many of the Greeks who voted for Syriza simply out of economic pain will be hostile, have no doubt, to an atheist Prime Minister who treats the church with disdain. And this was just one day after the election. You and I may think that distancing government from church is a good thing, but the Greeks are different. Being Orthodox in Greece is not like being Anglican in Britain. In Greece the national religion is much more closely interwoven with daily life and personal identity. It has deeper historical roots in the population than any political affiliation. Saying I am Orthodox is used as a synonym for being Greek - even some ideological leftist atheists declare their religion as Orthodox in official documents.

A different source of dissent will be those who had hoped they would be taken out of the Euro altogether, that Greece would default and the government would go into massive public spending. Syriza had promised not to exit the Euro but, if, constrained by a looming banking crisis, it fails to deliver on public spending promises, there will be riots in the streets all over again.

In foreign policy, Syriza is going head on against the West by taking a pro-Russia stance, opposing sanctions while Russia violates Ukraine. Although a member of NATO, in its first meeting of EU foreign ministers, Greece was the only country to dissent. This may be posturing to an extent, a ploy to extract better bailout terms, but it is also ideological. And there is a religious dimension in this too, due to a sense of brotherhood with other Orthodox countries, such as Russia, regardless of the Prime Minister's own atheistic persuasion.

The Greek psyche is traumatised. Greece lived under a savage Ottoman occupation for four hundred years till 1829. Imagine England living under the Iranian Ayatollah from Shakespeare to the present day. Imagine the so-called Islamic State ruling Christian Europe for four hundred years. How long would it take to heal that? Then, the memory of Greece's Nazi occupation in the 1940's is very fresh. Everyone above a certain age knows of someone executed randomly by the Nazis - mass executions of random civilians were common in retaliation for the death of any one German soldier. There was famine, schools were closed and highly intelligent people remained uneducated. More recently, Greeks still feel bitter that the West did not do enough a) to withdraw support from their Greek military junta and its dictatorship from 1967-74, and b) to prevent or reverse the 1974 Turkish invasion and continued occupation of northern Cyprus. Nazis, the Greek dictatorship, a capitalist West, a capitalist EU, and NATO - all have one thing in common in the eyes of many Greeks, they represent 'The Right'.

This is more than history and should be remembered when trying to dictate terms to the Greeks for whatever reason. There is a lot of bitterness and pain. Anxiety and insecurity are deeply ingrained in the national character, which translates into resistance and distrust towards any attempt at dominating them.

The irony is that, by failing to condemn Russia's effective invasion of Ukraine, Syriza is implying acceptance of the same principle which allows Turkey to hold northern Cyprus. But logic is one thing and feelings another.

This may explain, partly, a pro-Russia stance, and it will have some resonance even with non leftists. However, not all Greeks are anti the West. Many will feel a strong sense of injustice at their government's support for Russia, and this will not be along voting lines, so more of those who voted Syriza will be alienated.

In summary, we have to wait and see what Syriza will do in power because Syriza itself does not know. Yes, some ministers are Marxists etc, but make no assumptions about how any of that will translate into policy. If there is one thing the Greeks are best at, it is inventiveness and improvisation - breaking the rules.

QUESTION TIME
Some of the dilemmas of power:

QUESTION: If Syriza stops or reverses privatisations, how will Greece ever have a modern economy?

Syriza rejects the proven model of Thatcherism. Privatisation was a key economic policy shown by Margaret Thatcher to be the foundation of long-term prosperity, a model since adopted world-wide. If privatisations were abandoned, it would be a major step backwards in history and a missed opportunity for Greece.

But there is a lot of visceral hostility towards Margaret Thatcher and her ideas in Syriza, and some Greeks reading this would be genuinely astonished. 'What?! Everyone knows as given that Thatcher was wrong.' One might expect that of a radical left party led by Marxists, but in order to understand it, one has to understand other factors.

For a long time, the main broadcasting organisation in Greece, ERT, was an instrument of the government. So whenever a new party took over, ERT would angle the news to express the views of that party, just like newspapers in the UK have an editorial bias one way or another. ERT was the equivalent of the BBC, but nothing like the BBC. The BBC is biased in certain respects (news editors are human beings with prejudices) but the BBC is fiercely objective compared to the Greek media of that time. Listening to the news in Greece was worse than listening to party political broadcasts in the UK. This was later abolished to give ERT independence but ways of thinking, or reporting, are not as easy to transform. So the general population in Greece has a very distorted view of what was happening in the UK under Margaret Thatcher and the transformation of the UK (and the world) by her policies (whether one approved of them or not) or why so many countries around the world copied her economic model, including former Communist countries.

Margaret Thatcher won three general elections in a row by a vast majority - she never lost an election - working class people voted for her in their millions. Yet the perception in Greece is that the whole of the UK suffered because of Thatcher, and that only a few prospered. This view is being perpetuated to huge cost for the people of Greece who still struggle with antiquated ideologies, long defunct. For example, labour reforms are long overdue in Greece, along Thatcherite lines, but Syriza wants to go in the opposite direction - a recipe for poor productivity and a spiral of higher public spending.

In the early years of Thatcher's reforms, there was economic pain among those previously employed in old unproductive industries, some subsidised by taxpayers, and many became unemployed. This was short term, for a minority, until new modern, productive businesses sprung up and then unemployment fell below previous levels and real incomes rocketed. The only group who lost out long term were trade union bosses who wanted to run the government. Previously, the myth in the UK was that trade unions were protecting the interests of their members. Some did, or to an extent. But the truth was unions were using their members as pawns in order to gain political power and promote their collectivist ideology. One of Thatcher's reforms was to oblige a democratic vote of union members before anyone could call a strike, a secret ballot, so that people were not intimidated. And then the naked truth was exposed and the unions lost power, the country got back to work and prospered, and working class people bettered their lives by a long way. Equally important, Thatcher went a long way to kill an attitude among many that, even if you were fit and able, the state was there to do everything for you, and nobody was asking who was going to pay for him or her. Before Thatcher, Great Britain resembled a giant jumble sale, including new cars full of problems which people were told to buy out of patriotic duty. After Thatcher the UK became a modern economy producing desirable goods and services sold world-wide. This is how a country can become rich, improve the lives of working people and look after the poor.

A simple question for Syriza would be to look around the world and see which countries provide a better standard of living for their citizens. Is it mostly Marxist governments like those of Latin America, is it Russia and China, or is it capitalist, free market economies like the United States, Germany and Western Europe, and Japan? How is it possible to be having this argument in the 21st century after all we have been through? Free market capitalism will never produce equality and has many faults, but it is by far the best economic system known to man for delivering a decent living to the majority, and Thatcherism was the best model of it.

QUESTION: What is an oligarch?

Syriza's finance minister, Yanis Varoufakis, promised to "destroy the oligarchs." Taking on vested interests is not a bad thing, Margaret Thatcher was unafraid to do it, and you may think it is clear what an oligarch is. However, I fear Syriza may destroy successful wealth creators on whom the economy depends for entrepreneurial innovation, risk taking, and job creation. Destroying successful people would be ideologically driven, and would be costly, like Mao's cultural revolution and Stalin's purges before that. We have to wait and see exactly who is to be destroyed.

QUESTION: Syriza says it wants to kick-start growth, but how?

Every government wants growth as this brings in taxes, if nothing else, and makes the electorate feel prosperous. A fine ambition but as foolish a declaration as French President Hollande's impassioned pleas for "Growth! Growth!" when he ousted the brilliant Sarkozy.

In the 1930's the US came out of the depression through massive public spending. Keynesian economics, born of that depression, have been applied by many governments since then but economists always argue over the long term effects and unwanted consequences, especially in a healthy, even if sluggish, economy. There is fundamental disagreement about how and how much the state should intervene.

Since the 1930's, socialist or social democratic parties in Western democracies have preached that all you have to do is pump government money into the economy and it will start growing, so they borrowed money and spent it. The argument is convenient for those who believe in a big state and a major role for state intervention, something which appeals to their natural audience. But this is very different to the US government programs which brought an end to the great depression without creating a state dependent society. Back then, the US invested in major projects by printing its own dollars, the depression meant there was no fear of inflation, and confidence was so low it needed a massive dose of a powerful drug. What the US did not end up with was a perpetual system of major state intervention, nor a bloated public sector.

Anywhere else, those preaching or trying to apply Keynesian economics have made up their own versions, and all have shown short-lived benefits at best, with negative consequences down the line. Once again, looking back to the Thatcher years but also more recently with the Conservative government in the UK in comparison with France, the way to growth has been shown to be cutting public spending and allowing the private sector to flourish. It seems counter-intuitive, but it is proven. Even communist China has learned this lesson. France is now paying the price for choosing Hollande. The French economy is sluggish, whereas Britain is benefiting on every economic front from choosing a centre-right government. We are not endorsing any political party here, we are talking specifically about growth, without other considerations.

The question is whether Syriza will allow the state to grow again, after being cut down by the previous conservative reforms. And the answer almost certainly is, yes it will, if its creditors allow enough room for manoeuvre.

A bigger public sector would impoverish Greece. Under Syriza's Keynesian plans, the Greek economy, growing at the time of the election, might experience a short burst of accelerated growth. But would it shrink later, possibly to a recession, while entrepreneurs are being punished and have their rewards taken away from them? One thing Syriza should know from the years of communist experiments around the world is that, if people cannot get the reward they want, they stop working, they stop employing, and they stop producing. Investors certainly stop taking risks.

If people had voted for Syriza because of suffering under austerity, a worse form of austerity would follow, because a bigger state would damage the real economy which would shrink again, after an initial flourish created by the artificial demand of government spending. Not to mention the worst austerity of all, if Greece went bankrupt and public services stopped running, or if the banks went bust.

How many times do we have to see this cycle repeated in order to learn the lesson? Every government that likes to spend ends up damaging the economy, losing an election, and is followed by another government which has no choice but to impose spending cuts. Governments cannot spend money they do not have, any more than you or I can.

QUESTION: Where will the money come from for all of that public spending?

How would Syriza pay for increased pensions and salaries, not to mention promises like free electricity, food subsidies and free medical care? And how would it pay for the workers' wages it wants to re-employ, presumably to do very little in terms of productivity? This is how Greece got into trouble in the first place, by borrowing heavily to increase public sector wages and pay generous pensions, even encouraging early retirement.

OF CLOUDS AND SILVER LININGS

Syriza may do some good in a country where a lot was crooked or lopsided.

It may put distance between the state and the almighty (and very rich) Orthodox church, which normally gets involved in every tiny aspect of life in Greece, from the intimacy of private life and belief, to sporting events and cultural festivals; they even fielded a political party.

This could only be done by a party like Syriza and is long overdue, particularly in a country which invented secularism in society, invented independent thinking, invented freedom of speech and self-expression, invented pluralism in philosophy, and challenged the twelve gods of Olympus.

We shall see whether they can succeed or if the change can last.

Syriza may fight corruption and cronyism.

But to some extent it will replace old cronyism with its own people in many positions, and they, in turn, will appoint their own cronies on the grounds of re-balancing, as they would say, after all the years of old party cronyism.

Syriza may fight tax evasion endemic in the Greek economy.

But one fears what Greeks will get now is not tax collection but arbitrary seizure and confiscation. The language is reminiscent of Che Guevara.

Ordinary Greeks who voted for Syriza say that the national debt should be repaid by the rich, explaining, for example, those building a house. One shudders. In Greece houses are built singly by individuals, not in great numbers by developers as in the UK. In the UK the dream is to buy a house, in Greece it is to build a house on a plot of land you bought yourself. Working class people (if one can use the word 'class' for Greeks) build houses after saving money for years. It can take a lifetime to buy the land and then finish their house off, the dream being to leave it to their children.

Syriza says it would not go after the property of ordinary people building a small house, but where is the line to be drawn when it comes to defining wealth? Building a large house in some remote outback may cost less than a small apartment in some suburbs of Athens. A lot of Greeks choose to build away from cities, on previously agricultural land they may have inherited. One fears many will lose houses owned for generations, which they had made great sacrifices to maintain in the impoverished climate of the crisis, while their income had been savaged.

Many average families voted for Syriza out of desperation. What are the Syriza definitions now, and what will they be when it comes under pressure to deliver its promised increase in public spending?

BUT HAVING SAID THAT…

And yet, and yet, we wait to see what happens in practice. This would not be the first time in history Greeks have turned established wisdom upside down. Almost everything we believe as given today, certainly in the Western world, was thought of by crazy Greeks going against the rest of the world put together. Like democracy, for example, letting the ignorant layabout have an equal say in government as the learned and the wise. Mad, crazy, stupid - but it works. Mad, crazy, stupid but utterly brilliant. And so much better than kings or dictators and their arbitrary rulings, so much better than killing each other in popular revolutions or flattening cities over political arguments as they did recently in Syria and Libya, or bombing and murdering political opponents as in Pakistan.

My breath is bated. Syriza may well prove to be successful. Which would mean, have no doubt, the world would have to rewrite all its economic textbooks and ditch previous economic theories. I am a Thatcherite (not a Conservative) by persuasion and by reason. Thatcherism has been proven right, indisputably. I do not think that can be reversed - it has too much history behind it. But here we may see a radical alternative, which not even Syriza knows what it will be.

Syriza's ideology is deeply flawed, make no mistake, but what it does on the ground may be different.

The key issue is whether there is an alternative to the small state which runs on minimum public spending, borrows as little as possible, and puts fiscal discipline above a luxury portfolio of services which voters will always want.

Normally, left wing governments over-borrow and overspend, so more conservative governments follow them to mop up the damage, and that leads to another cycle of austerity. Governments, like anybody else, cannot spend money they do not have. If they borrow it, that's expensive, it will have to be paid back with interest - Greece knows that best. If they increase taxes, they stifle and choke those who create jobs for the many. If they print money, (provided they control their own currency) then they devalue and cause inflation, a cancer in any society, so they are back to zero. You just cannot spend money you do not have.

Or can you? We all know of exceptions in the past, the US 1930's depression being one.

Thatcher and other successful post-Thatcherite economies showed there is no known alternative.

Or is there?

Are we about to find out something totally new?

Out of this left wing party, a new doctrine may emerge which is no longer anti-capitalist, anti-markets traditional leftist in its pragmatism. Just like Margaret Thatcher who was a member of the British Conservative party, traditionally representing the middle class establishment, but she was in fact a radical revolutionary, anti-establishment, populist leader. She professed to conservative values in terms of individual choice, freedom, property ownership, and free market economics with minimum state interference, but rejected and destroyed the old Conservative status quo.

Will Syriza destroy the ideologically driven leftist / Marxist or even socialist agenda?

If any of that proves true, we do not know how different the world will be, but Greece and Syriza will have changed textbook economics.

A question connected with this is whether democracy has limits. Is there a democratic deficit? We have accepted that it is possible for a majority of voters to decree that the minority should pay for what the many want, through taxation. It is a form of partial confiscation, but preferable to a Bolshevik revolution where everything is confiscated and heads roll; so the few have been happy to go along. Now we face a bigger question: what if the majority vote to repudiate major legally binding commitments which previous democratic governments had made? And what if one democratic mandate in one country comes into conflict with another democratic mandate in another country, which has an interest, like Germany and others who have lent money to Greece on the understanding that contracts will be honoured?

THE LIMIT OF POLITICS

A third question is the nature of politics. Politicians can construct a new reality by making pronouncements, and this is far preferable to reality by bloody conflict. Words build up a construct which represents no reality except that created by itself. In the case of Greece now, insolvency is called something else, debt is declared unpayable but sacrosanct at the same time, undertakings are given (to voters in creditor countries) which cannot be fulfilled, and the whole system relies on the fact that a new form of words will be found in the future to deal with whatever the outcome turns out to be.

If Greece is insolvent and the EU & Co. insist all debt must be repaid, clearly we have a mathematical impossibility. Is this the limit of politics? Can political compromise, a form of words, even conjure up new numbers and rewrite the balance sheets?

This making up of artificial realities is preferable to guns in the streets or across frontiers, preferable to a collapse of confidence in the present financial system and hunger in the streets, a house of cards though it may be. This is what politicians are there to do, is it not?

Ten days after the January 2015 election, the new Greek Finance Minister said he could promise "to tell it like it is, without tactics." This is much more significant than non-Greeks realise. To Anglo-Saxons it would mean to "not mince words", to be blunt even abrasive. But Greeks have always been keen on hard reality as opposed to 'viewpoints' or conventional niceties, and Yianis Varoufakis meant that politicians and their words cannot change the numbers - i.e. the fact that Greece cannot possibly repay its mountain of debt, and therefore there is no point to any more bailout money adding to its existing debt.

So, words can change things, stop things or make things happen, but the question is to what extent? What are the limits? Or has Syriza called the bluff of all politics, by insisting that the king is naked, and there can be no disguise? And is it preferable, after all, for all governments to face mathematical reality rather than postpone an evil day? When does the price become higher?

Syriza's lack of experience showed from day one. Diplomatic language went out of the window in favour of logic and numbers. Very unwise, though their truth may be vindicated, it was said. A risky game of brinkmanship, others cried, which could lead to accidental disaster. True, but reality is more complex. If there is intentional brinkmanship from the Greeks (I am not sure there is), then Syriza will blink first, but hold your horses and do not judge. We may all be shocked and surprised. Remember the Trojan horse? That was the story of Greeks sending good wishes, declaring defeat and retreating, only to emerge behind enemy lines triumphant and utterly ruthless to the enemy.

LEFT AND RIGHT

If Syriza succeeds in the terms set out above, Greeks will no longer be able to call themselves 'of the left or of the right' as they do now.

The Greeks still feel the aftertaste of the brief civil war at the end of the Nazi occupation, between communist and nationalist Greek forces trying to fill the power vacuum when the Germans left. It was a struggle for the soul and future of the country, and Greece could easily have gone the way of Yugoslavia, Bulgaria and Albania into the eastern communist bloc, except that Stalin could not be bothered to bolster Greek communists. The civil war is recent memory even among the young Greeks because their parents and grandparents keep telling the story. People were dying from hunger in the streets; this is not a memory wiped out quickly. So there is a lot of vague talk of being 'left' or 'right' in a different way to the sense used in the UK. In the UK the terms refer primarily to socio-economic thinking; the differences between left and right are minute compared to how much they agree on. In Greece it is much more historio-philosophical, or visceral.

In the UK, people often say "I've always been Labour" or Tory, using the verb 'to be' to describe how they cast a vote every five years. They see the party of their preference as part of their personal identity. This kind of party affiliation does not exist in Greece in the same way, it is more generalised, an emotional preference for the right or left, hence the plethora of both left and right wing parties, each attracting some followers who will switch at the drop of a hat; hence also the rise of Syriza itself out of nothing, and the annihilation of the mainstream left social democratic party (PASOK) which had alternated with the conservatives in power for many years. That is also why electoral swings in Greece can be huge.

If Syriza succeeds, the lines will have been blurred, just as they were by Margaret Thatcher, a right-winger in theory but champion of the common man who wanted to improve himself. She showed that he could do that by being given freedom, and the incentive to own property (his house or shares) and keep more of what he earned - which turned many left wing voters to support the Conservatives.

Syriza's may prove to be the next such groundbreaking doctrine.

When Left turns Right, and Right into Left

One way or another, Syriza will never become a mainstream party in Greek politics. The Greeks are clever. They will take the most they can out of a Syriza government while it lasts and then ditch it. This is what the Greeks did with the previous two governing parties, the centre-left PASOK which negotiated the original bailout, and then the centre-right New Democracy government which had cut government spending, balanced the books to the point of a 3% surplus, stabilised the situation with Europe and the markets, and raised Greece's credit rating, all of that while drawing cash payments from the Troica - the IMF, the ECB, and the European Commission - mostly German money.

There was no subterfuge involved. The Greeks took all of that because it seemed the least painful option at the time, but when the medicine became more painful than the illness, they kept the benefit of all that and turned their back on those administering the medicine. There is no loyalty to parties in Greece, they are there to serve just like the plumber, and you can change your plumber any time you like.

Make no mistake, they will do the same with Syriza.

One hopes the centrist parties will have learned one lesson, that a government cannot balance the books at any cost. Austerity was overdone, resulting in high unemployment (25% overall and 50% among the young), property loss, poverty and hunger, and suicides.

In seeking to shrink the public sector and encourage the free market, the centre-right violated its own ideology, by distorting the market in a very different way, with a different kind of state interference. Taxation took so much money out of the economy, it was closer to communism than conservatism - the state taking as much as it wanted from citizens, arbitrarily.

You might say, this had been forced upon the centre-right government by its creditors or by reality on the ground. In the same way, left-wing Syriza will be forced to adopt right-wing measures of fiscal discipline, closer associated with capitalist ideology.

A complete inversion of traditional politics.

QUESTION:
And so back to our original question, who will be the long-term winners as a result of this election?

This Syriza victory will strengthen moderate conservatism in the long term, and by conservatism I do not mean just the centre-right parties like New Democracy, but any moderate party which will survive or emerge from this huge experiment.

If Syriza succeeds in the terms set out above, by writing off the Greek debt without exiting the Euro, it will have cast itself as a free-market political force with centrist credentials. Or if Syriza fails and inflicts damage on the structure of a free market economy, the kind of economy which can deliver wealth to the many, the conservatives will come back with a vengeance, electorally speaking.

If there is one mistake Syriza must not make, this is it, it must not bring back a bloated public sector. Forget left and right, the issue for Greece now is public versus private. This is the new battleground.

If Syriza allows the public sector to balloon again to its bloated old self, it would damage Greece. This painful reform had needed to be done, was mostly completed by the previous government, and the pain had been suffered, so to throw away the benefits after all the pain would be a terrible disaster. If the public sector does not shrink, the private wealth-creating sector will never flourish and Greece will never be rich, never export its way out of imbalance, never get rid of its deficit without stifling levels of taxation - and stifling taxation never produced a wealth creating economy.

Should more Greek debt be written off right now? This is a matter for creditors. Creditors also have to consider other indebted countries watching what happens to Greece. So-called anti-austerity parties have risen high who are no more than extreme left-wing anti-capitalist parties, even if their voters may not see that at first. To encourage such politics would be a disaster for those countries, for Europe, and for the world.

In reality, debt repayment can be put off for a long time. Great Britain has just repaid 100-year old war debts, although this is not much consolation to German and other tax payers who will not be here in a hundred years to get their money back. So the real problem is more political than economic. Unfortunately, political problems can be harder to solve.

But the implications for Greece are wider: Debt forgiveness must not encourage Greece to return to the past. It would be a wasted opportunity to reform to a modern, innovative, productive economy where the private sector thrives.

CATHARSIS

Related to debt forgiveness is the demand by Greece for war reparations from Germany. This is sensitive , or insensitive, depending on how you see it, whether as a ploy to extract debt forgiveness by force, or an opportunity to wipe the slate. Germany itself suffered terribly as a result of the Nazis, and to ask German voters now to pay up is more than economically painful, it feels offensive.

This does not change the fact that Greece suffered a brutal suppression under Nazi occupation, even by Nazi standards. The Nazis then ordered the Bank of Greece to pay Germany for the cost of its own occupation, money which has never been repaid. And we have mentioned the numerous executions of civilians and other war damages - damages as a result of which many Greeks are still suffering directly today, something I have seen with my own eyes.

Human beings can do very clever things but they can also create problems which do not have a solution. But it would be good all round, if this subject could be brought to closure once and for all, quite separately from any bailout negotiations. Syriza should not overplay its hand by linking the two together, as that would look like insult and extortion to one of its closest allies now, as well as its financial rescuer. And Germany must tread sensitively.

WILL GREECE EXIT THE EURO?

Last time, and throughout the crisis of 2008-12, ALFA had predicted that Greece would stay in the Euro (see earlier editorial below.) This time I am not so sure. On balance, my prediction is that Greece will stay, with a 75% degree of certainty.

What is the other 25%? It could well be that Syriza had intended to leave the Euro from the outset, or would not be averse to an exit, despite its promise not to, and was seeking the six month loan extension (they got four tentative months from the Eurozone) in order to make preparations for a possible new currency, such as print bank notes etc. That would be in line with the wishes of a large number of its members, to default on the debt, which they have said is unpayable anyway. If this were to happen, it would be costly to Greece's creditors, to Europe, and to the world, but it would be even more costly for Greece itself because, as set out above, much needed economic reforms would be reversed under Syriza - we all know of Mr Varoufakis' antipathy to Thatcherite policies. So for Greece it would be a big step backwards. For Syriza also it would be politically costly because its pre-election promise was to stay in the Euro. Not for the first time politicians would have gone back on their word; but this is the conundrum - would Syriza risk alienating so many voters in the hope that some payoff would compensate in the longer term for lost political capital , before the next election?

Grexit might also be one way of settling the war reparations issue with Germany, since Germany would be the biggest loser in a default situation.

Exit from the Euro under Syriza would mean descent into an economic winter for Greece, where trade unions and other vested interests ruled to ruin, with no regard to sound finance or economic prosperity.

Already there is talk of a parallel currency. That would mean the Greek government paying bills, pensions or its employees with IOUs (I owe you) which could start circulating, while the Euro remained the official currency. I find that very worrying. If the next round of negotiations produced an impasse, Syriza could use that as an excuse to exit the Euro altogether. Watch out for any signs of unbending language and lack of flexibility when the time comes.

But it is important to stress this is only a 25% chance.

DISCLAIMER

The content of these pages does not constitute professional advice, as it does not take account of individual circumstances.

ATHENS 2014

So Greece has escaped exit from the Euro - so far. ALFA had predicted this outcome, against the opinions of learned economists, and we believe Greece will continue to be a member of the Euro for as long as the currency itself survives. However, it was a narrow escape, and the price the Greeks paid was relatively small. It could have been a lot worse.

Before Greece joined the Euro, I had a debate with my cousin Timothy who worked in Brussels for the Common Market, as it was called. He was enthusiastic, but I predicted a crisis all the way back then. I had said, "The German will work and earn one Euro, but the Greek will work and work and still not earn one Euro." This was almost ten years before the banking crisis which precipitated the Greek crisis. No special powers of prophesy are being claimed here, just an understanding of productivity. To be wealthy you have to produce, produce things others want to buy, and produce them in the quality and in quantities others demand. If you do not produce, it does not matter how hard you work, you will have to keep borrowing and eventually you will go bust.

The pain inflicted on the Greek people was very severe, but in many ways this crisis was the best thing that ever happened to Greece itself. And it would have been a tragedy if Greece had exited from the euro, escaped from the enforced discipline, and missed a unique opportunity to reform a truly perverse economic philosophy.

The problem in Greece was not so much government overborrowing and overspending, they were the symptoms of a chronic disease. The cradle of philosophy had forgotten lessons they themselves had taught the world two and a half thousand years earlier. Many of its people had grown up with the idea that jobs exist and are created for the benefit of those who need an income. But Greece was one of the best trading nations ever in the history of the planet. They were free marketers. In a free market economy, jobs should only be created to serve the needs of customers, not job-seekers. People will always need to buy goods and services, and it is this demand which should create jobs, and only such jobs can make job-seekers prosperous and secure in the long term.

In pre-crisis Greece, we all had witnessed examples of people being paid to do work which served no purpose whatsoever, other than someone getting paid a salary. Incredibly, this was happening in the private sector too, whereas in the public sector it had reached cosmic dimensions. The number of civil servants was astronomical for such a small country. Friends were creating jobs for friends, some of those jobs even fictitious. In fact, if you pointed that out and complained at being put through an unnecessary process which was a disservice to you, they would often reply, "And how am I going to earn a living?" not always as politely.

And so millions were working hard doing nothing, or producing nothing which the rest of Greece or abroad wanted or needed.

The suffering of so many in Greece after the crisis was unjust and unfair to those born into such a system, not of their own making, but it is no different to the suffering of 290 million people in the old Soviet Union for seventy years, not to mention its satellites in the Eastern Bloc - and all this suffering was the inevitable outcome of faulty thinking. This is what happens when the state grows big and starts to spend money it does not have. The very people it was supposed to help, suffer.

It is a great blessing (in disguise) that this mentality is (hopefully) being put to the sword. The people of Greece are capable of hard conscientious work, they like quality and they are innovative, they are one of the most inventive and creative people, but they did have to learn all over again what their ancient forefathers knew: you should only get paid when you sell something useful to someone else.

Will Greece need another bailout? The question is too short term to be of interest here. What we can predict with certainty are great rewards after a period of intense pain. A modern economy will emerge, ready to compete and win. In an information age driven by technology, Greece does not need to become an industrialised giant to succeed. The Greek people have so much else to offer, as long as they are productive and live within their means.

DISCLAIMER

The content of these pages does not constitute professional advice, as it does not take account of individual circumstances.