Greek Tragedy: massive debts, socialist government, anti-entrepreneur, anti-profit, bloated public sector

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    Jul 13, 2011 9:43 PM GMT
    Greece: Where Profit Is Taboo - A shipping magnate on the fate of his country

    Wall Street Journal, Opinion Section, July 13, 2011

    http://online.wsj.com/article/SB10001424052702303678704576440434028124912.html?mod=ITP_opinion_0

    By Anne Jolis, Athens

    If you've ever wondered why so many Greeks succeed in shipping, John Coustas has a plausible theory: "Greek shipping has nothing to do with the Greek state."

    His firm, Danaos Corporation, is a case in point. Mr. Coustas took over the company, which owns container ships, from his father in 1987 and has since transformed it from a three-vessel outfit into the third-largest company of its kind in the world, with a fleet of 56 ships. Danaos is incorporated in the Marshall Islands, a popular and stable jurisdiction for the global industry, and handles many of its operations through its German, Ukrainian, Russian and Tanzanian offices.

    Nevertheless, Mr. Coustas is deeply concerned with the fate of his country. The government is now on the brink of default after passing its latest round of spending cuts and tax hikes. Yet the biggest risk to Greece, he says, is brain drain, that "all the good people, who really have something to offer, are either leaving or seriously considering it."

    The accepted wisdom is that Greece's tragedy began when it joined the euro zone in 2001. The rich-country currency club allowed Athens to borrow at interest rates tailored to Berlin and amass debts totaling 155% of GDP today. Mr. Coustas sees the rot as originating in 1974 when politicians in newly re-democratized Greece began expanding the state to "enlarge their influence." That process accelerated after 1981, when Greeks "got our first Socialist government. In Greece we had socialism through borrowing, and actually politicians were never honest about what the true situation was. That holds across the political spectrum."

    On top of misguided government spending, Mr. Coustas says entrepreneurial activity was denigrated for many years and profit was regarded as "wrong." "Anyone who wanted to make an investment here was considered a kind of bloodsucker."

    In the early 1980s, Mr. Coustas was in Japan to sign a new shipbuilding contract for Danaos. He recalls being approached by a Japanese workers' representative who "wanted to thank us for giving them work." The worker told him, "'We will do everything possible to build a good ship for you.' Can you imagine that happening here? Here, if you tried to do the same thing and place an order in the Greek shipyards, you would get protests that either you paid too little, or are trying to pressure the workers, or whatever."

    Little wonder, he observes, that Greece's Skaramanga and Elifsis shipyards went bankrupt. Danaos's recent new-build program was worth some $3.5 billion, and Mr. Coustas estimates that the entire Greek maritime sector's new-build projects were worth close to $100 billion in the last decade: "Imagine if a small fraction of that had been ordered in Greek shipyards."

    Today, of course, "everyone agrees that Greece needs private-sector growth," but "nobody really asks the private sector what is required in order to invest. Nobody listens."

    If they ever do, Mr. Coustas would recommend nothing less than a constitutional overhaul. He would start by "removing the Supreme Court's environmental involvement, through which it can practically annul anything, even if it's been legislated by the Greek parliament." He cites this judicial climate as a key reason for why Qatar has yet to proceed with its planned $5 billion investment in the Greek economy.

    Equally unhelpful is Greece's tax code, which Mr. Coustas says "is designed so that the taxman can benefit from the lack of transparency. . . . He gets bribed in order to accept your illegitimacy." Businesses' total levies are 47% of profits, according to the World Bank, and Mr. Coustas notes that "of course a lower tax rate helps." But stability and transparency are more important. "That's how you really generate corruption, when things are gray," he tells me. "When things are black or white, interpretation is very easy; that is why we need a complete rewrite of Greek laws."

    Greece's bloated public sector—state workers comprise at least 15.5% of the total labor force—are another burden. Politicians of all stripes, Mr. Coustas says, have given lifetime sinecures to this "totally unproductive" army of bureaucrats and now see them as a "sacrosanct" constituency.

    Whether EU-IMF bailouts and chiding can save Greece, Mr. Coustas says, is really beside the point. "These questions are conditional on what Greece is really prepared to do." He points to his own storied industry as "the example of what Greek entrepreneurs can do when the state isn't nailing us down. If that kind of philosophy extended to the other sectors of the economy, then we would definitely see Greece prosper and thrive."

    Miss Jolis is an editorial page writer for The Wall Street Journal Europe.
  • conservativej...

    Posts: 2465

    Jul 14, 2011 12:09 AM GMT
    I question whether it was ever prudent to provide bail-out funds to the Greek government. Let them fish.