Thoughts of Cyprus and Malta

What Great Depression? Greece is suffering the greatest economic recession in its history.

2011-12-22T03:00:00.000-08:00

One of the reasons I have been so upset with the powers that be in Europe is the fact that publicly there is great emphasis that they are trying to prevent a great depression, while their actions seem to mathematically send us into that direction. A crisis needs flexibility, and yet all the EU 26 (- UK) are proposing is more and more rigidity and bureaucratisation.

Greece can be seen as a test bed for their proposals since it has been under supervision since 2010. While new bureaucrats appointed with the Blessings of Brussels, such as the new head of ELSTAT, Mr. Andreas Georgiou, is being prosecuted for correctly calculating the Greek sovereign debt, it good to see what the IMF/EU measures did to the Greek Economy.

Below are comparisons with the Great Depression, which led to the downfall of the Venizellos government and the erosion of democracy in Greece. In that case Greece defaulted on its debts and left the gold standard, the global fixed exchange rate mechanism that was in its final death rows then. In yellow are the years for which the indicators are negative.

The Great Depression did not destroy Industrial output as convincingly as the current economic situation in Greece. This is tragic as manufacturing is a high productivity business, and a reduction of manufacturing usually leads to a focus on services which need high human capital and long hours of work. This is very bad news for manufacturing workers who might not have the human capital to find work in any service sector, and especially for those manufacturing cities that are far away from Athens and Thessaloniki.

In terms of GDP the recession is now the longest on record for Greece. In 1932 such a cumulative fall of income of 6.5% led to massive strikes, agricultural uprisings, and revolts, leading to the dissolution of order and democracy. Yet in this decade, a cumulative fall of income of -12.5% does not seem to lead to dangerous calls for revolution. The striking difference is how in the modern case the recession is both deep but also very prolonged, which morale sapping effects both for the business climate (acting as a stop to domestic and foreign investment inflows) and to the skilled section of the Greek workforce, who is seeking for better employment within the European market as things are not picking up.

Why was there a recovery in 1932-1933? Greece left the fixed exchange rate that existed between it and the major advanced states of Europe. This created chaos in the finances of the Greek state, forcing it to default on its loans and to look inward for development. This greatly aided the budding domestic industry which now had a captive market  the Greek people who now had no option but to buy domestic products as foreign products disappeared form themselves due to Balance of payments issues. Now exiting the Euro is not very simple; it is far more integrated and hence distributive than just a fixed exchange mechanism and you cannot exclude people from the outside economy in order to initiate a domestic recovery driven through industrialisation.

What happened to inflation when Greece exited the then gold standard? Inflation very quickly eroded part of the benefits of the recovery. In fact many of the big family names in Greece made their money in this period, as there was a redistribution of income away from wage earners and towards the owners of means of production.

The lessons from the Great depression are not simple, and more detailed analysis is needed before one can suggest concrete policy suggestions. But two things stand out:
1) This is the greatest economic recession modern Greece has ever seen with no recovery in sight.
2) An exit from the Euro will create problems such as inflation and a reduction of choice of local consumers, and though a reduction of the consumer surplus, there will be a redistribution of wealth from the wage earners to those who own and sell products.

A pdf version with cleaner tables can be found here.

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How to reduce the chances of a betting loss.

2011-12-07T08:21:00.000-08:00

We all know that Apoel Nicosia defies all odds and statistics, but having some insider understanding of statistics can really help on betting. Although betting is still seem as a non illegitimate investment for portfolio management (mainly because hard to insure or hedge for the losses).

However more and more data is becoming even freely available, and significant data is behind paid walls. Deloitte has a great annual summary, but now SAP is showcasing its powerful analytic tools.

Based on the results I would bet Manchester city to win and 70% possession. Still no hedging but i am sure the next on-line betting sensation will be a insurance to betting losses.
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An article in The Economist about the Cypriot Oil and Gas exploration

2011-12-05T01:34:00.000-08:00

I am very pessimistic about the hoopla over the oil and gas purported to lie just outside our reach in the Economic Exclusion zone of Cyprus. We still:
1) Do not know how much is down there
2) Do not have a way to take it out
3) Do not have a way to make it exportable (LPG or pipeline)
4) I have yet to see research that such a venture will actually promote economic growth (although the Euro does help against the Dutch disease --> where a increase in the exchange rate destroys all other industries but the oil and gas fields.

As a practical man I would like to see the steps taken to perhaps capitalize on the future boon of Cyprus such as developing the infrastructure, setting up the institutional basis, removing the topic out of the real of politics ect. Yet it seems that we are taking a different direction (secrecy, squabbling and promise of unearned riches ). Meanwhile the subject is getting an ever increasing interest from abroad as this article in the Economist shows.

I just wish some tells it straight: there is no such think as a free lunch, investments should go to developing a local exploration industry capable to compete globally, and we should copy the Norwegian example of taking gas decisions out of the real of politicians.
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Why do we listen to the market? Sound Macroeconomic policy means much more.

2011-12-02T01:28:00.000-08:00

I have been discussing with students recently in how odd the reporting of the financial crisis has been since 2007. Most news publications that claim to have some authority / influence in the global economy seemed to change their stories going through three stages during the last 4 years:
1) 2007 - 2008: The problem was how to save the banks. Governments Should step in and help banks because they are "too big to fail". This is intensified after the collapse of Lehman Brothers in 2008, since media reported that even a smallish banking collapse created panic in the markets.
2) 2009 - 2010: The focus was on the rallying stock markets and how governments are endangering such growth through excessive borrowing. They are removing liquidity from the market and destabilising currencies --> the Euro. The answer was very strict budget retrenchments.
3) 2010-2011: Unsurprisingly the reigning in of government budgets made the possibility of a "Double dip" recession very real as output growth faltered. Stock markets that were rising due to the injected liquidity by governments in 2007/8 ignoring that the real economy underperformed re-adjusted downward very rapidly when government sponsored liquidity dried up and the real economy felt the effect of reduced government expenditure. This caused another scare and placing the emphasis on the printed press to the need of governments to focus on economic growth as the only way out of the economic crisis.

[I am aware that the above is an oversimplification, but I think the emphasis on the three different strands is fair if one looks at the aggregate picture]

What disturbs me with this is that such analysis has proven not only short sighted, but also ruinous as it assumes that the financial markets always know what is best for their long run future.

Now I am not against the existence of global financial markets, far from it, but I do think that sound Macroeconomic policy means that market considerations is only one of the many factors that need to be taken into account. In short, the real economy is always more important than the market!

Back in 2007 growth should have been the only consideration: when you have growth you can fix all the other issues brought up by this crisis (excessive deficits, borrowing, financial weakness of banks, competitiveness)much easier than when you are in recession and all the above issues create vicious pro-cyclical loops that make solving any of them very difficult. I owe this understanding to an MSc class with Dr. Tim Leunig, who thankfully now he seems to be able to be the voice of reason in the UK through his work with the Centreforum.

When one assumes that the financial markets know best, they forget that the profit motive might lead to results that are sub-optimal to the society. It has been recently been discovered that the Federal reserve of US has pledged 7.7$ Trillion dollars, with very little of that being injected in the real economy, with the possibility of some even being re-invested in treasury bonds rather then invested in the real economy in order to increase income and hence promote growth.

Its is clear that what was best globally, including for the global financial markets, would be a return to growth in the US economy through the investment of part of such injections to the real world, but the safe bet won out in the period where bears (conservative investors) as more than the bulls (risk takers) by investing them instead in treasury bonds. Hence market decisions can lead to below optimal results .

If the Fed gave support only on the condition that a share of the liquidity would be given to the real economy as loans, then growth would have enabled the global economy to tackle the issues of excessive government debt much more simply, thus calming the markets and enabling government to support any banks that were still in trouble.

Sadly we once again seems to have forgot our goal, which has to be growth. The press and financial markets seems to be caught in the dream of austerity again, but only a long term goal of growth (followed by reform) will make make the US and EU economies healthy again.

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Another Excellent Article on the economic travesty of Unions in Cyprus

2011-11-20T22:52:00.000-08:00

I personally respect the work of three journalists working in two different fields: Stefanos Evripidou on social and issues, Antonis Polydorou on political issues, and Michalis Persianis on economic issues.

Michalis has been a breath of fresh air since he appeared on the scene with his online comments on www.kathimerini.com.cy and his deeper analysis on the sunday edition of the paper. His knowledge is not just on economics but also in many other fields, allowing a very spherical approach and understanding of our problems.

For example, he has been consistently calling for a Medium term Budget plan for over three years, but unfortunately no one listened to him and now we need to release in a hurry as it has been demanded by the European Union.

In the following article which you can see here in print or read it in his excellent blog, Michalis points out that the ideological division of the organised workers and of the cruel bourgeoisie does not hold when 91.8% of business in Cyprus is classed as SMEs (Small and medium size enterprises), while leaders of unions such as Pasidy take home a greater pay than most entrepreneurs.

Michalis is a breath of fresh air in the economic discussions that take place in printed media - I just hope that he is listened to more often. The article as published in Kathimerini is below:

Ημερομηνία: 20.11.2011 | 14:06
Τα φετίχ της «εργατικής» αριστοκρατίας
Του Μιχάλη Περσιάνη
Ένα από τα πιο αναπάντεχα φαινόμενα που βασάνισαν τον Λένιν, ήταν η στήριξη που παρείχαν τα οργανωμένα σύνολα που μετείχαν στη Δεύτερη Διεθνή, στις εκάστοτε κυβερνήσεις τους κατά τη διάρκεια του Α΄ Παγκοσμίου Πολέμου. Αντί οι προλετάριοι να στηρίξουν την εργατιά, στήριξαν τα έθνη, δηλαδή –κατά τον Λένιν– το κεφάλαιο. Φυσικά, ο Λένιν δεν ήταν κανένα τυχαίο κεφάλι και η εξήγηση ήταν απλή.

Την είχε, εξάλλου, εντοπίσει και ο Ένγκελς, ο οποίος συχνά έγραφε στον τρόφιμό του, Μαρξ, για τον συντηρητισμό των προλετάριων: Η «εργατική αριστοκρατία» αποτελείται από εκείνους τους προλετάριους που, μέσα από τον συνδικαλισμό, εξασφάλισαν καλύτερους όρους εργασίας και μετατράπηκαν σε μπουρζουαζία.

Αυτή η διαπίστωση οδήγησε τον Λένιν στη θεωρία του για τον ρόλο του ιμπεριαλισμού στη διεθνή καπιταλιστική σκηνή και δη στον Α΄ Παγκόσμιο. Ο ιμπεριαλισμός ήταν μια αθλιότητα που ευθύνεται για μεγάλο ανθρώπινο πόνο, αλλά ο Α΄ Παγκόσμιος μάλλον δεν οφείλεται σε αυτόν. Αυτό, όμως, είναι ένα άλλο θέμα.

Η δημιουργία, όμως, μιας εργατικής «αριστοκρατίας» (των «σκλάβων του σπιτιού», όπως λένε και οι μαύροι των ΗΠΑ), η οποία δεν θέλει να ταράξει τα νερά, δεν είναι πλέον το ουσιαστικό πρόβλημα για την Αριστερά. Σήμερα το πρόβλημα είναι πολύ μεγαλύτερο και εστιάζεται εντός των ίδιων των συντεχνιών.

Εντός της εκάστοτε συντεχνίας, υπάρχουν μεγαλύτερες ανισότητες παρά μεταξύ των «εργαζομένων» και των «εργοδοτών». Αυτός ο διαχωρισμός έχει αλλάξει ριζικά ύφος και, μαζί του, πρέπει να αλλάξει και η προσέγγιση της Αριστεράς.

Εάν η εκμετάλλευση ήταν αναπόσπαστο μέρος του πλούτου κατά τη βικτωριανή εποχή, σήμερα υπάρχει και μια άλλη παράμετρος – η άνοδος των μικρομεσαίων επιχειρήσεων (ΜμΕ). Λόγω των ΜμΕ, ο «πλούτος» είναι αποτέλεσμα σκληρής εργασίας και όχι της εκμετάλλευσης. (Υπάρχουν, φυσικά, εξαιρέσεις).

Αυτό μάλλον οφείλεται στην παγκοσμιοποίηση, παρά εμποδίζεται απ’ αυτήν. Στην Κύπρο, όλες οι επιχειρήσεις, με εξαίρεση 72, είναι ΜμΕ, ενώ το 91,8% των επιχειρήσεων είναι μικρές, οικογενειακές. Αυτός ο πλούτος, «η Κούλα η ράφταινα», όπως συνηθίζει να λέει αυτή η στήλη, μάλλον είναι ήρωες της βιοπάλης, παρά εκμεταλλευτές των εργαζομένων.

Αντίθετα, εντός των ίδιων των συντεχνιών, παρατηρείται μεγάλη ανισότητα. Γράψαμε πολλές φορές πως ο τρόπος με τον οποίο λειτουργούν οι συντεχνίες, αδικεί τα χαμηλόμισθα μέλη τους και ευεργετεί τους υψηλόμισθους. Μάλιστα, αυτή η στήλη διερωτήθηκε –και ακόμα διερωτάται– πώς υπάρχει τόση ανοχή από τα χαμηλόμισθα μέλη των συντεχνιών για την ηγεσία τους.

Ίσως η εξήγηση να βρίσκεται σε μια άλλη μαρξιστική ανάλυση. Ο φετιχισμός των εμπορευμάτων ήταν μία έννοια που ο Μαρξ τράβηξε από τα μεγάλα ρεύματα των ανθρωπολόγων που άνθιζαν στην εποχή του. Τα αντικείμενα, μέσα από τη διαδικασία παραγωγής τους –την εργασία–, αποκτούν μια σχεδόν μεταφυσική ιδιότητα, «σαν να είναι ανεξάρτητα, προικισμένα με δική τους ζωή». Κάτι παρόμοιο έχει συμβεί, φαίνεται, και με τις πολιτικές.

Στην Κύπρο βλέπουμε μια επιμονή των συντεχνιών, ακόμα και της ίδιας της Αριστεράς, σε μια σειρά από πολιτικές που είναι αντιλαϊκές.

Η ΑΤΑ εντείνει την ανισότητα αλλά η κάθε μεταρρύθμισή της αντιμετωπίζεται ως «κουτσούρεμα», ακόμα κι αν το «κουτσούρεμα» αφορά αποκλειστικά και μόνο τους υψηλόμισθους και όχι τις χαμηλές κλίμακες.

Παρομοίως, ως απώλεια των «κεκτημένων» (ένα άλλο φετίχ) αντιμετωπίζεται και η μείωση των επιδομάτων που είναι αφορολόγητα αλλά συντάξιμα. Ένα τρίτο φετίχ είναι και η συνεισφορά των δημοσίων υπαλλήλων για τις δικές τους συντάξεις, μια συνεισφορά που ουσιαστικά κάνουν άλλοι, συνήθως φτωχότεροι.

Εν τω μεταξύ, ίσως το μεγαλύτερο φετίχ να είναι και η φοροδιαφυγή, η οποία αντιμετωπίζεται ως «εναλλακτικό» της διόρθωσης των προνομίων της «εργατικής αριστοκρατίας». Η λογική των συντεχνιών είναι πως πρέπει να δώσουν χρήματα οι φοροφυγάδες για να μην κοπούν προνόμια από τους πιο εύπορους. Ουσιαστικά, λένε: «Αντί να τα τρώνε οι δικηγόροι και οι γιατροί, πρέπει να τα τρώμε εμείς».

Η φοροδιαφυγή, φυσικά, είναι κλοπή και πρέπει να πατάσσεται, όπως και να ’χει το πράγμα. Αλλά η λογική πως είτε οι Α προνομιούχοι είτε οι Β προνομιούχοι πρέπει να τα φάνε, αγνοεί τα όσα υποφέρει «η Κούλα η ράφταινα» για να πληρώνει όσα δεν πρέπει να κλέβουν οι μεν για να τα τρώνε οι δε.

Εν τω μεταξύ, η οικονομία έχει φτάσει σε σημείο όπου, μελλοντικά, η περικοπή μισθών είναι σχεδόν αναπόφευκτη. Τελικά, οδεύουμε προς μείωση μισθών για όλους, με στόχο να προστατευτούν τα «φετίχ» της Αριστεράς. Χαρακτηριστικό είναι πως, με τις πιο πρόσφατες αποφάσεις, το επίδομα τέκνου αποκόπτεται μόνο κατά 50% για μια οικογένεια με μέσο μηνιαίο εισόδημα 7.500 ευρώ.

Εάν κοβόταν στο 0, και με πιο χαμηλό όριο, θα ήταν πιο δίκαιο, ενώ θα μπορούσε να μας επιτρέψει να αυξήσουμε τη χορηγία των πιο φτωχών και να έχουμε, ταυτόχρονα, και εξοικονομήσεις. Αλλά μπαίνει στη μέση το φετίχ των «κεκτημένων».
Ίσως να ήρθε η ώρα να αξιολογηθούν εκ νέου αυτά τα φετίχ, ιδίως αν αναλογιστεί κανείς πόσο «αντι-αριστερό» είναι το αποτέλεσμα.

Επίσης, ένας αληθινός αριστερός θα τα έβαζε με το κεφάλαιο για να προχωρήσει το ΓεΣΥ. Και πρέπει να εκπονηθεί Μεσοπρόθεσμο Δημοσιονομικό Πλαίσιο (ΜΔΠ).

www.kathimerini.com.cy
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Relaunch of the Syndicated Blog: "Economists of Cyprus"

2011-11-20T22:24:00.000-08:00

Back in December 2008 I noticed that there was a great deal of good economic analysis of the Cypriot economy, but it was disjointed on social networks and blogs. Thus I attempted to bring all this together through a syndicated blog of online commentators, In order to create a community of interested parties to the Cypriot economy.
Today the site "Economists of Cyprus" is being re-launched with additional material and help by Protesilaos Stavrou, a very active member not just of the Cyrpiot blogosphere but also in a European Context.
Please have a look at the website and subscribe and/or comment!

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Old comments... But like many other warnings, none listened.....

2011-11-18T04:08:00.000-08:00

It was not just me who was warning that things would reach a crisis in Cyprus, but sadly no one listened. I was requested to repost the comments I made previously to the crisis and i take the opportunity to do so in this post.

Here is the Article on "The Economist" warning on the potential problems published on December the 2010. The interview was extensive but looking back the journalist was right to focus on this:

"Alexander Apostolides of the European University of Cyprus laments the lack of urgency. “There is not a feeling that we are on a slippery slope.”

On an non-related issue this is the comment I made and it was published on "The Economist" the real ideological debate within the ECB back in March 2009. This debate between Keynesian and Monetarist principles is now the focus point of the whole EURO project. If the ECB just accepted the principle of last resort or supporting the the EFSF then the Euro crisis would cease to threaten the fragile global economic recovery. Note that if the ECB believes in the ability to influence the real economy then it knows it can provide a solution (even if it is short term in nature). I finish with a quote back in 2009:

"While there might be a definite disagreement on what the monetarist solution is for Europe, both parties within the ECB accept that the ECB holds the answer and fiscal policies of the respective European countries are at best complimentary but at worst unhelpful."
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Bad news for Cypriot Banks in the Greek Stock Market...

2011-11-17T21:51:00.000-08:00

From www.imerisia.gr published date 16/11/2011.
Τορπίλισε» το Χρηματιστήριο Αθηνών η Morgan Stanley με τις αλλαγές στο δείκτη MSCI. Ο ξένος οίκος ...έδειξε την έξοδο σε τέσσερις ελληνικές μετοχές διότι η κεφαλαιοποίηση τους έπεσε κάτω από το 1,5 δισ ευρώ. Οι μετοχές που αποχωρούν είναι η Alpha Bank, η EFG Eurobank , η ΔΕΗ και η Τράπεζα Κύπρου.
Η είδηση έριξε στα Τάρταρα τις μετοχές. Η μετοχή της Τράπεζας Κύπρου έπεσε 15,65% διότι οι επενδυτές φοβήθηκαν ότι θα αυξηθεί κατακόρυφα η προσφορά τίτλων τις επόμενες συνεδριάσεις. Σύμφωνα με ασφαλείς πληροφορίες ο αριθμός των μετοχών που κατέχουν τα index Fund ανέρχεται σε 4,2 εκατομμύρια μετοχές ενώ η Morgan Stanley δεσμεύτηκε ότι δεν θα πουλήσει τα 46 εκατ. μετοχές που έχει στα χαρτοφυλάκια της.
Η EFG Eurobank έπεσε 12,35% αφού η προσφορά τις επόμενες ημέρες θα φθάσει τα 14 εκατ. μετοχές. Η Alpha Bank έχασε 11,67% και ο αριθμός των μετοχών που θα βγει στο «σφυρί» φθάνει τα 21 εκατομμύρια. Ο τίτλος της ΔΕΗ σημείωσε τη μικρότερη πτώση κατά 5,86% διότι ο αριθμός των μετοχών που θα αλλάξει χέρια ανέρχεται σε 4,9 εκατομμύρια.
Οι αλλαγές θα πρέπει να ολοκληρωθούν την Τετάρτη 30 Νοεμβρίου 2011.
Σύμφωνα με χρηματιστές για να ολοκληρωθεί η έξοδος των ξένων θεσμικών επενδυτών θα απαιτηθεί χρόνος που φθάνει ακόμη και τις 18 συνεδριάσεις με βάση τον ημερήσιο όγκο που κάνουν οι τέσσερις μετοχές. Πάντως η Εθνική Τράπεζα παραμένει στο δείκτη αλλά αυτό δεν εμπόδισε τους επενδυτές να προχωρήσουν σε πωλήσεις. Η τιμή της είχε απώλειες ύψους 4,30% στο 1,78 ευρώ.
Οι ίδιοι εκτιμούν ότι εξαιτίας των αλλαγών θα εκδηλωθούν πιέσεις στο ελληνικό χρηματιστήριο ενώ οι μετοχές που δεν επηρεάζονται δεν είναι σε θέση να απορροφήσουν τους κλυδωνισμούς που θα προκληθούν στο Χ.Α. Την ίδια στιγμή αναλυτές θεωρούν πλέον βέβαιο ότι ο γενικός δείκτης θα πέσει κάτω από τις 700 μονάδες. Προσθέτουν ότι η στήριξη των 680 μονάδων θεωρείται καθοριστικής σημασίας για την περαιτέρω πορεία της αγοράς. Σύμφωνα με τα στοιχεία της εταιρείας ZTrade.gr ο γενικός δείκτης έκλεισε με πτώση 2,41% στις 717,93 μονάδες.
Στο σύνολο της αγοράς με κέρδη έκλεισαν 48 μετοχές ,οι 113 με ζημιές και 131 παρέμειναν αμετάβλητες. Ο τζίρος ανήλθε σε 46,8 εκατ. ευρώ.

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Forecasts of the Cypriot Economy: Estimate still on Track

2011-11-16T03:21:00.000-08:00

Back in the 14th September, I was asked to estimate the GDP of 2011 and 2012 for Cyprus. I was reluctant to do so since I do not consider myself a forecaster, nor do I have a formal model of the Cyprus Economy that is forward looking.

I do however understand national accounts and how they work, and having recently looked at estimates and with help of others revised the Mari disaster, I applied this knowledge to GDP. Yesterday the Government of Cyprus has released the latest quarterly estimates being negative at -0.6. So up to now total growth of GDP is just 0.7%.

I am aware that this is a flash estimate and I am sure once the additional cost of more expensive electricity gets updated the value added will drop and the GDP fall will be even larger (-0.1%/-0.2%)

Unlike the third quarter, which was considered universally poor from most available indicators and anecdotal evidence, there is a less clear picture for the fourth quarter. The SMEs in the construction sector and support services to construction seem to be recovering. Consumers are upgrading and repairing existing houses and cars rather than spending for new ones, providing substantial work for several repair and SME services such as plumbing, carpeting etc. One is unsure how much of such business is actually recorded since it is largely done in the shadow economy to avoid paying VAT.

At the same time the news from the most dynamic contributors of economic growth, such as the banking and the construction of housing are suffering. The need for the financial services sector to raise capital and prepare for exposures to Greece, and perhaps additional losses due collateral damage of the current turbulence of the markets (see the exposure to the receivership of MF Global) will reduce income generation.

I stand by my original predictions of September: Negative growth in 2011 (-0.1%), weak recovery in 2012 (0.8%) and negative per capita growth for both years. Any one willing to bet on a different number?

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The Euro crisis and democracy

2011-11-15T02:20:00.000-08:00

I am troubled by the idea that Politicians are great during the good times, but in bad times one needs to hand out power to technocrats. I think it makes democracy sound like a luxury that prosperous persons can afford, and that politicians (and by proxy those who elected them) are in this way escaping their responsibility of creating the mess in the first place.

Another interesting issue is posted by Protesilaos Stavrou, who has been blogging constantly and with good insight on the economic issues of the Eurozone crisis. He highlights the lack of democracy of the European Central Bank and how this affects the decisions of handing to it the ability to impose both monetary policy (which it has) but also fiscal policy (in the form of control of finances). See the original article here.

ECB and democracy: The traps of debt monetization By Protesilaos Stavrou

Sooner or later the European Central Bank will have to monetize debts to pacify markets, who see the illiquidity of Italy and Spain as an underlying risk that might make their public finances unsustainable within the few years ahead or even sooner, depending on the overall conditions in the Eurozone first and the global economy second. What should be made clear is that the ECB is already buying sovereign bonds from the secondary markets, via its Securities Markets Programme (SMP), though the quantities it purchases are relatively insignificant to shape interest rates and send a clear message to international investors that there is a determined final backstop in the Euro Area. Having already stated on several occasions my belief that the ECB should take a more active role in combating the disintegrating dynamics of the crisis, I now need to point out some issues relating to democracy, transparency and equality with respect to euro member-states, that are often neglected by the vast majority of analysts, for whatever reason that may be.

First of all, the ECB has been given the unique task to issue and control a currency (the euro) without the existence of a counterparty treasury with jurisdiction over the exact same area. The eurozone is a currency union, an area with a single monetary policy (together with all the rest Community acquis), which lacks a unified fiscal policy, or in other words a single authority that would have the power to raise money from its constituent states, by imposing taxes or issuing bonds of its own. Regardless of what was the rationale behind this setting, the gist is that there is a significant institutional gap in the architecture of the euro that makes the management of the crisis ever more challenging. This currently leaves the whole euro with only one policy leg, implying that any efforts to introduce the missing "leg" would either require a cumbersome Treaty change that will take years to be concluded, given the complexity of law-making in the EU and the need for any Treaty change to be ratified by 27 parliaments, making the labor unfeasible within the rigid time frame of the crisis; or alternatively the introduction of ad hoc measures that would give the missing powers to some mechanism that would lack credibility and would most probably be undemocratic, just like the EFSF, or ultimately to assign to the ECB itself the twin task of monetary and fiscal policy.

Given that a credible Treaty change is practically impossible within the time frame available (what Merkel is saying all the time about changing the treaties is mostly to exert pressure on certain governments to pass the necessary reforms), the only real choice, should full scale monetization be allowed, is to either resort to half-measures undertaken by ad hoc mechanisms, or to give all power to the ECB. In either case we are dealing with an issue of democratic illegitimacy and most probably with the over-concentration of powers to unelected bureaus/bodies/agencies/institutions with basically little to no accountability. The ECB for instance is completely independent and no power can tell it what to do. This derives from Article 130 of the Treaty which states the following:
When exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB [European System of Central Banks] and of the ECB, neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks.
Given this legal framework, the transfer of considerably more powers to an institution that cannot be controlled by anyone, is certainly not a prudent choice. The institutional gaps of the euro make the ECB a supranational entity, not a federal one, like the Fed in the US, which is from a qualitative perspective quite different since the ECB will in fact be above any state and will therefore have the power to impose its own conditions for monetization and discriminate among the states it wishes to support. This might sound overstretched to some, yet there already exists an instance of such coercion back in August, when a letter dated August 5 was sent from the ECB to the Italian government demanding austerity measures to be taken prior to the intervention in the secondary markets that took place during that time. Who can guarantee that similar actions may not be repeated in the future, especially in the case the ECB is asked to perform the dual task of being the treasurer and the issuer of the currency imposing rules and conditions and making discriminations? This democratic deficit is indeed an important issue, one that needs be considered prior to any steps towards such a direction.

On the flip-side, one might argue that the EU as a whole is already suffering from a similar democratic deficit which of course exists from the national level and it increases as we move higher in the institutional hierarchy. For instance the European Commission is unelected, yet the powers it commands are impressive. The point now is not to raise the issue of democracy in the EU, but to add to the discussion the argument which suggests that since Europe already suffers from a structural democratic deficit and since all measures that have been taken so far to combat the crisis are in most cases democratically illegitimate (excessive powers to the monitoring mechanisms in bailed out countries, democratically illegitimate mechanisms such as the EFSF etc.), why not move deeper in to the hole by adopting in full the sort of Faustian policies that are already exercised?

Regardless of where one stands regarding the argument, the point remains the same. We as Europeans are found in a situation where we have restricted our selves by designing a flawed monetary union and we now come to the point where the ECB will, sooner or later, have to monetize debts to prevent the implosion of the whole project. Democratic or not, this seems to be the only path to safety (combined with a series of other measures of course). Given that our leaders have proven to be quite creative when it comes to devising all sorts of complicated plans and bizarre mechanisms, an optimist might suggest that we should expect them to come up with a way to circumvent the democratic issue that has been raised above. Failing to do so in an effective manner, might well lead to unpleasant consequences, suggesting that this issue requires carefully taken decisions, with full agreement by all parties involved. At any rate we are already walking on a very thin diving line between virtue and vice. Alas we brought our selves to this position.

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Some interesting juxtapositions: Cyprus and the Piri Reis

2011-11-15T01:22:00.000-08:00

The republic of Cyprus and Turkey have increased tension on the Eastern Mediterranean due to the decision of the Cyprus to use its sovereign right of allowing drilling for gas its its economic exclusion area. Turkey has responded by sending the cartographic vessel "Piri Reis" not to the North of the island which is is under occupation by its military, but to the south, dangerously close to where the explorations are taking place.

Yes not many people do not know who Piri Reis was. His name and effort to build very accurate global map indicates the ambition of the Ottoman Empire at that time, when it began to dominate the Eastern Mediterranean through the conquest of Egypt and by forcing the Christian enclaves of the region into retreat or dismemberment. Detailed maps of the New world where commissioned as the empire looked not to the conquest of the Mediterranean which was seen as inevitable(but was eventually checked in Vienna, Malta and Lepanto) but in access to the riches of the New world shared by Spain, Holland, France and Britain.

It is clear that Cyprus was also an important expansion point, as the Venetian ruled island could dominate trade between the Ottoman Empires possessions of Anatolia, Greece, Palestine and Egypt. In its history Cyprus was always considered as a threat by the greatest power of the region, but after conquest it its value declined; it was always valuable to keep it from the enemy, but not so valuable to have it yourself.

I have no way to check if indeed this drawing is by Piri Reis as the source claims; However it puts into perspective that the island, as well as the sea around it has been a strategic concern of Turkey as far back of the 16th century.
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Lessons from History: Government Wages in Cyprus

2011-11-09T18:39:00.000-08:00

In 1931 the British colony of Cyprus was facing a debt crisis. The very serious effects of the great depression, made worse by the worst drought the island had seen in 100 years, led to a lack of funds for the government. The government cut all public works spending, and argued that the situation would get better soon.

Politicians from all communities, discussing in the talking shop (bereft of real power) provided by the authorities (known as the Legislative council) were pointing out that the wished for surplus was not going to materialise, since the same wishful thinking occurred in 1929 and 1930; then the government increased taxation, only to see further deficits and the shrinking of the colony's reserve. They suggested instead:
1) a cut in surplus positions in the government (especially high ranking ones) starting by cancelling the newest appointments and or promotions.
2) A reduction to the COLA (Cost Of Living Allowance) increase (ATA was in Cyprus since 1878!) and performance related increase by 2/3 but not for those with income below 120 pounds
3) Reduction of government scales across the board especially of those who were created after 1914, which operated in a higher scale.

Of course in 1931 the demands were a statement of political intent as wall as an attempt to introduce fiscal austerity to the apparatus of government: The above measures would hurt the British working in Cyprus, forcing some of them to leave and thus weakening the British grip on power in Cyprus.

What is interesting to me however is how modern these demand are in regards to the current problems of Cyprus. ATA - our current COLA adjustment to wages is set to go in hiatus, and there have been calls for it to remain for the lowered income civil servants. At the same time the desire of the majority population to see more public works at the expense of an over-privileged government wage sector is facing resistance by the government itself, which like in 1931 , is worried about the repercussions in its ability to govern.

What is depressing is this is taking place not between a clash of nations but through a clash of vested interests: It is clear that the pay scales of some government appointments have to be re-aligned to the conditions of the demand and supply of the labour market - there simply is no reasons to have an 80% premium for government teachers as it starves the education system of new teachers and distorts the signalling of our graduates.

If history is our guide the results are not encouraging: the government refused to listen and managed to rack up a very large deficit, leading to a outside aid, increased taxation implemented by force and violent riots. Our government's inability/unwillingness to accept the need of similar measures is sadly leading us to the same direction.

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In defence of NOVA (Greece) and the European Court Rulling

2011-10-04T06:45:00.000-07:00

The European Court of Justice (note: the court that interprets EU law) has said that the English government wrongly stopped publican Karen Murphy (note: when did publicans stop being ugly as sin ex-boxers?) from paying for the cheaper satellite service of Greek company NOVA in order to show premier league games in her pub. Now one can watch from the cheaper service on offer, regardless of the EU country - The end of the SKY stranglehold on Premier league football.

This decision is the correct one and is based on the principle idea of the European Union - more competition is good for everyone, especially the consumers. But I predict far reaching consequences for football and club financing because of it - it might turn up to be more important than the Bosman ruling on EU players:

1)The financing platform of most Football Associations and of most clubs will need to change. The ruling states that an FA does not "own" the game (that is "owned" by the teams on the pitch) and hence it can not sell it as part of a parcel. Except most clubs signing separate deals with broadcasters in the near future - with possible an even greater divide between rich and poor clubs.
2) Once again it has shown how behind the times are the conservative heads of European Football Associations really are. It is clear even to basic student of EU laws that discriminatory pricing based on national borders is illegal - and yet they have failed to move to another model of financing. FA's would sell the rights to platform in different countries at varying prices, making a fortune in the process - this was clearly illegal since the creation of the single market in Europe. FA's are completely incapable in finding solutions (we are still waiting for the answer to diving, and promoting national players) and should be reformed.
3) This is good news for the prices of games. This ruling makes it very difficult for anyone to offer anything but the lowest price in Europe, especially if a clever clogs takes UEFA to the same court for forcing internet video of the Champions league to have alternative pricing according to the country you are watching it.
4) The financing of clubs is directly affected. A greater drive to have a pan European presence will be needed, as suddenly your share of the pot from the UK TV rights will be reduced. I think it might make playing in Europe more important as the new trance of Sky TV cash for premier league games will be significantly reduced, since SKY will not be able to force British citizens to pay 480 pounds a month (for a Sky pub licence) to show the games, when consumers can watch them for 118 pounds.
5)Well done to NOVA - that is exactly how Greece can bounce back - by being cheaper and aggressively trying to get exports from the EU.
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Number Crunching: Why all efforts to reduce the budget might have been futile...

2011-09-27T00:12:00.000-07:00

I was told to try and be more positive on the goings on in Cyprus. As a natural born optimist I try, but unfortunately it seems that no one connect the bigger picture - which is completely dire.

1) Possible savings if the measure to withhold the wage indexation of government employees (ATA): 130 million over two years. Will cost 130million more after 2013...
This measure passed with great resistance and with a strike from government teachers.
2) Cost of the contribution of Cyprus to the Greek bailout plan: 150 million
Thus our actual savings is -20 million

In addition:
Amount of short run debt that needs to be rolled over (reborrow) by the end of 2013: 9.9 billion. Amount the Republic of Cyprus is planning to borrow on a 3 month basis 100million. Thus amount we need to roll over soon on a much more expensive interest rate has topped the 10 billion mark.

Oh and what happened to that "loan" from Russia? Can someone please explain who you announce such a deal before it is finalized - and why there has been such a delay in closing the deal?

So once again I tried to write an optimistic article, but my optimism evaporated by 11:00 am. I hope you have a more optimistic day...
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From a series of bad choices, we chose the one with unknown repercussion.

2011-09-08T21:57:00.000-07:00

That the Cypriot state is facing a serious an immediate liquidity crisis was known for a while. Most analysts who saw the first package of measures realised that they were mainly measures to aid the reduction of the structural deficit in the future and less about raising finances for the present. The new package of measures was expected to introduce deep cuts to government expenditure and increased revenues through taxation in order to alleviate the short term issues of liquidity for the government.

The news of the Republic of Cyprus borrowing 2.5 billion from the Russian Federation is instead a much more worrying development. Although the amount sounds small by global standards it is huge by Cyprus standards as it represents about 25% of yearly Government expenditure. The deal is for five years at a high (4.5%) but sustainable interest rate.

The concern is twofold:
1) This will reduce the pressure on the government to introduce very unpopular reforms that need to be addressed.
2) Such a huge aid package offered directly from the Russian Government is not given without giving something back. In choosing between the very bad decision to resort to the EU support mechanism (the DEVIL we know), we instead chose the one with unknown consequences - both in our economic and political sovereignty.

The DEVIL we do not know might in the end compromise our national sovereignty in more significant ways that resorting to the EU support mechanism. The EU support mechanism shows a way out and offers a return to fiscal policy sovereignty in recovery; a loan by a government keen to influence EU decisions by proxy can be an open ended commitment.

We must avoid such open ended commitments just because we panic about the present; The lesson of Dr. Faustus, who sold his soul to the devil in order not to die, but lived perpetually in damnation, should make us cautious in making open ended borrowing commitments in order to avoid making hard decisions now.

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In praise of the New Cypriot Minister of Finance

2011-09-03T10:35:00.000-07:00

After the slow departure of the Cyprus cabinet in the beginning of the month many names were suggested for the position of minister of finance, Until Mr. Kazamias was chosen.

I have to say that I originally thought the choice was a unknown and hence not what one would needs in grave times like these. However I withheld judgement since Mr Kazamias has the support of the respected fellow blogger Professor Panikos Georgiades, who gave a shining reference on his personality, astuteness and character.

The Minister has surpassed all expectations in his first month of office. He has repaired the relationship between the minister of finance and the governor of the central bank, and has brought a spirit of co-operation with the opposition parties, allowing a very swift passing of economic measures that the previous Minister of finance argued they were not possible - even arguing that such measures were not even necessary.

The minister has quickly and without fanfare rescinded decisions of the previous minister that did great damage to the Cypriot Credit Rating. It gave the handling of the government debt back to the central bank, thus reversing one of the most damaging decisions of the previous minister. He has talked bravely of tough changes and managed to haggle something out of the strong unions without ruining his relationship with them... relationship that is crucial in his attempt of passing further measures of budget restrictions.

The success of the new minister makes the previous "do nothing" approach of the Mr. Stravarkis look very poor in comparison. Mr. Kazamias seems capable in providing strong leadership and in promoting the spirit of co-operation that would allow for drastic changes to tackle structural problems of the government budget and i wish him all the best.

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For those that speak german: My interview as part of an excellent and optimistic article in Die Welt.

2011-08-05T00:59:00.000-07:00

I am so glad to see this well balanced article that has contribution by me and the fellow blogger economist that I admire, Professor Panikos Demetriades. The link here is in German - you can get a poor translation of it in google translate.

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A single party government will lead us to Greek style trouble

2011-08-05T00:02:00.000-07:00

Having been a resident of this island for 20 years, I am still amazed by the narrow mindedness of political priorities in Cyprus.

There is no doubt that we were facing very difficult economic times even before the explosion of Mari. The governor of the Central Bank of Cyprus, (who has not been invited by the government to suggest any plan for the economy) has openly warned that the economy after the Mari explosion is facing the largest national emergency since 1974. The explosion's effects have led to a further downgrade of our economy and our major banks by credit rating agencies, making public borrowing in the international market prohibitively expensive.

The opinion of the credit rating agencies matters as it directly affects at what interest rate the Cyprus Government can borrow. The rule of the thumb is that an interest rate of above 6% Medium terms borrowing is unsustainable, as the very high interest payments will force governments to default rather than introduce incredibly harsh budget cuts.

Back in December I warned that despite repeated downgrades “There is not a feeling that we are on a slippery slope.” The inaction in taking the type of measures that would calm international investors and rating agencies is now hurting us tremendously as the government has very substantial debt to roll over over the next 3 years, and it will have to do so at substantially higher interest rates.

So the next 3 years the Cyprus government will be called to find the money to pay more interest payments in order to renew its existing debt, as well as borrowing more due to Mari and the reduction of revenues that the explosion has caused to our economy. Only very brave and immediate drastic actions to tackle to budget deficit might convince foreign agencies of the will to avoid default in 2-3 years time.

Yet despite the increasingly anxious calls for action, politicians still behave irresponsibly, by mixing political priorities along with measures to prevent a economic meltdown. The fact that it took more than a week to form a government, is very bad news for our credit rating agencies, who want to see quick and decisive politicians who agree on the steps that needed to be taken (especially in regards to supporting our banks and in reducing the size and borrowing needs of government).

DHKO decided to push concessions out of the president on the Cyprus issue at a time of a national economic crisis, delaying the appointment of a government for a whole week. Other parties did not want to join the floundering ship of the president's government. Most irresponsibly of all, the president decided to go ahead and have a one party government.

This one party government is a totally irresponsible act. This government will not be able to pass the budget for 2012 through a hostile parliament, which means that we are set for even more inaction and political wrangling in October. All of this will lead to further downgrades of our economy, making borrowing prohibitive and a default / EU support more likely.

The economy is at a crisis point, and all political parties need to work together to tackle the looming dangers that are just around the corner...

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Another Estimate By Credit Suisse: 2.4 billion.

2011-07-21T21:48:00.000-07:00

Credit Suisse has reached similar results to my First and Second Estimate. I am glad that there is now a lively discussions on costs and their effects.

I base the similarity from this report on stockwatch, which indicates the only substantial difference is the 600 million which will be recovered by the insurance has been factored in. I am still not sure if the insurance will pay up and thus barring any confirmation I left it out.

It is slightly sad to see that they do not reveal their sources, but for a private institution it is perhaps understandable. Once again I would urge economists and other professionals to crowd source and get both estimates policy implications collaboratively. If you are interested replay to this in the comment box.

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The cost to GDP of the Vassiliko for 2011: Bringing the economy down by -1.6%

2011-07-19T23:33:00.001-07:00

Apparently (I have not had the chance to verify it) The Economics Minister has argued that the Vassiliko Explosion will reduce our growth from 1.5% this year to 0%. It means that the public assertion of Mr. Stelios Platis that the maximum damage can be a reduction of GDP by -1% is not believed by the Cypriot Government, as the Cypriot government expects a fall of at least -1.5%. I feel vindicated in saying that things are much worse than Mr. Platis suggested on the panel on Monday.

I have many reasons to doubt however if the Ministry number is accurate. Even if the first quarter GDP of 2011 showed we were on our way, there is no doubt that industry and retail felt that the second quarter there was a slowdown as unemployment was higher than what we expected during the tourist season.

I have thus converted my own estimates to GDP effects in order to have an attempt to calculate the effect on GDP. I corrected my previous estimates for several issues:
1) Electricity power cuts will be less severe thanks to T/C power. Hence time spent off work for those affected was reduced to just two hours a day (5 day working week).
2) I added the urban effect of Nicosia, which suggests that more people come to work in Nicosia from areas that might have uninterrupted electricity, by increasing the affected rate of Nicosia labour from 80% to 89%.
3) I argued that since Gross Fixed Capital Formation (i.e. creation of new capital) was 2.8 bn in 2010, it is not possible to invest more that 500 million to repair Vassiliko until the end of the year.
4) Thus there is a positive effect of rebuilding Vassiliko of 500 million, with its positive multiplier mean there is a positive GDP effect of 746 million.
5) I have also argued that the reduction of the capital to labour ratio will reduce our growth. If 30% of Growth is from capital deepening, and since capital stock took a hit of 6% due to Vassiliko and other failures of stock, then a reduction of the expected growth rate by 0.30% is very likely.
6) I added the cost of IT repair and IT systems after the demand of friends who constantly complain about this issue. I argued it only affects Tertiary companies and it affects then by raising costs (and hence intermediate consumption) by 0.005%. Let me know if this is valid or if it should be removed since it is a transfer payment between industries.

The results are shown below:

The effect is bad. I fully stand by my numbers and argue that at best we scrape with -1.5 / -1.7%% of GDP for 2011.

However i would not be a good researcher if I did not indicate what can alleviate the losses:

1) Faster, uninterrupted power supply. The above is based on regular power back on the the 18th of December. A faster power normalcy will can dramatically reduce the GDP impact.
2) A faster reconstruction of Vassiliko than the 500 million I suggest until the end of the year.

Here I would like to appeal for help. I have a very old input output table, and crappy capital stock and growth accounting for Cypriot growth. Being a fan of crowd sourcing I appeal anyone with relevant information to send it my way and we can work together.
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A fuss over the 3 bn number. It is a valid and worthwhile estimation, but we need to understand what it is.

2011-07-18T22:07:00.000-07:00

An explanation of the 3 bn cost of Vasiliko.

There has been a good load of fuss over the number 2.9/3.1 bn. euro of my 2nd and 1st estimate respectively. I must re-iterate that this number is the reduction of Wealth Of Cyprus. What is the difference between reduction of wealth: this combines the loss of capital stock like Vasiliko in addition is showing losses of income.

In an odd way if only the losses of income where estimated first, people might have been puzzled why repairing Vasiliko would be positive for the income of the economy.
For economists, I will provide today a cost and benefit analysis in terms of GDP.

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Article in Greek Presenting the Second Estimates At Kathimerini On Sunday

2011-07-17T04:30:00.000-07:00

This is an article written by Michalis Perisianis and my self that explains the 2nd estimate and its impacts in Greek. It was published in today's Kathimerini.

My interview of CYBC on Saturday night on the Costs of the Naval Base Explosion

2011-07-17T04:18:00.000-07:00

Calling for a debate and research on the cost of the Naval Base explosion and the Urgent action to be made on the naval base disaster. Things can be changed today, but once again brave but urgent decisions are being postponed.

2nd estimate on "best case" cost estimate: 2.9 Bn euro

2011-07-17T03:38:00.000-07:00

This is the second estimate of the Cost of the Naval Base explosion using several different sources and internalizing many things that very previously exogenous. I still come to within 5% of the original estimate. I want to thank Michalis Persianis at Kathimerini and Manos of LolGreece for all their comments and help.

Once again this is a preliminary and rough estimate that that is here to show the "best case" scenario and to begin a debate on how to tackle the calamity. That I came within 5% of the original with different sources makes me more confident that this is the Lower Bound cost. Most international commentators argue I am much to conservative and that the true cost of the "best case" scenario could be up to 30% higher.

------------------------------------------------------------------------------------

Our thoughts are to the families of the deceased at these moments, but it is important to quickly understand the effect of this apparent negligent homicide and get a public dialogue on the costs. I tried to make calculations based on energy intensity per sector, but being out of power today for more than six hours meant that I could not access vital data. Once again this is an effort to stimulate debate and not by any chance a final projection of costs.

Total damages are close to 3 billion Euros, or 17% of the GDP of 2010. Even if we delay fixing 2/3rd of Vasiliko until after Christmas, the burden to the economy just in 2011 will be 11% of GDP, with the additional 6% to be imposed on 2012.

I am ever more confident of this estimate, and have calculated a 30% confidence interval at a 95% level. I know this is rough, but if you notice have at least internalized some issues such as costs of petrol etc. that where previously exogenous. Once again I have again biased all figures against what I expected (a high result), so this should be seen as a conservative estimate.

1) Vasiliko Power station
There is increasing hope in salvaging one turbine and perhaps recovering some of the investment, but until we hear a cost figure I stink to a low estimate of the recovery and repair. We need to ask original builders, Austrian Energy and Environment, which built the first phase, and Ansaldo which built the second.

2) Loss of Work Hours in Nicosia, Limmasol and Pafos
We argued that not all areas are affected by the power cuts. Thus we decided to try and capture that by only having the power cuts affect some workers of the economy. We argue that based on the areas that power rationing exists at present, 80% of the Nicosia workforce, 50% of the Limmasol workforce and 60% of the Pafos workforce is affected.

The using the total workforce of the 2009 labour Statistics (376,300) we needed to calculate how much of this labour force is in each province (without having access to the internet due to another powercut). Thus we argued that the population per district of the latest Demographic report is representative of the labour force per district, as use the share of total population to find out the population share per district. This was used to find the total employment per district. Actually this is almost certainly an underestimate as the we actually know that the economic activity rate in Nicosia is about 9.9% higher than that in Limassol, according to the EU’s urban audit.

Thus the total employment per district was multiplied by the proportion of employed population affected per district to argue that 194,146, or 51% of the islands labour force will be affected.

We then used the labour survey of 2009 to estimate the average salary of the labour force per hour. We assume that salaries are constant since 2009 (effectively meaning negative salary growth) in order to bias the result downwards. The average salary of 2,130 euros per month is multiplied by 13 salaries to get an annual average salary figure. Then we estimated that with allowed time of work, the average worker works 40.2 hours a week for 50 weeks (taking out the large number of public holidays in Cyprus, to estimate the average labour hours worked. We then divide the average annual salary by the average hours worked per year to get a annual creation of value added of 16 Euros an hour. Again this is quite an underestimate as the labour cost per hour worked in Cyprus is considered on average as 17.43 Euros.

How much labour time is lost by the power cut? Based on research by Dr. Tim Leunig of the LSE on train delays, predictable cuts (delays) are better for people than the type of unpredictable power cuts we have been having, as one can plan to maximize his efficiency around the power outage. Since power cuts are unpredictable, we estimated that there will be power cuts at least until the last week of December, and that they will be on 3 hours a day for 5 days a week, leading to 360 hours of powerless working time for each affected labourer.

We then argue that the unpredictable nature of the cut does not allow you to be very effective during power outages, being able to produce only 20% of when you have electricity. Thus for every hour of lost time, on average 12.8 euros of value added are lost. So for each worker that is affected the lost hours from the power outage from now until resolution before Christmas costs the economy 4608 Euros.

Again this is very optimistic and almost certainly and underestimate. The cost of planned outages is estimated at one third to one tenth of unplanned ones in Thailand, about one fifth to a quarter in Nepal, or about one half in Sri Lanka, etc. International commentators have argued that even these figures are very conservative as it omits, in a knowledge-based economy, the impact of data and service outages. LolGreece argues that the additional probability of an IT company going out of business following a major data loss incident can create additional significant costs.

By multiplying this by the amount of workers affected we get a staggering loss of the economy of 894,628,513 Euros of lost value added.

3) Additional loss due to Multiplier effect of no.2 (same for 5,7,9,13)
The loss of value added has cumulative effects the economy. Each 1 pound placed in the economy created more than 1 pound. Alternatively each 1 pound loss of the economy will reduce the income of the GDP by more than 1 pound. Using the input/output of the Cypriot economy we can then estimate the additional loss for the economy. Thus for 3, 5, 7, 9, 13 I calculate the knock on effect of the reduction of income when it is resolved through the economy of each cost.

However the Republic of Cyprus does not release its newest Input/ Output tables, and as a result the only publicly available input-output table is shamefully from 1986. Thus I reduced the multiplier effect to lower numbers (biasing against a high figure) to take account of the increased import dependence of our economy since 1986.

4) Loss through increase electricity cost (50% rise) primary and secondary sector(excluding Utilities), and 6) Loss through increase in tertiary sector

The Cyprus Electricity Authority can in no way absorb all the cost of the smaller and hence expensive units that are in use today due to Vassiliko being knocked out. In addition many companies have to rely on alternative power sources such as generators to keep operating even basic systems going. Thus the cost of electricity for companies and households will increase, despite any suggestions to the contrary. A brief survey found that electricity is approximately 4% of cost in the Secondary sector and 2% in the Tertiary sector. An increase in the cost of electricity by 50% (partly increased unit costs and partly cost of rebuilding) will thus lead to a reduction of the value added, as cost will jump by 2% in Primary and Secondary, and by 1% in the Tertiary sector. Thus assuming all else is constant (i.e. value added of 2010) there will be a reduction to the value added share due to the increase cost (2% or 1%) of electricity Production.

Once again LolGreece is correct to argue that we need to add to the estimate some cost consequences of other power plants running at high capacity levels, as indeed we have already experienced system failures through the overload on Friday. This can lead to more costly more maintenance and the increase the frequency of outages.

8) Loss of Utilities value added

All major utilities are affected, with electricity generation being the first. We estimate the loss of value added as 40% for the last six months of this year. This is based on estimates of increased cost per unit of electricity produced (i.e. a reduction of the value added share of electricity, as more of the gross output is cost), and of a reduction of electricity capacity. Similar reductions are expected on all major utilities, water / sewerage, as they are also main clients of electricity and hence very much affected by this crisis where our electricity maximum capacity has fallen below our demand for electricity.

It must be clear to all that there is no doubt that the income created by the production of electricity has been reduced as even if we come to our previous capacity the power currently produced by Moni, Dekelia and auxiliary sources, cost much more per MW hour to make than Vasiliko, as power plants have very large economies of scale in production.

11) Diverted resources of police, army, fire-fighters etc.

The diversion of police, army and fire fighters due to traffic duties, helping trapped visitors and gassing peaceful protesters diverts police time. I arbitrarily picked a low number for the overtime and additional work load based on high overtime wages

12) A fall of 1% of hotel occupancy rate due to tourism cancelations

Using estimates I devised in another project that attempts to measure economic interdependence between the communities in Cyprus, I have an estimate of how a 1% in occupancy rate impact the hotel and restaurant sector. Notice I am only suggesting a very small decline in occupancy and not a mass exodus of tourists – just a reluctance of a small number to come to Cyprus after the negative publicity.

Things I have not estimated include: Increase in insurance premiums due to increased car crashes (traffic lights are out); cost of repairing the damage to the villages around the base; cost of rebuilding the state of the art base that was destroyed; cost of compensation to victims if negligent homicide is proven; additional deaths caused by heat during power blackouts during the expected August heat wave; additional cost of health provision for the injured of the accident and of the accidents due blackouts; Machine degradation and IT support due to system shutdown and failure.

Congratulating the Communal Chamber of Commerce

2011-07-16T06:31:00.000-07:00

****I am not saying that the government did not aid the Chamber for this agreement to happen; all I am pointing out that a braver decision was to be candid about our energy means and do it directly****

The Cypriot Chambers of Commerce have reached an agreement in providing at least 70 MW of electricity from the Turkish Cypriot power station. This is the greatest relief for the economy and once again the private sector has steeped up to make decisive steps where the government prevaricated.

Electricity was always provided across the green line from the Republic of Cyprus to the Turkish Cypriots - this needed no involvement of the private sector and it went without saying that no one in the Turkish Cypriot Community thought that this entailed recognition of the sovereignty of Republic.

However the latest request to receive electricity was made in a major political issue by the government adding provisos that were not necessary, such as stating that this would take place only if it would not entail recognition.

That last statement shows lack of knowledge about the issues of the Cyprus problem. It is endemic of the lack of a clear line given top down to the whole government apparatus in how to behave in communal matters. There are very clear things that entail recognition, and also clear what things led to recognition. The republic and the Turkish Cypriot communities have constant interaction about day to day issues. In fact more informal interaction needs to be encouraged: Is it better to let a murderer run away because you do not want notify the police of the other community that he fled across the Green line? The answer is no - informal negotiations for mutual benefit happen even between parties at time of war.

However the government prevaricated, making a non-political issue political. Once again the Chambers of Commerce have shown that it can step up where the government prevaricates. It has secured a deal that saves us for a looming disaster: the existing electricity capacity is failing under the strain. The diagram below
explains the issue.

Our productive capacity has been suffering from using it 100% all the time and its falling to even less than 40% of what we had before the accident. From having a problem between the hours of 11 and 6 we now have a problem from 7:00 to 1:00 at night. We are not just in crisis in peak periods any more: we are in crisis in all the productive periods!.

EUROKO (and DHKO's Nikos Papadopoulos) are pandering to the masses saying that we do not need the T/C power. This is an outright lie. The loss of man hours through unpredictable power cuts is approximately 1 billion alone. This is only until December: Any further delay will increase the cost and the recession of the economy will deepen.

The new generating equipment for Israel and Greece will only provide at best 10% of T/C electricity. EUROKO (and DHKO's Nikos Papadopoulos) are being totally irresponsible in arguing that rationing or other sources can lead to an increase in capacity: T/C power is the best way to stop our economy bleeding to death. In a national crisis, we all need to stop and think of the consequences of what we are suggesting: EUROKO, by rubbishing the agreement, effectively tells us that even greater electricity rationing and much harder economic hardship is worth it, even if there is no issue of recognition. This is unacceptable behaviour.

The best and immediate way to get electricity is the solution that did not have to be political and that a prevaricating government let the private sector to finalize. Well done the Chambers of Commerce on both communities: showing us that tough times needs rapid and brave decisions.

The Macroeconomic costs of the Naval Base blast

2011-07-15T12:00:00.000-07:00

In this third article on the “E Florakis” base I will consecrate on the macroeconomic problems that arise from the disaster. Just to recap, up to now we have seen the very serious microeconomic effect to companies, and that the lowest estimate possible of costs of the disaster is €3.1 billion, or 17.9% of the whole income of the economy (GDP).

Sadly this only captures what we call the static costs of the accident. This only takes account of income lost until the damage is fixed in the electricity generation and in fixing the generating capacity of Cyprus. However, experience has shown that the dynamic costs on the economy can be much more significant, and still have an effect in the economy after many years.

The dynamic costs will reduce not just income today but create conditions that keep the growth of income of Cyprus lower than it would have been. I will focus on three issues: Inflation, Reduction of Capital intensity, and national debt.

1) Inflation:

The electricity produced either by the existing stations or through generators is by far more expensive to produce that the (relatively) cost efficient Vassiliko power station. At times like this the emphasis on basing our energy future on carbon based power stations rather than diversifying in renewable energy is clearly seen for what it is: totally myopic. The cost per MW hour of many of the power sources currently used to make electricity are more expensive than renewable resources, resources for whom funding was partially reduced in an effort to cut costs in the last 2 years.

Part of this additional cost of electricity will be passed to the consumer: it is not possible for firms and the electricity authority to absorb this added cost in their entirety as they have already been struggling due to the economic crisis. An increase of fuel bills though a hike in electricity bills or indirectly through emergency taxation, is unavoidable.

Thus prices will increase (i.e. inflation) across the board, and inflation tends to create a self fulfilling cycle of further inflation in the future. This increase in prices will have two main effects that will create further downward pressures in our total income (GDP). The purchasing power of the income of those working in the private sector will fall, reducing consumption and thus further reducing the expenditure that keeps the economy afloat. More serious is the second possible effect of a reduction to competitiveness. An increase in prices makes all our products and services less competitive relative to other EU countries, who can freely export to Cyprus. Thus imports are expected to increase while exports fall, making it very difficult for the economy to find the road to recovery.

2) Reduction to capital intensity

Economic growth depends on many factors, but the most important are considered increases in capital (both human - education and physical - power stations) and the adoption / generation of technology. In my first article I explained how the lack of power is slowing down the rate of technology adoption (or even at times making people go to older less efficient technology, like analogue phones). This will reduce the rate of economic growth in the future, as long as our electricity needs are not fulfilled.

More serious is the loss of capital intensity, or the amount of capital per worker in the economy. According to all theories of economic growth (Unified Growth Theory, Endogenous Growth Theory, Neo Classical Growth theory) the increase of the amount of capital per worker is the single largest component of economic growth and prosperity. Simply put, a man with just a needle can only sew one shirt a day, but with a sewing machine (more capital per worker) he can produce much more. Using a personal example i cna relate it to what we are experiencing today: I am writing this by candle light, without internet access.

The destruction of the largest investment project of the island though ineptitude lead to a mass reduction in capital intensity. It is not just that the capital stock of the economy is poorer by €2 billion euro. It is also the fact that so much capital is lain dormant at as the unexpected power cuts prevents their use.

All growth theories argue that a reduction of capital intensity can lead not to just lower growth, but in extreme cases it can lead to a reversal of the growth process. This is by far the most serious consequence of the blast: it reduced not just our current capabilities for growth, but our future capabilities for growth as we need an ever greater amount of capital to reach the capital to labour ratio that we had on the 10th of July, since our population keeps rising.

3) National debt

The debt we will need to incur for Vasiliko alone is in excess of 1 billion; even if we assume that the insurance will pay 600 million despite not being an act of god or war damage. This is debt was not projected for 2011 and for 2012, and the ability for the government to borrow both from domestic and for external markets was already being questioned before the accident and the additional need to find resources to rebuild the damage. The issue is how the government can raise the money for repair without raising too much debt, and without lowering the GDP. Both are crucial as Debt to GDP (Debt / GDP) is a measure used by international markets and the EU to judge solvency of a country.

The choices of the government are thus as follows:
a) Appeal for aid: This will be ineffective our traditionally major aid donors (US, UK, Greece), since they are already in debt trouble of their own. EU aid is a possibility.
b) Save: An emergency withholding of 5% of government wages to be used to repair Vasiliko will have little impact in terms of GDP as additional revenue created by the government wage bill (i.e. the multiplier effect) is very small.
c) Tax: Taxation will need to go up, but as taxation reduces output, this can actually still increase the debt to GDP ratio as the economy will shrink further.
d) Borrow: It will be at much higher rates that previously; thus government will still need to save through a reduction of government wages in order to afford the repayment of the debt. It will also lead our debt to GDP ratio at close to the levels seen in other Eurozone countries when they requested EU/IMF bailouts and hence we will be running the risk of handing fiscal control to outside organizations.

Choice A and B are by far the “least bad” choices. We must remember that even before the explosion we were talking about the need to lower wages in the government sector: this negligent homicide has me convinced that the best policy right now is an across the board reduction in wages, for both the government and the private sector, bit with an greater cut for the government employees.

This is not unprecedented in face of disaster; union agreed a large pay cut and an increase in hours worked after the 1974 invasion and it must be understood that what happened in the 11th of July is the second biggest calamity faced by Cyprus since independence.

A reduction in wages (especially if wage indexation is suspended until Vasiliko is repaired) can aid both with inflation low, and the reduction of the wage bill will allow for repair expenditure at Vasiliko.

What can we due to reduce this Macroeconomic costs:

1) Buy Cypriot:

Our producers of goods and services will need support since they are now competition with other EU countries while facing power cuts and higher costs.

2) Regular and planned power cuts:

The cost of planned outages is estimated at one third to one tenth of unplanned ones in Thailand, about one fifth to a quarter in Nepal, or about one half in Sri Lanka, etc. Planned outages reduce the microeconomic and macroeconomic consequences of the loss of Vasiliko.

3) Set up an Escrow account for repair:

The civilians, companies and government officials that might be requested to make monetary sacrifices will need to feel that such sacrifices are not misused. A separate account from central government accounts needs to be created, with deposits only being withdrawn if they are to be used to repair the effects of the calamity. This account needs to be transparently managed, allowing the people to make the sacrifices without feeling that accounts are misappropriated (i.e. it is not being used for dental work for government officials).

4) Wage reduction:

The government unions must now understand that there is not choice: the only real savings that can be made in the government budget, is a substantial reduction of the pay scale at all levels. This is the “least bad” way of financing reconstruction as it calms the markets and prevents us going to the international markets with a large amount to borrow. PASIDI, OELMEK and other government unions need to realise that the most patriotic think is to allow the government to withhold a 5% of their monthly wage in an Escrow account to rebuild Vasiliko, or else the whole economy will be in much greater danger of default.

5) Immediate debt restructuring:

We do not need to wait until we are in the position of Greece to ask the private sector to come to a new, more favourable deal with the government for the existing debt. Even if we can reduce debt repayment by 1% through such voluntary re-negotiations, this can release valuable funds for the immediate repair of the damage.

Sadly all of the above needs a government that is willing to be innovative and acts decisively fast, and the events since the 11th of July seem to indicate that the present government seems incapable of taking accountability, acting rapidly and being brave.

Αγανάκτηση

2011-07-14T23:22:00.000-07:00

‎"καλύτερα στη μπανανιά κι ας τρώω μόνο μπανάνες" - Ιντα τόπος είμαστε σιορ..

Θ’ ανέβω σε μια Μπανανιά
Στην πόλη βρήκες δουλειά
και στο καψόνι σ’ έχουν ταράξει
τρέχεις για αλλωνών λεφτά
κι εσύ δεν έχεις βενζίνη στ’ αμάξι
Σπίτια ,νταηλίκια ακριβά
κι έτσι μένεις σε μία τρύπα
όλοι άγνωστοι στη γειτονιά
δεν ξέρεις ούτε τον δίπλα
Διασκέδαση ,δύο ποτά
κάθε Σάββατο σ’ ένα μπαράκι
να του πει να πας σινεμά
Κυριακή,τι πίκρα παιδάκι
κι εγώ
Θ’ ανέβω σε μια Μπανανιά
και θ’ αρχίσω να τρώω μπανάνες
καλύτερα στη μπανανιά
κι ας τρώω μόνο μπανάνες
Θ’ ανέβω σε μια Μπανανιά
και θ’ αρχίσω να τρώω μπανάνες
καλύτερα στη μπανανιά
κι ας τρώω μόνο μπανάνες
καλώδια στην κίνηση με κόρνες
κάμερες και μπάτσοι στη χρονιά
εκμετάλλευση, βαράς διάλυση
πάμε μαζί στην Μπανανιά
Άτοκες δόσεις, υποχρεώσεις,
δε φτάνουν τα λεφτά
ακρίβεια, κι εσείς τα ίδια,
ανέβα σε μια Μπανανιά
Θ’ ανέβω σε μια Μπανανιά
Με το ευρω σου πατάνε καλά
σου πίνουν το αίμα, μα ο χρόνος κυλάει
κυβερνήσεις πέφτουν,απο αυτες περιμενεις
τα θες κ τα παθαινεις
όλοι τα ξερουν κ ολοι τα κραζουν
ολοι μιλανε κ ολοι φωναζουν
οι ιδιοι σωπαινουν, οι ιδιοι βελαζουν
μολις βολευτουν, αραζουν
κ εγω
Θ’ ανέβω σε μια μπανανιά
και θ’ αρχίσω να τρώω μπανάνες
Καλύτερα στη μπανανιά
Κι ας τρώω μόνο μπανάνες
Θ’ ανέβω σε μια μπανανιά
και θ’ αρχίσω να τρώω μπανάνες
Καλύτερα στη μπανανιά
Κι ας τρώω μόνο μπανάνες
Δικτυο, καλωδια, στην κινηση με κορνες
καμερες και μπατσοι στη γωνια
Εκμεταλλευση, βαρας διαλυση
Παμε μαζι στη μπανανια
Άτοκες δόσεις, υποχρεώσεις,
δε φτάνουν τα λεφτά
ακρίβεια, κι εσείς τα ίδια,
ανέβα σε μια Μπανανιά

Excellent Review by Finance Lecturer, Alexander Michailides. This insanity goes right to the top.

2011-07-14T05:41:00.001-07:00

Original source: Stockwatch 14.07.2010
http://blog.stockwatch.com.cy/?p=580
By: Dr. Αλέξανδρος Μιχαηλίδης

Αξιότιμε Πρόεδρε της Κυπριακής Δημοκρατίας, κύριε Δημήτρη Χριστόφια.

Επειδή έχετε στο πρόσφατο παρελθόν ενθαρρύνει τα παιδιά του γυμνασίου να έχουν και να εκφέρουν άποψη, πιστεύω θα θέλατε και τους καθηγητές πανεπιστημίου να εκφράζουν και τη δική τους άποψη.

Επειδή τα εκρηκτικά στο Ζύγι σκόρπισαν το θάνατο και άφησαν την Κύπρο χωρίς τη μισή της ηλεκτρική ενέργεια στην πιο κρίσιμη στιγμή της οικονομίας μετά το 1974.

Επειδή δεν μπορείτε να πείσετε τους πολίτες ότι είτε δεν είχατε γνώση του προβλήματος, είτε ότι δεν χρησιμοποιήσατε το φορτίο σαν μέσο άσκησης εξωτερικής πολιτικής.Επειδή η δικαιολογία «Ο Πρόεδρος δεν γνώριζε» δεν είναι ούτε πιστευτή, ούτε αποδεκτή.

Επειδή η κυβέρνηση χρειάζεται επαγγελματίες σε όλα τα επίπεδα για να ελπίζει ότι θα μπορεί να δουλέψει επιτυχημένα, δεδομένης της πολυπλοκότητας διακυβέρνησης μιας μελλοντικής ομοσπονδιακής χώρας με τους Τουρκοκυπρίους.

Επειδή επαγγελματίες όπως ο Αθανάσιος Ορφανίδης (Διοικητής της Κεντρικής Τράπεζας) και η Χρυστάλλα Γιωρκάτζη (Γενική Ελέγκτρια) δεν έχουν διοριστεί από εσάς αλλά από τους Τάσσο Παπαδόπουλο και Γλαύκο Κληρίδη αντίστοιχα.

Επειδή αντί να προστατεύετε τους πιο πάνω επαγγελματίες, είτε τους υπονομεύετε (Ορφανίδη) είτε τους αγνοείτε (Γιωρκάτζη).

Επειδή οι ανάλογοι διορισμοί από σας είτε δεν εμπνέουν το κοινό (Παπασάββας), είτε δεν έχουν τα ανάλογα προσόντα (Χριστοφόρου), είτε έχουν παραιτηθεί υπό την κατηγορία για διαφθορά (Μολέσκης, Βάσος Γεωργίου), ενώ συμβάντα όπως η «απόδραση» Κίτα δε βοηθούν την εικόνα της διακυβέρνησης.

Επειδή δεν βασίζεστε σε αξιοκρατικά κριτήρια για τους διορισμούς σας. Αλήθεια, ο κ. Χάρης Θράσου ήταν τόσο καλός υπουργός Συγκοινωνιών κατά τη διάρκεια του ατυχήματος της Ήλιος που έπρεπε να τον επιβραβεύσετε με το διορισμό στην προεδρία της ΑΗΚ;

Επειδή ο κομματισμός οδήγησε την Ελλάδα εκεί που έχει οδηγηθεί και το χρώμα της κομματικής ταυτότητας από μόνο του (είτε αυτό είναι κόκκινο, είτε μπλε) δεν θα οδηγήσει ποτέ σε αποτελεσματική διακυβέρνηση.

Επειδή η αναβλητικότητα και αναποφασιστικότητα στην εισαγωγή μέτρων για την οικονομία είναι παρόμοιας μορφής με τη διαχείριση του φορτίου. Και όπως για το φορτίο σας τα έχει γράψει στην έκθεση της η κα Γιωρκάτζη, για την οικονομία σας τα έχει γράψει τουλάχιστον ο Διοικητής της Κεντρικής εδώ και πάνω από 2 χρόνια.

Επειδή όπως ο λαός δεν ξεχνά τι έγινε στις 15 Ιουλίου 1974, ο λαός δεν θα ξεχάσει τι συνέβηκε στις 11 Ιουλίου 2011.

Επειδή δεν αμφιβάλλω ούτε για τη δική σας τιμιότητα, ούτε για τον πατριωτισμό σας, ούτε για τη θέληση σας να προσφέρετε στον τόπο. Λανθασμένοι χειρισμοί όμως είτε από άγνοια, είτε από ερασιτεχνισμό, είτε από περισσό γινάτι, παραμένουν κατακριτέοι.

Επειδή η προσπάθεια της κυβέρνησης να αποδώσει αλλότρια κίνητρα στους επικριτές της δεν είναι μόνο προσβλητική για τους πολίτες, αλλά δείχνει και μια ανησυχητικά επικίνδυνη αντίληψη και ερμηνεία των πραγματοποιηθέντων γεγονότων.

Επειδή έχετε απωλέσει την εμπιστοσύνη των πολιτών ότι μπορείτε να κυβερνείτε αποτελεσματικά τη χώρα.

Επειδή αν παραιτηθείτε ίσως να διασώσετε την υστεροφημία σας. Σαν ο πρώτος πρόεδρος που παραιτήθηκε για να αλλαχτεί το σύστημα και να βάλει πίεση στον επόμενο πρόεδρο να ακολουθεί αυστηρά αξιοκρατικές διαδικασίες. Να βάλει τέλος στους ερασιτεχνισμούς, τέλος στον κομματισμό και τέλος στο ρουσφετισμό.

Για όλα αυτά τα επειδή κύριε πρόεδρε, σας καλώ να παραιτηθείτε και να προκηρύξετε άμεσα προεδρικές εκλογές.

Ο Αλέξανδρος Μιχαηλίδης είναι καθηγητής χρηματοοικονομικών στο Πανεπιστήμιο Κύπρου.

Counting the cost of the disaster of Naval Base / Vasiliko Power station

2011-07-13T03:20:00.000-07:00

*****These are very rough estimates done in a day to get a dialogue on the issue. Improvements, suggestions and criticisms are welcome****

This second article is a very rough, “back of the envelope” attempt to understand the monetary cost of the disaster. It is the first such attempt and no doubt better attempts can be made once we know more facts about Vasiliko, and once I have electricity in my office so I can use the internet to collect data.

In order to defray criticism of scaremongering, I have consciously decided to be completely open in how I come to these numbers, and use the lowest possible estimates in order to bias myself against a high cost.

Unfortunately even with such a negative bias I could estimate the cost of the accident at 3.1 billion Euros, well over 18.5% of the whole income of the Economy in 2009. This is huge: it is the largest ever cost suffered by the economy of Cyprus since the 1974 invasion.

Below I will try and explain how I derive each number:
1) Cost to rebuild power station:

We are still unsure of this but there have been suggestions of 1 to 2 billion euro and thus I took the average of these numbers. No doubt we will know this when a full evaluation of the situation is completed.

2) Loss of electricity Value Added (50% of 2009 Value added)
There is no doubt that the production of electricity has been reduced. Thus the gross output of electricity has also been reduced, reducing the total GDP (income) of the economy. In addition the power currently produced by Moni, Dekelia and auxialiary sources, cost much more per MW hour to make than Vasiliko. Hence the created income (i.e. value added) of each unit of electricity is much less.

3) Loss of income through Multiplier due to loss of electricity

The loss of value added has cumulative effects the economy. Each 1 pound placed in the economy created more than 1 pound. Alternatively each 1 pound loss of the economy will reduce the income of the GDP by more than 1 pound. Using the input/output of the Cypriot economy we can then estimate the additional loss for the economy.
4) Lost man-hours

Once again the most conservative estimates were used. I estimated that less than 1/3 of the labour force (I used 100,000) will lose 2 hours of productive work per day for only 12 weeks. I also reduced the lost productivity to just 23 euros an hour. This is a major underestimate and no doubt with more data and and understatement of how long these shortages will be taking place this cost could rise and be as big as the reconstruction of Vasiliko.

5) Diverted resources of police, army, fire-fighters etc.

The diversion of police, army and fire fighters due to traffic duties, helping trapped visitors and gassing peaceful protesters diverts police time. I arbitrarily picked a low number for the overtime and additional work load based on high overtime wages.

6) Reduction of Manufacturing by 1% / 8) Loss of Tourism by 1%

I wish I could do better here by knowing the proportion of cost of electricity to manufacturing. As I do not I just assume a 1% fall in production.

7) Loss of Income through Multiplier due to loss of Manufacturing / 9) Loss of Income through Multiplier due to loss of Tourism

The loss of value added has cumulative effects the economy. Each 1 pound placed in the economy created more than 1 pound. Alternatively each 1 pound loss of the economy will reduce the income of the GDP by more than 1 pound. Using the input/output of the Cypriot economy we can then estimate the additional loss for the economy.

11) Destruction of products 0.005% of retail

Another very difficult estimate – until i have state from companies I arbitrarily said that 2.5% of value added of food retailers is consumed by the cot of wasted products, which is approximately 20% of the retail sector’s value added.

12) Increase in cost due to more petrol imported + imported machinery

This is very speculative. I need more time to look at cost of petrol and of generators but i think this is an underestimate.

A first Microeconomic analysis of the disaster in the Naval Base and Vasiliko Power station.

2011-07-12T08:24:00.000-07:00

*****14/07/2010 update: substantial aid in terms of electricity expected from UN force in Lebanon (Germany) and Greece. Expected to alleviate partially the effects below, especially if they pay their costs of production.

The economic effects of the apparent negligent homicide in the “E. Florakis” naval bases are immediate and far reaching. I will concentrate on the microeconomic consequences here, but i am hoping to expose the macroeconomic effects as well as the criminal, political and psychological damage in further articles.

Economically speaking the effects where the tragic loss of life (which needs to be compensated as their death was apparent homicide), the loss of skilled workers and the damage to our electricity network.

The Vasiliko power station is gone. This event is the largest negative shock to our economy since the Cyprus invasion of 1974. One could ask how is it possible that in a country living under the threat of a possible war, our capacity to generate electricity was centered on just one source. Although the plant was 60% of our capacity, it must be realized that it was by far the cheapest source of energy on the island, and hence its 60% was almost always in use. The graph below (from the transmission system operator) indicates the seriousness of its loss.

The ability to produce electricity was about to receive a massive boost from the unused new power unit at Vasiliko, comfortably being capable in boosting production to above 900 MW hours, the average peak demand in the summer. The destruction of the power station (and the new and unused power unit) meant that we are suddenly not in any position to satisfy the projected summer demand of 900MW, since our maximum capacity has been cut way below the peak demand for electricity. Even if the projected capacity rises over time, we are doomed to still face power cuts and disruptions since no electricity grid can operate without some capacity going offline for repairs and maintenance.

So despite the government’s encouraging announcements is it very clear that we will be in this situation for at least a year: barring building a new power station in record time, the measures suggested by the government can only provide an additional 10/100 MW each. Floating electricity plants can provide more than 200MW which would ease the situation, but such big electricity systems can really operate in very calm waters (i.e. rivers) and in areas where the electricity infrastructure has been adapted to its use; we will need to construct the capability to house such a unit, which might take 6 months. They are also usually very expensive to run and maintain, as the experience of Pakistan shows.

The dire situation is confirmed when one looks at the electricity consumption of this week last year, shown below:

Assuming the fact that we can operate at full (750MW) operating capacity at all times, we could not cover the electricity needs of last year needs during the weekdays, as demand in peal time is way above our cut off of 750MW.

However the cost of this explosion does not just affect in terms of rebuilding, compensating and repairing. The dynamic effects on companies will ensure a return to recession, especially if you factor in the effects of the electricity crisis is having in Cypriot companies. The electricity shortage causes three devastating blows to our economy: Reliability, Capability and Cost.

The lack of Reliability in electricity provision provides a great drag to the economy. Already power cuts are taking place and sadly it seems that since our electricity system is operating in full capacity the authorities have not been able to announce when and where such cuts should occur. As a result business are already suffering from lost labour time, repairing software and hardware issues relating to cuts, and an ever greater need for technical support, all in a period where the focus has been to cut costs and thus remain competitive to other European companies, who can operate freely in the EU market without having such reliability constraints.

The lack of reliability makes the desire for the imposition of Flexible working hours immediately. Government offices especially should move to working hours that go around the peak time, and thus reducing the load on the network. There should be an immediate agreement with the unions to adopt the model of the Cyprus Central Bank, where staff is in several shifts with varying starting times, from 8:00 to 12:30 and various leaving times from 5:00 to 8:00. This will spread electricity demand enough to ensure we stay below our maximum capacity and this will aid in reliability. The electricity authority should also release a schedule of cuts as soon as possible, and emergency legislation should be put in place to allow companies to schedule working time around these cuts without fear of union action for as long as the shortage in electrical capability is an issue.

The second is electrical capability. This in an issue usually faced by Less Developed Countries, whereby several innovative ideas and machines can fail due to the fact that electricity is rationed. Electricity is what we call a “general purpose” technology: it allows for other machines and people to make their jobs more effectively. Any restriction in our ability to use electricity also restricts our ability to use other machines, which are constructed for countries where electricity is not a rationed good. As a result the rationing of electricity lead to a slower dissemination of productive technology in the economy.

A good example of our diminished capability and the additional cost to society is the traffic chaos that the electricity cuts have been causing, since traffic lights switch off, causing accidents and delays, and needing an ever greater number of traffic officers diverted from more important duties.

The third and most pressing issue is cost of the current electricity provision. Power stations have massive economies of scale; this means that the cost per unit of electricity produced gets cheaper and cheaper the bigger the power station. Vasiliko was the biggest (and most modern) power station we had in Cyprus, and thus it produced the cheapest electricity per unit. The remaining power stations were effectively backups to Vassiliko: their cost per unit of electricity was much higher, and their capacity was effectively only used when the power needs were higher than Vasiliko’s capacity to cope. In addition running such factories at 100% of their capacity dramatically raise costs, as staffing cost rise and the necessity to expedite spare as well as putting less efficient generating machines online.

So the raising of the cost of production leads to the big issue that all politicians avoided: A new increase in the electricity bill of Cypriots is inevitable, as the Electricity Authority, who has also posted large losses and has already substantially increased the electricity bills of consumers by 30% in April.
Let us be clear: this is not an additional cost to repair (or rebuild) the Vasiliko power station. This is additional cost that we have to pay for the current electricity we receive from other sources, now that the cheapest source of electricity has been destroyed.

This is the most terrible news for our economy. When companies are faced with increased cost of production, the reduce the quantity the produce at any price. If the company was willing to produce 1,000 shampoo bottles for €2 euro, it will now have to produce less if the market price remain the same. The result is more companies on the verge of bankruptcy and more unemployed workers, just as the economy is struggling to get back on track after the recession.

This accident has singlehandedly led us back into a recession, with very serious consequences both for our level of unemployment, our society and our credit rating. Quick, decisive action is needed. In a crisis a government that leads with brevity, rapidity and open to radical solutions can act as a positive catalyst. Sadly, the 3 years in power show that this government lacks, the strength, will and ability to do anything drastic.

Excellent news: A Turkish Cypriot will be in Cyprus First Division football this year

2011-06-14T04:26:00.000-07:00

Alki F.C, a club in Larnaka, Cyprus, has done something that was obvious but for many clubs unthinkable: they signed a Turkish Cypriot player on a 1+1 contract. This is not the first time a club has done it: Salamina has a Turkish Cypriot Player in 2004, but sadly that did not seem to create a momentum of more footballing integration.

In a league were all the clubs have left or right political leanings there seems to be a reluctance to admit that we prefer paying huge sums of money to bring foreign has-beens rather that look for great talent in our Fellow Cypriots. This is of course true for Greek Cypriots, but even more so for Turkish Cypriots, who play in a league that is unrecognised, and whose salaries are equivalent to third division football.

The truth be told, because of the political nature of Cyprus football, and hence by extension of the Cyprus Football Federation, there was always somewhat uncomfortable to admit Turkish Cypriots in the league: In 1951 Çetinkaya Türk Spor Kulübü took the championship, and followed its dominance with two more cups and super cups before being kicked out from the Cypriot league in 1955.

To be fair the league also kicked out a lot of left leaning clubs earlier in 1948 so it is not that such actions targeted just Turkish Cypriots, but anyone who did not agree with the nationalistic attitudes of the Football league.

Mustafa Yaşınses is exactly one of these talented players that Cypriot clubs can shop from the Turkish Cypriot league. Having played his football at KÜÇÜK KAYMAKLI, he can now prove with his game that there are many Turkish Cypriots whose talent is not recognised which could be very good deals for the clubs that are struggling for finances. It is just a shame that such a move can really be undertaken by the left leaning clubs, as many of the nationalist clubs would consider such a move an outrage (shame on them!). I wish Mustafa the very best and hope he can be a beacon for all young Cypriot talent.

Now its time for the Cyprus Football league to step up to the plate and show that Turkish Cypriots and Turkish Cypriot teams will be treated like anyone else should they chose to join, as it has been telling UEFA for years.

Excellent Gorrilla documentary On Migration and Greece

2011-06-09T06:52:00.000-07:00

A wonderful story on second generation Greek migrant called MC Yinka. Such respect on people who have seem to have such deep thinking and understanding about their life, and such a nice portrayal of the bits of Athens people have left behind.

http://www.theprism.tv/home1.html

From the New York times Op -ed: Parallels of USA and Cyprus

2011-06-08T23:12:00.001-07:00

This is a link to an excellent article from the New York times in how Peter Diamond has been stalled form joining the board of the FEDERAL RESERVE due to political posturing by the Republicans in the house.

Of course Nobel Laureate Diamond in not on his own in this. WE have not asked Dr. Pisarides, our own Nobel laureate, from any position in the Cypriot government. The board of our own Federal Reserve equivalent, (i.e. the board of the Central Bank of Cyprus) does not include DR. Pisarides. In fact out of the five members of the board, two (Marios Kleitou, Nikos Konstatninou) are members of accountancy firms that are in no way placed or have the education to make decisions about monetary liquidity, and the other two (Dr. Orphanides and Charalambos Achinitis) are employed by the central bank. The last member, Andreas Matsis is a member of the Cyprus Chamber of Commerce and we know nothing of his resume and his education, as it is not provided on the website.

We have bestowed the accolades of pomp and pageantry to Dr. Pisarides, but we have not let him bring his understanding to the labour market into effect at a time of record unemployment in Cyprus. This is intentional, as the government knows that Dr. Pisarides calls for an urgent and radical departure from 50 years of labour policy in Cyprus: liberalization of the labour market and the removal of some union privileges, lowering of wages in the government sector to take account of job security, the removal of the unfair system of "job lists" for educators that distorts the skills market, and a change of emphasis away from unemployment benefits and towards job searching. The government prefers to honor this English trained but Cypriot born Nobel laureate , but not to have him use his knowledge effectively for the good of the island.

Thus we have also kept our own Nobel laureate away from our economy and its urgent issues. Two paragraphs from Dr. Diamonds op-ed are particularly poignant in the Cyprus case too:

"There is too little public awareness of the real consequences of some of these [budget] decisions. In reality, we need more spending on some programs and less spending on others, and we need more good regulations and fewer bad ones.

Analytical expertise is needed to accomplish this, to make government more effective and efficient. Skilled analytical thinking should not be drowned out by mistaken, ideologically driven views that more is always better or less is always better. I had hoped to bring some of my own expertise and experience to the Fed. Now I hope someone else can."

Such is the case in Cyprus too - the people we the answers are being pushed away by people who have to much vested in the economic system that is falling all around us.

Kapuscinski Lecture on Development

2011-06-08T02:07:00.000-07:00

A great event took place last night at the home of co-operation in Nicosia. The Cyprus Island-Wide NGO Development Platform (CYINDEP) hosted an address by guest speaker Ms Eveline Herfkens, founder of the UN Millenium Campaign. I would like to personally thank the NGO support centre, which is doing great work on development awareness in Cyprus, for inviting to present to the event.

The visit of Ms Herfkens is part of the “Kapuscinski Lectures”, named after Ryszard Kapuscinski, a Polish reporter and writer who covered developing countries. Organised jointly by the European Commission, the United Nations Development Programme, and partner organisations in different countries, this series of lectures aims to offer Europeans the opportunity to learn and discuss development and issues related to development cooperation, and to contribute to the debate and formulation of European-wide development policy.

It was a great event and Ms Eveline Herfkens was a particularly impressive speaker. It certainly highlighted how we should move forward. I also presented the (dreadful) state of Cyprus development efforts, made much more explicit by Dr. Youlli Taki.

A copy of my presentation is here. Interesting to note that if we gave the Eurocypria money to the Cyprus aid we would be on target in satifying our EU comitment of 0.33% of GDP aid by 2013.

Presentation of the economic effects of Migration at the European University

2011-06-08T01:56:00.000-07:00

This is a powerpoint from my presentation at the "International Conference on Economic Migration in Europe" at the European University of Cyprus on the 10th of May. It indicates how migration has been up to 2009 very beneficial for the Cypriot economy, and how now the latest economic crisis in Cyprus has increased the demand for foreign housekeepers as the family household is under crisis and women have chosen to go back into the workforce and thus demand housekeepers to share the household chores/babysitting duties.

Roger Milla in Cyprus

2011-06-03T00:41:00.000-07:00

INCAMSA, the Cameroonian student society of Cyprus and registered NGO, is bringing the legend that is Rodger Mila in Cyprus for an event open to the public!
In this document, you can see many events, lectures and celebration, with a lecture on Wednesday the 8th of June, a cultural night on Friday 10th of June, and the highlight of a football match at Makario Stadium at the presence of Rodger Mila in the 11th of June starting at 6 O'clock.

For those that do not remember the legend that is Rodger Mila needs to be aware that he opened the door for African players in Europe (scouts would not have been flying to Africa without his performance) and that he is the oldest man to score in a world cup at the age of 43! He was the face of Coka Cola in the last world cup.

Two events of interest next week

2011-05-27T04:13:00.000-07:00

The NGO Support Centre and the Management Center is having a a discussion on Federalism and Europe on Monday 30 May, at 19:00, at Fulbright Center. Speakers include Dr. Michael Keating (politics;Aberdeen), MEP Mr. Takis Hadjigeorgiou, and Turkish republican party member Mr. Ozil Nami.

On Wednesday the first of June at 19:30 the ever active (for which i am grateful) OPEK- Όμιλος Προβληματισμού για τον Εκσυγχρονισμό της Κοινωνίας μας- with the EU parliament invite people to join the discussion with the topic «ΥΠΕΡΒΑΙΝΟΝΤΑΣ ΤΗΝ ΟΙΚΟΝΟΜΙΚΗ ΚΡΙΣΗ: Η Ε.Ε. ΚΑΙ Η ΕΛΛΑΔΑ at the house of the European parliament on Byronos Avenue 30. Speachers will be Λουκάς Τσούκαλης, καθηγητής, πρόεδρος ΕΛΙΑΜΕΠ, and Γιώργος Ευσταθίου, Sec. Gen of ΟΠΕΚ.

hope to see you there!

The best summing up the elections - written by Patroclos before the results came out.

2011-05-26T06:35:00.000-07:00

One of my favourite things in the Cypriot press is the Cyprus mail and the excellent "Tales from the coffeshop" by Patroclos.
If you missed his election sunday column then please read below. As i have reposted below: Please bear in mind credit and reproduction ot be given to Patroclos and the Cyprus mail.

Tales from the Coffeeshop: Feeling sorry for the sad losers
By Patroclos
Published on May 22, 2011

ELECTION DAY poses a big moral dilemma for all us Sunday piss-artists, who have to write for a living. The dilemma arises from the fact that elections are always held on a Sunday, the day that most weekly columns appear.
According to the election law, on this day, any form of electoral campaigning is banned. This means we could not write that the Eurococks have the most progressive policies on immigration, that Diko is the most idealistic party or that Lasok sounds like a drug for constipation, as this could be construed as an attempt to influence voters.
This is the moral dilemma: do we disregard the law and write a column about the elections or comply with it by writing nothing, not getting paid and leaving our family without food for a few days? As a law-abiding citizen I hate to break the law, but putting food on the family table has to be a good reason for doing it.
We could avoid the dilemma by writing about the latest developments in the Cyprob, the comrade’s nine-day visit to Australia and the dirt cheap prices of cucumbers and tomatoes, but we would be letting down our customers, who expect our establishment to advise them who to vote for on election day.
Not wanting to disappoint loyal customers or to leave my kids without food, I have taken the heroically courageous decision to defy the law. I just hope that if I end up behind bars Coffeeshop customers would declare Patroclos a political martyr and stage big protests in all towns and villages demanding his immediate release.

OVER THE last few weeks, several people have asked me, ‘what do you think will happen in the parliamentary elections?’
Every time I have been caught unaware, my stock response being ‘I don’t think,’ which is a civil way of saying ‘I really don’t give a damn, and I feel sorry for you for being such a sad loser, wasting valuable minutes of your life thinking about these boring elections, why don’t you get a life.’
I know I am an even sadder loser writing about the elections, but I feel I need to make this personal sacrifice for the sake of the Coffeeshop’s loyal customers, whose right to be misinformed is non-negotiable and I am willing to risk imprisonment for it.

MISINFORMATION, to use a milder term than lies, has been the key feature of the election campaign. The campaigns of all the big parties have knowingly misinformed or made promises that even the last idiot know they cannot keep. As always worst lies have been uttered with regard to the Cyprob.
Take for instance Edek, which wants us to vote for it because it would ensure a “democratic solution” and ensure the “withdrawal of rotational presidency.” How it would do this, we were not told, because the party does not have a clue.
The Eurococks are no better. A vote for them, would not only lead to the withdrawal of rotational presidency, it would also rid us of the Turkish settlers (Edek hasn’t figured out how to achieve this) and pave the way for the “European solution” that will ensure we live happily ever after.

THE BIGGEST disappointment in this campaign has been Diko, which has been very subdued. It drastically toned down its fiery, patriotic rhetoric and made nothing of its idealistic devotion to high principles, sticking instead to bland reminders of its glorious past and its support for the ‘no-vote’ in the referendum, of seven years ago.
The ‘no-vote’ in the referendum is the only thing it has in common with the commies of Akel, which the bash-patriotic party has been very careful not to offend in the campaign. Diko’s slogan, for heaven’s sake, is ‘Yes to stability, No to stagnation.’
What has happened to the proud party of Spy Kyp and the Ethnarch, the party that always acted as our guardian angel protecting us from the vile plots of foreigners and ensuring our national survival? Suddenly, it is acting like an Akel satellite, peddling stability and pandering to our commie rulers. Its most hard-line candidates, very disappointingly, have lost their patriotic voice, avoiding mention of the comrade’s nationally suicidal handling of the Cyprob during the campaign

POLITICAL rivals mischievously claimed that Diko boss Marios Garoyian was acting like Akel’s poodle and had turned his party into a commie satellite because he wanted another term as House president. Of course, nothing could be further from the truth.
Had they read the interview Marios gave to Kathimerini in March 2009, they would not make such scurrilous allegations. “When it comes to matters of principle, matters relating to the survival of the country, no chair interests me, no public post and no spoil.”
Is it his fault that no matters of principle or issues relating to our national survival are at stake in these elections and he is free to show an interest in the chair and the spoils?

WE ALL expect the mass production of misinformation and empty promises on the Cyprob during a campaign because this has proved our most successful industry and is what our politicians know how to do best.
But many customers of our establishment were taken aback by Disy’s advertising campaign, which implied that by voting for the party, by tomorrow, all our problems would be a thing of the past. The message of the ad was that on May 21 youths were sad and depressed (picture showing them), on May 22 ‘Youths took the future in their hands’ by voting for Disy, and on May 23, the picture showed them sitting in the park smiling and laughing.
We can only deduce that they had been smoking marijuana, because there is no way that they had found a job and personal happiness over the election weekend.

THE SAME advertising concept and lay-out was applied to a man leaving a business that has closed down on May 21. On May 22 ‘workers and small business owners took the future in their hands, voted for Disy and on May 23, presto, the man’s business re-opened and he was smiling again.
This guy must have taken something stronger than marijuana to be hallucinating about his business re-opening two days after it had been closed down.

THE WORST election ad by far was the one used by Edek at the start of the campaign which urged voters to ‘Break the moulds’. The visual of the ad had some Neanderthal man leaving what looked like a cave (in reality it was the mould he had broken out of) in search of food. I suspect the ad failed to boost the Neanderthal vote (Edek traditionally does very well in the Paphos district anyway), which is why we have not seen it in the last few weeks.

MANY CANDIDATES used text messages to win support. Top prize in this category goes to the well-known Nicosia beautician who was not standing herself. Her text message said: “I am your friend Maria Papasavva and I am relying on your vote for my son, parliamentary candidate of Diko no. 17 Alexi Papasavva. Thank you.”
This moving plea by the loving mother was based on a sound political argument. Women must vote for Alexi because his mother waxed their legs and bikini line.

COMMIE leader Andros Kyprianou sparked a classic knee-jerk reaction when he was quoted as saying that he would rather have a left-wing Turkish Cypriot as president than a right-wing Greek Cypriot. Everyone turned on him for this treacherous view as political outrage is common currency in public life. Personally I would rather have an illegal immigrant, on welfare, from Pakistan, as president than an Akelite, because our economy’s future would be much safer in non-communist hands.

OUR GOOD friend Charilaos never gives up his efforts of shifting the blame for the economy’s mess on others. What blame could he have. He is just the finance minister.
On Wednesday he said that he was “ashamed” when he saw people who had invested in Cyprus government bonds last October, at an interest rate of 3.8 per cent. Now the yield on these bonds was 6.5 per cent, because there was less confidence in the Cyprus economy, something which had nothing to do with the finance minister.
“Senior officials” were to blame, according to Charilaos, because they questioned the government’s data on the economy, thus creating a bad impression and forcing interest rates to rise. We all know that the “senior officials” he was referring to is one – the Central Bank Governor.
One thing our good friend never asks himself is why international markets and ratings agencies take the views of “senior officials” about the economy more seriously than the finance minister’s? Is it because his optimistic forecasts are as believable as DISY’s election ads?

AFTER the elections, Charilaos has promised he would tackle the state pension problem. He would achieve this through “consent and dialogue” with the parasites’ union PASYDY, which means he and his boss would beg the miserable moaner Hadjiklamouris to make a tiny concession that could be presented as a big compromise and the matter will be closed.
In the last week a complication surfaced with regard to state pensions. The altruistic, public spirited government doctors’ union brought up a long-standing demand – they want the years they spent studying and working to qualify as doctors to count as years of service when their pension is calculated.
At present their pensions are not as high as the rest of the highly-paid public parasites, because they have fewer years of service. Why not also calculate their years at high-school when they spent a lot more hours studying than the rest of us in order to get the grades that would get them into medical school.
I am certain Charilaos will satisfy the doctors’ just demand when he reforms the pension system through dialogue and consent.

WE HAVE reached the end of this week’s Coffeeshop without answering the million dollar question – what is at stake in today’s parliamentary elections? My guess would be ‘nothing’ but more authoritative commentators believe it is the House presidency which will determine the alliances in the 2013 presidential elections.
If DIKO and AKEL secure a majority, Garoyian would get the second term and the alliance of the two parties would contest the presidentials. If they fail to get a majority, DISY would probably back EDEK chief Omirou for the House presidency and pave the way for an alliance in 2013, the socialists backing the Fuhrer’s candidacy.
The country would benefit if Omirou becomes House president (he is not as big a windbag as Garoyian, but he has a better vocabulary) because Garoyian, free of official commitments, would be able to give all his time to matters of principle and ensure the national survival of country, which I fear may face many threats from many directions over the next few months. And we would be in a better position to face them if freedom warrior like Marios does not have the distraction of the House presidency.

I HOPE our establishment will have helped you make the right choices today. To summarise, if you are an unemployed youth and quite enjoy living off your parents do not vote for DISY, because if it wins, tomorrow you will have a job. But if your business has gone bust and you want to re-open it tomorrow, vote for DISY.
If it is stability you are after vote for AKEL and it will make sure Garoyian gets his second term. Personally I would have voted for the Eurococks had they told us how much water would be needed for the European solution, because I would hate the solution being too thick.

Why academics fight... and why community quotas on academic events is repuslive

2011-05-23T10:29:00.000-07:00

I always used to find it so amusing to see how serious the interpersonal rifts exist between academics, especially economists (which I had more exposure to it might be valid in other disciplines as well). It is not that I felt there was an ivory tower of academia where all flaws of character are left behind, but I could not understand the real anger people felt for each other.

I know understand why. Academics trade on ideas. Thus not only are ideas very hard to pin down (and thus one can steal and idea from another), they are very easily picked up by another and twisted into something that goes against the principles the original creator had in mind -> thus creating real anger.

A great idea is the emergent Peace economics movement in Cyprus. It was an idea that started by many persons at the same time (the Wolfson inaugural meeting was one of the most inspiring I have ever visited) and that is developed by many at the same time for the same ideal of helping promote and insure a stable solution to the Cyprus question to the benefit of all.

Sadly like many ideas that gain grass root support many then jump in the bandwagon. I happen to know that the latest "forum" that is organised by a foreign university this week (sadly with EU money)was an idea of a person who worked hard form the beginning to make people think the solution in Economic terms. This person was not rejected by the "Forum" organizers to be there and present to present his work (and thus save the organisers the inevitable red faces) with the excuse being that a strict quota of Turkish and Greek Cypriots is applied in the event --> something anyone working on the academics of the Cyprus problem has never accepted.

Ideas and interested academics should be free to meet and promote practical ways of brinigng peace in Cyprus -> Quotas on members based on community is a idea brought from outside from people who do not understand that the Cyprus problem was never a problem of interpersonal relations between the main actors. For once I am angry to see the effort of so many being twisted by persons who come in and might even damage the existing great atmosphere that economists between economists on both sides (and third parties) who are working on the issue. I just wish that the damage caused this week will be minimal by these hijackers, and that those who have truly have been working on the issues can get their just reward for all their effort.

Free Amjad Baiazy

2011-05-20T21:40:00.000-07:00

Friend and fellow blogger Amjad has been arrested by Syrian police as he tried to go back to the UK and continue his studies. He was instrumental in letting us know what was happening in Egypt, and helped with text to speech service from Egypt to the world. Please help spread the word.

Amjad Baiazy, age 29, Syrian citizen living in the UK. Arrested at Damascus International Airport on the morning of May 12, 2011 as he was returning to the UK. Amjad is a young Syrian civil activist who has worked with MSF and has spent many years participating in exchanges to build bridges of understanding between youth in Syria, the Middle East, and Europe.

Great Letter by Cypriot Economist and fellow blogger

2011-05-19T01:18:00.000-07:00

Dr. Panicos Demetriades brilliantly encapsulates in a letter in the Financial times what I have been teaching in Economics of the European union for the past two weeks: that it is Germany who is out of step with the rest of Europe and thus it is Germany that needs to readjust its exchange rate to make its export more expensive.

Right now Germany is getting the best of all worlds - it has successfully lobbies for the ECB to raise interest rates in order to cool time domestic spending; it has prevented losses on the German banking system by keeping Greece afloat for enough time for the German Banks to offload their debt; and the concerns about Greece are keeping the Euro low which allow it to massively increase its exports without any accusations of "beggar thy neighbour policy". Yes it gave money for the bail outs but that money was loaned (and has been receiving interest on) and not a handout as the German media have suggested.

Thus it is the German economy that is out of lockstep that the rest of Europe and it is the German economy that needs a separate currency that is to appreciated. The ECB Raising interest rates at a time where at least 3 Eurozone states are already finding it difficult to repay their debts sounds illogical until on factors in that the desire for Germany to cool inflation it its own country takes precedent over what is happening in souther Europe.

Beautiful pictures from renowned anthropologist of Cyprus: Dr. Peter Loizoss

2011-05-17T00:07:00.000-07:00

Professor Emeritus Peter Loizos taught Anthropology at LSE from 1969 to 2002. He is concerned with the anthropology of Mediterranean societies, particularly of Cyprus. He has been conducting fieldwork since 2000 on a group of Greek Cypriots first studied in 1968. The photographs are reproduced with the kind permission of Moufflon Publications (Nicosia) and the proprietor, Ruth Keshishian.

The Beautiful pictures of his village - Argaki -are available on line here.

A brilliant piece again on Al Jazeera by a very respected Economic Historian

2011-05-16T23:37:00.000-07:00

Following the great article By Geoffrey Sachs, All Jazeera ahs published a piece by Dani Rodik of Harvard that points out that regulation is not just necessary for growth, it is nesseary for democracy and hence for proper fuctioning institutions with that democracy. See the orginal article here.

The crucial role of democracy in economics
I have been presenting my new book, The Globalisation Paradox, to different groups of late. By now I am used to all types of comments from the audience. But at a recent book-launch event, the economist assigned to discuss the book surprised me with an unexpected criticism.

"Rodrik wants to make the world safe for politicians," he huffed.

Lest the message be lost, he then illustrated his point by reminding the audience of "the former Japanese minister of agriculture who argued that Japan could not import beef because human intestines are longer in Japan than in other countries."

The comment drew a few chuckles. Who doesn't enjoy a joke at the expense of politicians?

But the remark had a more serious purpose and was evidently intended to expose a fundamental flaw in my argument. My discussant found it self-evident that allowing politicians greater room for maneuver was a cockamamie idea - and he assumed that the audience would concur. Remove constraints on what politicians can do, he implied, and all you will get are silly interventions that throttle markets and stall the engine of economic growth.

This criticism reflects a serious misunderstanding of how markets really function. Raised on textbooks that obscure the role of institutions, economists often imagine that markets arise on their own, with no help from purposeful, collective action.

Adam Smith may have been right that "the propensity to truck, barter, and exchange" is innate to humans, but a panoply of non-market institutions is needed to realise this propensity.

Consider all that is required. Modern markets need an infrastructure of transport, logistics, and communication, much of it the result of public investments. They need systems of contract enforcement and property-rights protection. They need regulations to ensure that consumers make informed decisions, externalities are internalised, and market power is not abused. They need central banks and fiscal institutions to avert financial panics and moderate business cycles. They need social protections and safety nets to legitimise distributional outcomes.

Governance in economics

Well-functioning markets are always embedded within broader mechanisms of collective governance. That is why the world's wealthier economies, those with the most productive market systems, also have large public sectors.

Once we recognise that markets require rules, we must next ask who writes those rules. Economists who denigrate the value of democracy sometimes talk as if the alternative to democratic governance is decision-making by high-minded Platonic philosopher-kings - ideally economists!

But this scenario is neither relevant nor desirable.

For one thing, the lower the political system's transparency, representativeness, and accountability, the more likely it is that special interests will hijack the rules. Of course, democracies can be captured too. But they are still our best safeguard against arbitrary rule.

Moreover, rule-making is rarely about efficiency alone; it may entail trading off competing social objectives - stability versus innovation, for example - or making distributional choices. These are not tasks that we would want to entrust to economists, who might know the price of a lot of things, but not necessarily their value.

True, the quality of democratic governance can sometimes be augmented by reducing the discretion of elected representatives. Well-functioning democracies often delegate rule-making power to quasi-independent bodies when the issues at hand are technical and do not raise distributional concerns; when log-rolling would otherwise result in sub-optimal outcomes for all; or when policies are subject to myopia, with heavy discounting of future costs.

Independent central banks provide an important illustration of this. It may be up to elected politicians to determine the inflation target, but the means deployed to achieve that target are left to the technocrats at the central bank. Even then, central banks typically remain accountable to politicians and must provide an accounting when they miss the targets.

Similarly, there can be useful instances of democratic delegation to international organisations. Global agreements to cap tariff rates or reduce toxic emissions are indeed valuable. But economists have a tendency to idolise such constraints without sufficiently scrutinising the politics that produce them.

The importance of democratic deliberation

It is one thing to advocate external restraints that enhance the quality of democratic deliberation - by preventing short-termism or demanding transparency, for example. It is another matter altogether to subvert democracy by privileging particular interests over others.

For instance, we know that the global capital-adequacy requirements produced by the Basel Committee reflect overwhelmingly the influence of large banks. If the regulations were to be written by economists and finance experts, they would be far more stringent. Alternatively, if the rules were left to domestic political processes, there could be more countervailing pressure from opposing stakeholders (even though financial interests are powerful at home, too).

Similarly, despite the rhetoric, many World Trade Organisation agreements are the result not of the pursuit of global economic well-being, but the lobbying power of multinationals seeking profit-making opportunities.

International rules on patents and copyright reflect the ability of pharmaceutical companies and Hollywood - to take just two examples - to get their way. These rules are widely derided by economists for having imposed inappropriate constraints on developing economies' ability to access cheap pharmaceuticals or technological opportunities.

So the choice between democratic discretion at home and external restraint is not always a choice between good and bad policies. Even when the domestic political process works poorly, there is no guarantee that global institutions will work any better. Often, the choice is between yielding to domestic rent-seekers or to foreign ones. In the former case, at least the rents stay at home!

Ultimately, the question concerns whom we empower to make the rules that markets require. The unavoidable reality of our global economy is that the principal locus of legitimate democratic accountability still resides within the nation state.

So I readily plead guilty to my economist critic's charge. I do want to make the world safe for democratic politicians. And, frankly, I wonder about those who do not.

Dani Rodrik, Professor of International Political Economy at Harvard University, is the author of The Globalization Paradox: Democracy and the Future of the World Economy.

A version of this article first appeared on Project Syndicate.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

Do you want to know how a real estate bubble sounds in opera?

2011-05-06T11:56:00.000-07:00

As music and mathematics are linked the excellent planet money has placed the USA real estate crash into notes and has had baritones sing it.

I think this should be mandatory for all who are in these markets. If people who insisted that the rise was not a bubble (just before it blew in their faces) heard it reach the top range of sounds produced by the wonderful voice of a trained opera singer i wonder if they would have paused and recollected if a condo in Florida could really increase in price by 300% in a year.

Another Great Rap video of Keynes Vs HayeK

2011-05-06T11:49:00.000-07:00

Should the government spend a country's way in out of resession?

Another great video by Econ stories:

I use them in class and they have a great reception.

New OECD report - the rich are getting richer except in Greece, Turkey, Hungary and Belgium

2011-05-06T11:29:00.000-07:00

The excellent blog and radio show "Planet Money" has brought to my attention that even through inequality within countries was rising in the boom, inequality is rising in the recession too.

Very interesting to note that Greece is not one of them - although i think this shows that recession hit everybody badly and the rich did not have the umbrella of government support that the poor have (and not that George Papandreou id following his "socialist principles")

According to the report there are three reasons for still rising inequality even in hard times:
I would however add a very important reason that is not mentioned by the report. The owners of capital were the big winners of globalisation as global wage demands were moderated through competition in the boom and they have successfully managed to protect their margins through the boom --> look at the support of stock markets and financial institution even of capital such as general motors. As a result owners of capital got away with sharing the less of the burden of the recession. Taxpaying public of Iceland, Ireland and the US know all about that. Sadly the UK is misled to focus on public spending and not on the reason that capital ownership was supported when it made bad decisions and is refusing to pay for the support or for future insurance that such things will not happen again.

The other three reasons acroding to the OECD for the rise of inequality:
[Quoting PLanet money]
"Why is this happening? Here are three possible answers from the report.

1. Robots, etc.

Trade barriers have come down. Technology has advanced. The combination of these two factors has disproportionately benefited highly-skilled workers. You want to be the guy building the robot, not the guy whose job got replaced by a robot.

2. Rich people marry rich people

Inequality is calculated by household, not by individual. And a few changes at the household level have driven some of the increase in inequality.

For one thing, it's become more common for people to choose spouses in their own income bracket. In other words, rich people are now more likely to marry other rich people, and poor people are more likely to marry other poor people. (There's a creepy term for this: "assortative mating.")

Single-parent households and single-person households without children have also become more common. Both groups are disproportionately likely to be at the bottom of the income ladder.

3. Free-wheeling job markets

State ownership of corporations has declined. Price controls have become less common. Minimum wages have fallen relative to average wages. Legal changes have made it easier to fire temporary wokers.

Taken together, these changes have actually improved overall employment levels. (Businesses are more likely to higher hire workers when they can pay lower wages and when it's easier to fire people.)

But despite the gain in employment, the same shifts may also have driven up inequality. In the words of the report, "the high-skilled reaped more benefits from a more dynamic economy.""

A divisive article by a very divisive economist: Corruption is a Developed rather than a developing country problem

2011-05-06T03:41:00.000-07:00

Reposting form all jazerra a great article by Jeffrey Sachs. Sachs has been a divisive figure but does point out that many of the issues we think as problems of the less developed world (LDCs) originate from the willingness of the advanced world to corrupt and undermine weak institutional systems in the LDCs. In the wake of the latest crisis it is a bit rich to preach corporate governance to LDCs...

The global economy's corporate crime wave
Advanced economies with "good governance" are facing alarming incidents of business corruption at the highest levels.
Jeffrey Sachs

Two years after the US financial crisis, not a single Wall Street executive has faced jail time [GALLO/GETTY]
The world is drowning in corporate fraud, and the problems are probably greatest in rich countries – those with supposedly "good governance".

Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.

Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs. A massive insider-trading ring is currently on trial in New York, and has implicated some leading financial-industry figures. And it follows a series of fines paid by America's biggest investment banks to settle charges of various securities violations.

There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fueled by unscrupulous behaviour by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practises have a solid rate of return. Even today, the banking lobby runs roughshod over regulators and politicians.

Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major health-care company known as Columbia/HCA. The company was charged with defrauding the United States government by over billing for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7bn.

The FBI's investigation forced Scott out of his job. But, a decade after the company's guilty pleas, Scott is back, this time as a "free-market" Republican politician.

When Barack Obama wanted somebody to help with the bailout of the US automobile industry, he turned to a Wall Street "fixer," Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.

But why stop at governors or presidential advisers? Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country's oil fields – access worth billions of dollars. When Nigeria's government charged Halliburton with bribery, the company settled the case out of court, paying a fine of $35m. Of course, there were no consequences whatsoever for Cheney. The news barely made a ripple in the US media.

Impunity is widespread – indeed, most corporate crimes go un-noticed. The few that are noticed typically end with a slap on the wrist, with the company – meaning its shareholders – picking up a modest fine. The real culprits at the top of these companies rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.

The explosion of corruption – in the US, Europe, China, India, Africa, Brazil, and beyond – raises a host of challenging questions about its causes, and about how to control it now that it has reached epidemic proportions.

Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on.

Second, companies are the major funders of political campaigns in places like the US, while politicians themselves are often part owners, or at least the silent beneficiaries of corporate profits. Roughly one-half of US Congressmen are millionaires, and many have close ties to companies even before they arrive in Congress.

As a result, politicians often look the other way when corporate behaviour crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them. The result is a culture of impunity, based on the well-proven expectation that corporate crime pays.

Given the close connections of wealth and power with the law, reining in corporate crime will be an enormous struggle. Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light via email and blogs, as well as Facebook, Twitter, and other social networks.

We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.

Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts. The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy's legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments' inability politically – and sometimes even operationally – to impose taxes on the wealthy.

So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other "advanced" country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.

Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

The article was first published by Project Syndicate.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

While the Government Berates the best Technocrat we ever had, Europe rewards

2011-05-05T06:16:00.000-07:00

Dr. Orphanides of the central bank of Cyprus by placing him at the head of of the steering committee of the European Systemic Risk Board (ESRB). In a period that we celebrate even the tiniest victory for our beleaguered economy this acclaim has gone unnoticed by the local media. The committee will have a great role to play in shaping the future rules and regulations of the financial industry and no doubt it will seek to enforce and shape new Basel rules of banking as well as additional banking directives.

Thus the comment by Dr. Orphanides that ""A crucial weakness is that insufficient progress has been made, and one that needs to be addressed urgently, on how to allow major institutions to fail," must have made the big banks sweat with anxiety and made them call their army of lobbyists to the fray.

Of course Dr. Orphanides is right: the feeling that banks got away with paying for the damage when the crisis they fueled hit, even though they profited in the (personally and as corporations)in the bubble is not just a moral argument but an economic one. Removing the chance of bankruptcy removed the proper calculation of risks as moral hazard meant that there was money to be made if suspenseful and the looses would be borne by others. Great to see Dr. Orphanides trying to refocus the world on what got us in such a big financial crisis in the first place.

Intercommunal Blogger Event - See you there

2011-04-15T00:49:00.000-07:00

Fellow Bloggers,
I just wanted to bring to your attention the event for bloggers of all shapes and colour arranged by the Cyprus Community Media Centre. The event is on Friday and Saturday 29 & 30th of April and its is free - you just need to register.
So I hope to see you there,
Best,
Alexander Apostolides

Economic Activism at it's best

2011-04-09T02:29:00.001-07:00

I loved activism that is by the young and that is hard hitting. Andrew Lansley of the Cameron government wants to bring many US style reforms to the NHS, despite the fact that :
a) the American healthcare system is even greater financial problems that the NHS
b) the NHS needs some peace after 15 years of radical reforms every 2 years in order to get the growing pains of reform out of the way and thus see if the feform has the desired effect.

With over 1.5 million hits this is the best way to get a message across, and much more effective that the Cantona money withdrawal we discussed in this blog a while ago...

Migration: Its (Hidden) Economic Benefits

2011-04-08T03:01:00.000-07:00

Due to the upcoming debate on emigration organised by OPEK and ELIAMEP (details here) i just wanted to point out 2 positive economic arguments for economic migration that one never hears in the local media:

1) Migration can help our pension fund deficit.
More people are retiring and pensioners are living longer; these reasons, combined with he fact that we are having less children to replace the adults who retire, leads to pension system crisis in most EU countries.
The dependency ratio, the ratio of how many are not working relative to those of working age is increasing; as a result those who are working will have a greater pressure to subsidize the living standard of the majority who are retired or underaged. The solution could be to lower the amount given to retired persons (as advocated in the UK by its switch from final salary to an average salary pension scheme) OR to allow migration.
Migrants are in the working age bracket and thus they allow a decrease in the dependency ratio, with the social contribution allowing retired people to keep living with the income they are used to. Considering that many migrants do not get the full benefit of their welfare contributions as some emigrate back to their countries, the pensions funds of EU countries could be placed in a much sounder footing if more migration of persons of working age were initiated.

2) Migration can lead to complimentarity and increase in skills.
If developed economies have a high wage for unskilled employment then they run the risk of being uncompetitive - this is especially true for countries in the European Union since the are many countries in the EU whose cost base is much lower, thus creating an incentive for factories and offices to move from countries with a high wage environment to a low wage environment. Migrants taking up unskilled work enable local workers with the advantage of language to up-skill themselves allowing for a much more competitive products both in price and in quality. The concern must be to push for our domestic workers to up-skill themselves and thus create a complimentary cycle with the incoming migration.

If migration is not encouraged then one might actually lead to economic degradation and the movement of work positions to cheaper European destinations.

One does not deny that there are social and other problems regarding migration in our islands of Malta and Cyprus, but at least for the author the economic case for increased but controlled migration is very clear. Comments and Thoughts welcome as usual.

The credit rate slide in Cyprus is mostly due to government actions

2011-04-07T23:55:00.000-07:00

The other night the President has called that the problems of the economy were partly inherited by the previous government and mostly from abroad and that his government did nothing to make things worse.

I have mentioned previously how this is actually not true. The economic crisis started in the US in 2007 and spread in most of Europe and the world by 2008. Despite warnings that Cyprus will be affected, and the emerging problems in several sectors, such warnings were ignored by this government. The serious slowdown in taxation revenue and investment was a warning sign of a economic recession that lay ahead, but the government again ignored these warning signs.

The statistics Cyprus submitted to EUROSTAT indicate that just as revenues of the government were falling at an all time low in the last quarter of 2008 and in the first quarter of 2009, the expenditure of the government, and particularly wage expenditure, was rising dramatically. When revenues were falling, expenditure was rising, causing the government to need to borrow exactly at the time when the international markets were nervous of governments that refused to reign in the expenditure in the face of such revenue shortfall. The credit downgrade of our government was thus in part due to government actions; although most credit rating agencies cited the large size of our banking sector as a concern, the inability of the Government to live within its means became an ever more important factor in our continuing loss of credibility.

The fact that in 2008 and early 2009 the government increased its wage expenditure just when revenues were dramatically reduced resulted to the government wage expenditure rising to 50% of government revenues by the end of 2009. This meant that just when the economic recession was reaching its peak in the private sector, the government cancelled an alarming number of investment projects in order to satisfy the need to pay its employers. Government investment is crucial when private business is facing uncertainty: it replaces the investment that private business holds back and provides the momentum for the economy to begin the road towards recovery. The retraction of government investment in the third quarter of 2009 in order to pay government wages meant that the recession was both made worse and was prolonged for at least another quarter.

Any attempts to reduce the wage bill came to late (in early 2010) and have so far have managed to just reverse the mass increases in the wage bill expenditure that this government initiated; they have failed to stop the upward trend of government wage expenditure. In fact the government's emphasis has been on increased taxation and borrowing, further crowding out private business and increasing the size of government to the GDP. This is serious: there is not doubt that interest rates are high in Cyprus, but this just might be because the government sucks it a substantial number of domestic savings due to its large borrowing needs, the credit available to private business men and households is reduced, leading to high interest rates.

This government can not play the role of Pontius Pilatus and wash its hands of the economic problems of the island. It was not responsible for the economic crisis, but it has a large share of the blame for the poor management of the crisis. It made bad decisions and it showed a lack of courage to get important reforms through. The government was aware that revenues were falling, but it seemed that the message did not percolate through to the persons hiring government employees and raising government wages.

The President should look at his advisors: did they not warn him of the outcome of such decisions and the need to tackle the government wage bill forcefully and immediately as the Governor of the Central Bank asked him to do? If they did and they were ignored then the onus of the poor management lied to bare with himself and his cabinet.

Contrasts...

2011-04-06T11:27:00.000-07:00

A certain minster recently stayed for over a week in VIP accommodation having VIP treatment, and then donated a bunch of pc to get his picture in the local (and the Cypriot) papers. The cost to the taxpayer.... I let you decide.

In contrast I saw the Governor of the Central Bank of Cyprus fly economy class from Prague, where I am guessing he spend the weekend (national days do not count if you are in the Euro-system) locked in one meeting or another.

The funny thing is that the minister is a member of an elected government and hence theoretically countable to the voters / taxpayers who foot the bill for his shenanigans, with the unelected bureaucrat (who many in the government have unfairly attacked) is thriftily taking heed of the need to restrain government expenditure. It is not the first time that Dr. Orphanides shows us the way; let us hope that those who we elected will follow him.

Italy at 150: Lessons of Unification

2011-03-17T07:30:00.000-07:00

On the 17th of March 1861 Italy was declared unified. The event was strangely an anti-climax, which left most, if not all political actors in Italy, disappointed by the outcome.

Mazzini, the spiritual father of the ideal of Italian reunification, was disappointed that the unification looked less that his democratic and republican ideal of equals uniting to a greater whole, but more like an expansion (or even conquer) of the rest of Italy by the (somewhat) constitutional monarchy of Savoy/Sardinia based in Turin.

Garibaldi, the person that made the unification possible in 1861 by his conquest of Sicily and Naples and his threat to attack the papal states, was even more disappointed. His successful volunteer expedition to Sicily was subjected to harassment by the police of the Kingdom of Savoy/Sardinia, while the new King of Italy - the Victorio Emmanuelle II, did not want to jeopardise his expanded kingdom in order to free the remaining areas of Italy under foreign control (Venice under the Hapsburg and Rome under the French / Pope). He died disappointed as the troops that hailed him as leader prevented him ever fulfilling his dream of revolutionary unification.

The upper class advisor around the king of Savoy, the Count conde di Cavour was also disappointed. Through foreign policy alliances and great power diplomacy the Kingdom already secured the richest areas of North Italy, and the idea that they would have to share power with the much poorer south was abhorrent. The advisor only consented to the invasion of the papal states to stop a revolutionary ,republican version of Italy to take shape and ensure the supremacy of the Kingdom of Savoy/Sardinia above the Italian peninsula - Turin remained the capital. The idea of so many persons in need in the south and the expectation that North Italians would support them was not at all what Cavour had in mind at the beginning of 1860.

The lessons of the unification are many: Italy is now is a vibrant democracy that has managed to shape one identity out of many parochial identities and it has survived through many problems, including internecine strife. Mazzini need not to have worried as his vision finally prevailed but only after the dark shadow of Fascism. Garibaldy's Italy was completed in 1871, but the nationalistic fervour fed aspirations of greatness that led to its country's ruination in 1943. The northern dominance of Cavour is still in place, and problems not resolved due to the rapidly rapid and rushed unification during 1861 still plague Italy today.

We should see that in Italy's case, as in our own efforts to unify the island of Cyprus, there needs to be compromise of beliefs and ideals by all. The positive that we can take away is that over time one can create a new national identity without needing to reject his previous, more parochial, identity. However, despite nationalism's honourable roots, the ideal needs to be checked by realistic compromise or else it can end up doing a great damage to the nation. Most positively worries that loomed large in 1861 seem very insignificant today - just 150 years after the declaration of unity. However the planning of the day of unity and beyond is essential in the smooth running the unified state, as errors and omissions can get "locked in" and thus plague new country indefinitely.

However perhaps the most important lesson is that people with strong convictions laid them aside: they also laid aside their reservations of whether unification would work and accepted that what was needed most was a great leap of faith, especially from the leading personalities of the day. Solutions need to be based on hopes and not fears, and Italy's story, which stands proudly 150 years to the day, can affirm that.

Of great books: Elmos Konis and Mark Mazower

2011-03-12T03:19:00.000-08:00

I want to take the chance of plugging two books which I have just finished and I absolutely adored.
The first is by my colleague Dr. Elmos Konis. It is a novel called "Magnette: a Cyprus odyssey." A wonderfully told age of 40 something persons facing a re-evaluation of their lives through mysterious yet charming recollections of the islands' (as represented to me by the octogenarian leading character) past. An overall great read, I am looking forward to the next one Elmo!

The second is Mark Mazowers "Hitler's empire: Nazi rule in occupied europe". Mazower is the most internationally respected expert of Greece from 1921 to 1945 and he has turned his sights now to a broader issue that of ideas within the Nazi rule. What I love about this book is that is discards all descriptive narrative of what happened during the dark times of WWII in occupied Europe, and instead focusses on how half baked and poorly thought out ideas can take root in existing prejudices and produce the horrific results of Nazi rule, particularly the Jewish genocide.

It has changed my outlook of the Jewish genocide --> nothing has ever (thankfully) reached the stage of systematic prosecution and extermination of the Jews in Europe, but such a humanitarian disaster was perpetrated by men already holding prejudices routed in history that society felt they were not important enough to stamp out. This, I think, is a very important lesson for the rising (almost casual) racism I see around me every day

Reflecting on the Arabic revolutions

2011-03-10T21:19:00.000-08:00

In 1848 there were revolutions across Europe from Portugal to Poland. The whole continent was griped in a euphoric state. The world thought that with the coordinator of the oppression, the Austrian Metternich, gone, then their demands of liberty and representation would be met.

However the successful revolutions turned inwards after their national oppressors where gone. Petty squabbling and inwardness made the European revolutionaries miss the bigger picture: the oppressors co-operated and worked in plans to crush them. By 1949 all revolutions were crushed through a combination of divide and rule and support of oppressive kings to their fellow oppressors under pressure. As a result the revolutionary fervour and the legitimate demands was converted into anarchy. terrorism and communist ideals

History echoes warnings for today's revolutionaries. Tunisia and Egypt are not safe if the Lybian revolution fails, while the mutual defence pact of the Arabic gulf is aimed to allow cross military interventions to crush future legitimate demands.

The fact that Europe fails to intervene under the pretext of colonial echoes (but really due to the incentive of petro-dollars by dictatorial leaders)is a tragedy that will come back to haunt us. Terrorism is in part the side effect unrealised demands of freedom of expression.

Some news just in: Sir Howard Davis quits the LSE

2011-03-03T13:21:00.000-08:00

According to the guardian Sir Howard Davis, who I last met on a LSE alumni event 3 months ago in Cyprus, has stepped down. [Although I see strangely that his CV blurb does not show any doctorate or economist training skills... perhaps a typing omission?]

A likeable character and a good administrator will well meaning views of reform, who irked departments by the somewhat imposing way he would bring decisions top down, from the issue of how many masters degrees places would be offered to how phd's would be funded.

However his (too?) friendly approach to business meant that when he was the first chairman of the FSA, where he established the "softly softly" approach that resulted to the FSA being toothless to stop gross abuse by those it sought to control.

His approach with students was love-hate. Most loved his approachable way and his ability to survive frequent roastings that most vice-Chancellors would rather avoid, but his desire to bring controversial business buddies such as chairmen of BP in the board in spite of student opposition was hated.

In the end wikileaks sealed his fate as the eagerness of the school he commanded of getting to bed with Gaddafi was deeper than just Gaddafi's son having studied here, and just having accepted a 1.5 million phd from a Gaddafi affiliated foundation.

All these actions seemed to give increasing weight to those voices in the LSE that said that from a Fabian institution with outspoken minds the LSE was coming to close to giving the justification for the UK state's surprising entente with Gaddafi.

Although such links in the USA would be normal for good universities, his decision to go to detach the school from more embarrassment was the correct one, as the LSE was always special in being the alternative voice, and thus such allegations hurt its central image.

What's happening in the real estate sector?

2011-03-03T13:06:00.000-08:00

At least some serious people are thinking of the economy in a rational way [you know who you are - thanks for a stimulating conversation today]. Perhaps unfortunately they are not politicians, technocrats or journalists: although they are exceptions, most, including the credit rating agencies are focusing on issues that are not such a big threat to our future well-being.

In general the real concerns in Cyprus are real fundamentals and not the issue of bank guarantees to Greek debts --> the banks themselves are well handled to deal with that since they have strong liquidity and access to ECB funds if needed to.

Our issues are the fact that unemployment is rising and businesses are closing. In addition the person who I spoke to pointed out that the real estate needs to be given a higher visibility.

Having moved away from a system of borrowing on trust (where two signatures of solvent persons would guarantee your loan) to a system of loans backed by property, we created two issues:
1) The issue of whether prices have bottomed out in the real estate sector both in the housing, business and tourist housing sector.
2) How many developers are practically insolent, and to whom they owe their money.

Strangely enough we had much lower rates of defaults using the trust borrowing system rather than the property system. Although its is partly due to the fact that smaller sums where involved it is my hunch (which i would like to explore further) that the issue was one of not upsetting family bonds and greater due diligence on the solvency of their clients by banks.

Anyone with an opinion on any of these two issues is welcome to comment

Lol Greece - I salute you!

2011-02-26T18:14:00.000-08:00

A blog that has helped so tremendously my writing style and has allowed me to keep on track on the Economic situation in Greece while trying not to laugh and eat my breakfast every day.
http://lolgreece.blogspot.com/
Thanks Manos for such a great blog and please keep it up - I draw strength (and dare I say lolgreece inspires me not to hold back) from your work

A great article on 3D cinema and television

2011-02-26T18:05:00.000-08:00

Another great article from a man I have had the pleasure of getting to know in various events in my old alma matter, Dr Gerben Bakker is a great man to speak to in terms of the entertainment industry, since he knows the history of a sector that often suffers from amnesia.

I saw my first glimpse of 3D TV today (very good high def TV, ps3 blu Ray) and I was very impressed. I have to say I am not a great fan of 3D cinema except if it is in a well equipped IMAX (i.e. the IMAX cinma in Waterloo Bridge).

Dr. Bakker enlightens us on the fact that cinema has been recession prone and really technology is the one that brought its hayday and almost led to it destruction. I do think the 3D TV will take off, but I saw it complimentary rather than replacing the cinema experience. Its development however means that 3D movies will not remain a sage island against lost revenues from illegal downloads... expect that sooner or later copies of 3D movies filmed illegally might still make inflation

An interesting Article on the revolutions in the Arab world

2011-02-26T18:00:00.000-08:00

So much has been written on this issue, but I respect when there are alternative and well written views. This article by Abbas Barzegar starts off so beautifully, even I do not share all of his options, it does make you think. Well worth a read.
Its starting paragraph
"The renegade philosopher and cultural critic Slavoj Zizek once noted the absurdity of certain items in our modern consumer culture: The chocolate laxative, non-alcoholic beer and decaf coffee. What these products have in common is that each one offers you a much desired substance without its negative side effects. It is a way of enjoying, consuming something but avoiding the potential harm it might cause. The same tendency, according to Zizek, can be found in our politics."

New downgrade of the economy: Knock knock on the (deaf's?) government's door!

2011-02-24T00:35:00.000-08:00

Despite myself (in The Economist, and the Cyprus Mail) and many others, including the IMF, warning the government repeatedly that drastic action is needed to avoid the downgrade of our credibility the present government has failed to listen. AS a result we have suffered our greatest ever downgrade by Moody's Credit Rating agency, down two pips to A2.

I have stated time and time again that credibility is easily lost and then it is very difficult to regain it. The previous, smaller downgrade has cost the Republic of Cyprus approximately 20 million euros in increased interest premiums, and this downgrade bring us ever closer to the point where structured financial assets in the USA might need to begin to offload Cypriot debt in order to remain within their strict limits of the type of top quality paper they need to keep in their portfolio. This will make our borrowing harder and more expensive, at a time when the government needs to borrow more that ever since its revenue has fallen substantially relative to its expenditure.

All of us urged the government to make drastic actions on the government budget bill of 2011 and especially the wage bill of the central government's employees in order to send a message of its willingness to do what it takes to put its finances in order. This would be the best answer to halt more credit rating drops and thus be able sooth the fears of foreign agencies about its ability to support the banking structure, fears that are unfounded as as Cypriot banks have not yet used the massive ECB lifeline and have maintained enviable liquidity.

The government has also argued that the economy is now out of a recession and thus a massive restructuring of the government's expenses were unessential. After all as the graph from the statistical service shows below, the worse was over for the Cypriot economy.

The international and local calls for brave action against the large and structurally unsound system of government wages led to the government promising reforms during the 2011 budget. Yet the budget that came out in December 2010 was a wish-wash of compromise between the two ruling parties. There has been no radical restructuring of government wage system. Wages will keep growing due to the socially unfair system of wage indexation, where taxation on basic staples such as medicine will be used in part to pay the increase in wages for government employees even on the highest paying scale. The greatest emphasis of the budget was in increasing government revenues rather than reducing government expenditures.

The latest detailed statistics on the government finances as submitted to EUROSTAT bear this out. Below is a graph of government expenditure (red line) by quarter from 1995 to 2010, and of government revenue (green line).

Note how for almost all governments since 1995, with the notable exception of late 2007 / early 2008 when the Ministry of Finance was in the hands of Dr. Michalakis Sarris, expenditure was higher than revenue even if very good economic years. This has led us into problems today, since the government is already saddled by substantial debt that it should have paid off during good economic years, when government revenues are increasing.

However note that is the last quarter of 2009 the wage bill of the central government exploded, and as a result the wage bill of the government was 48% of the total revenue! Since then the government has stemmed the rapid increase but not the underlying trend of increasing wages: even in the third quarter of 2010 the wage bill has increased relative to the third quarter of 2009.

Its about time we realise that we are loosing our credibility on our ability to maintain our standing as a solidly conservative financial destination because we are unwilling to solve the issues that we neglected for decades, such as the increasing government wage bill and the lack of government savings during times of prosperity.

PhDs and Wannabes: Karl-Theodor zu Guttenberg and now maybe Christofias

2011-02-24T00:16:00.000-08:00

Despite the proven futility of having a PhD degree in life (at least one you have worked at properly for 4/7 years!)as recently shown by The Economist, more and more politicians are being caught red handed in their lies in having a doctoral title. |Most recently the Defense minister of Germany, the flamboyant Karl-Theodor zu Guttenberg was forced to strip his title as Doctor after it was revealed that not only aspects of his Phd were plagarised, but that it was partially writen by research assistants. His position and career as a politicians are now in doubt.

Before we start laughing at the expense of others lets not forget that only as recently as 2008 the Dean of Business and Economics of the University of Durham, the Cypriot Tony Antoniou, was thrown out of office after he was found guilty of also plagarised his thesis and a journal article.According to sources many politicians in Cyprus claim to have post graduate degrees from prestigious universities, even if they have only been to the said university for a seminar or week long course.

Then there is the case of the President of Cyprus, Mr. Christofias. Many of his CV's claim that he has a Doctorate in historical science from the institute of social science (Academy of Social Sciences of the Soviet Union).

There are several things wrong with this. Firstly Mr. Christofias only resided in Moscow for 4.5 years, during that time he finished his undergraduate degree, his postgraduate degree and his doctorate! What is odd is that one asked to see the President's thesis, and that the so called thesis has never been published in Greek or Russian, despite the fact that as the leader of the largest party in Cyprus and now president, his book would sell and be a adding steeping stone to his campaigns for popularity.

Up to now there hasn't been one journalist that has asked Mr. Christofias about his Phd. Despite being a politician for at least 25 years. I believe that we should ask the academy of social sciences if such a thesis exists, and ask the president how did he manage to achieve so much academically is such an impossible time frame of 4.5 years, while being an active member of the political life of the communist youth movements at the time.

The not so innocent bombing of the Chinese embassy in Serbia in 1999!

2011-01-25T05:27:00.000-08:00

The revelations that China has managed to produce a stealth fighter by reverse engineering parts of a downed f-117 US fighter in Serbia made me think.

I don't like conspiracy theories, but as a historian I can connect the dots to raise great suspicions about the total annihilation of the Chinese embassy in Serbia in 1999 by US ordinance. At the time president Bill Clinton first claimed it was accidental, but the guardian claimed that the bombing was deliberate claiming it was to stop the Chinese monitoring of US cruise missile capability and thus prevent them from developing counter measures.

At the hearing about the attack the head of the CIA has admitted that this was the only strike that was authorised and directed by the CIA in the whole conflict.

Even at the time it was considered that the Chinese were making deals with the Serbian government to acquire the parts of the US (no so) stealth fighter. We may never know the truth but circumstantial evidence seem to build a significant case that NATO intentionally bombed an embassy:
1) Downing of F-117 stealth plane March 28, 1999, using simple modification of 1960s SAM site technology
2) May 7, 1999 bombing of the Chinese embassy
3) Acceptance that this was the only operation made by the CIA
4) Acceptance that the story about having the wrong address were not accurate by the CIA
6) New smokescreen put up by the US army about Chinese relaying Serbian Military messages
5) Rapid development of Chinese Stealth fighter - based (apparently) on parts from the downed F-117

So it sees quite likely that the bombing was made by the CIA in an attempt not to allow China delicate technology. It seems very unlikely that this would have the go ahead of President Clinton as bombing an embassy is not to be taken likely.

No doubt this should be investigated further. Since Serbia and Nato were in an (undeclared) state of conflict, the Serbs had every right to sell any captured technology to the highest bidder. The bombing of the Chinese embassy is illegal and in violation of several international treaties, and raises the question about the morality of the US in War.

Creating dangerous precedent to save an ailing airline

2011-01-20T22:41:00.000-08:00

The government has recently announced plans to compensate Cyprus Airways for Turkey’s refusal to open its airspace to our former national carrier, in order to save it from bankrupcy. The amount of 20 million euro is not insignificant, especially when one considers that the government is facing a very real crisis of excessive borrowing, having very recently borrowed 60 million euro from domestic banks in order to cover its immediate cash needs.

I am not going to raise issues whether this is against EU rules that forbid aiding former state airlines (it clearly us), or if it is a wise use of government money at a time of necessary frugality. I am not even going to comment on how the airlines’ real issue has not been the closed airspace but rather the overstaffed and inefficient practises that it inherited in its days as a government company, and its continued unwillingness (or ineffectiveness) in tackling them.

What I want to raise is the fact that this decision, taken in order to save Cyprus airways from bankruptcy, undermines our position in the negotiation of the Cyprus problem. Our position has always been clear that compensation for the events since 1974 should not arise from those who suffered, but by those who caused it. As a result we have always insisted that Turkey should, in one way or another, shoulder the blame for the loss of the right to use properties in the occupied area.

Yet with the decision of the republic of Cyprus to compensate Cyprus airways for Turkey’s intransigence we set up the dangerous precedent, where we pay for Turkey’s decisions! At one stroke, a not well thought out decision made to save an ailing company has undermined our ability to ask turkey for any kind of compensation, since we have shown our willingness to pay for such costs ourselves. To save Cyprus airways, have unintentionally killed off our claims to any compensation for Turkey’s actions, since we are prepared to compensate the parties damaged by such actions ourselves.

Unfortunately this is not the only time where spasmodic decisions led to dangerous precedents. The decision by Greek-Cypriot insurance companies not to compensate for accidents in the occupied area, and the state’s acceptance of this, means that the Republic of Cyprus has tacitly and unintentionally accepted that there are two separate identities in Cyprus, since a purchased island-wide insurance document does not cover the occupied areas. We consonantly say the Cyprus problem is our first and foremost priority, but constantly undermine it unintentionally through badly thought out policies.

Lessons from 1929: Private Banks and Central government should not come any closer.

2011-01-20T22:40:00.000-08:00

Kathimerini announced today that Cypriot banks will contribute 60 million Euro to the government’s “economic plan”, which effectively means that Cypriot banks will shoulder a great part of the state’s upcoming borrowing needs. As a result the Cypriot state will avoid borrowing money from the international community and thus spare the humiliation of much costly loans due to the continued downgrades of our credit worthiness, at least until after the parliamentary elections,

This is a very worrying development for Cyprus as a whole. The Cyprus banks, already battered by international concerns over their exposure in economies such as Cyprus and Greece, have opted to aid a government who is also battered by credit rating agencies for the failure of tackling its runaway wage bill. Each could separately tackle their issues with tough and painful decisions. But instead of the banks and the government will entwine their problems, creating the conditions for a potential economic meltdown.

The more the banking sector, which is under stress, is helping a government who is failing to put its finances in order, the more we run the risk of the financial system collapsing if (and thankfully it is still a very remote if) the government is unable to repay its loans.

Perhaps more subtly, this kind of close relationship of the banks’ and government’s balance sheets also raises other concerns. How can the state adequately monitor the banking sector, when it is indebted to the domestic banks for its immediate fiscal survival? We live in a country where bank changes are levied even in cases without any economic reasoning (such as having a pre-payment charge on a variable interest loan) but the state may be unwilling to ensure the rights of banking consumers if the sector offers relief to its immediate funding needs.

An example of the problems of such a close relationship was the situation with Greek banks to the Greek state during the Great Depression. As the banks became ever more exposed to covering the growing debt of the state, their executives took a greater part in running the economy, resulting to bankers controlling the most profitable aspects of the economy in the name of the government, resulting to a post-depression Greece that was oligarchical, cartelised and undemocratic.

Although we are far from this situation at the present, it would be preferable for both the Cypriot banks and the Cypriot government to tackle their separate issues individually and thus insulate the economy both from a (remote) economic meltdown and an excessive control of the economy by the banking sector.

We are Falling – but we refuse to open the parachute

2011-01-20T22:12:00.000-08:00

First I wanted to apologise for not blogging for so long. The reason was that I was interviewed by the Economist, where I extolled the virtues of Cypriot banks and condemned the lack or any sense of urgency in actively tackling our economic crisis by our government.

The resulting article however focused more on the perceived difficulties of the banks and their exposure to Greece, and went so far as suggesting that we might be the next Iceland or Ireland in the making, which was completely contrary to my belief.

However such negative exposure has been our own fault. We have given the international community to doubt even wise investments and strategies because of the unwillingness in tackling with our current domestic problems.

I stated in the Sunday mail on the 22nd of Octomber 2010 that the first small downgrade of our economy and our banks was more a warning to our government that “Credit rating agencies will first wait to see the government reaction in the new budget before making further decisions” in regards to a deeper cut to our international standing.

The result: the downgrade seemed to spur the government in some haphazard measures to reduce the public deficit, measures that were then bogged down and diluted so much before passing through parliament that they bared no resemblance to the brave measures demanded by the global economic players. As a result further downgrades of our economy are expected and with it our banks ability to borrow also suffers a blow, to the detriment of all Cypriots.

However we must understand that we were not pushed out of a plane without a parachute: the government had the chance to significantly reduce government wages, and thus free up capital both for debt repayment and investment projects, but it chose not to do so. The analogy is of government economy falling out of a plane and choosing not to open the parachute in order keep a consensus with the major unions of the government sector. However the result is that the drastic measures needed will hurt now more that if they were taken a year ago. My greatest fear is that with each further downgrade the incentive to point to foreign “dark powers” will outweigh our desire to finally tackle the real problem in the Cypriot economy, which is the lack of any connection between the government wage bill and the country’s competitiveness.

DNA, Dog Poop and Limassol

2010-11-30T01:35:00.000-08:00

Recently the American radio show "this American life" has mentioned that Limassol municipality is considering using the services of an American DNA company to create a biometric database of dogs in the city, and use it to find out who are the errant pet owners who refuse to pick up after their pets.

This service is up-and running in the US and it is called "Poo-prints". It uses the type of technology that is used to solve serious crimes such as homicide, made possible by the recent determination of the Dog DNA genome. The idea is that dogs are to be led one by one and in isolation to an office (in order for them not to lick each other and thus contaminate the DNA sample) to be swapped and their DNA information stored. Once poo is found in public places (i.e. filling the beautiful park by the old harbour)then the offending article will undergo a chemical treatment by a city worker before shipped for analysis - if it matches the database the owner will get an automatic fine as the error is as small as when DNA of a (human) culprit is found on a murder weapon.

Lets ignore the fact for the moment that this technology is perhaps more advanced that what the police is using for quite serious crimes. It is actually an quite interesting alternative to ways other cities have tried to tackle the issue, such as place cameras in all public places (expensive and invasive to privacy) or have people videotape errant dog owners (creating public tension). The cost of swapping DNA is not much higher than $30, and all dogs in Cyprus already need to get the European identifier chip which costs a lot more than that (and which could be replaced by the DNA identifier).

If we ignore the errant silliness of DNA testing dog faeces, its is actually a good idea and I am all for it. It is innovative and if successful it can promote companies innovating new products that can use Cyprus' advantage of a healthy stock of geneticists who work for next-to-nothing wages at the Cyprus Genetics institute.

In addition the DNA testing, once successful in mapping the population (i.e. once it eliminated the issue of communal dog ownership prevalent in the Mediterranean countries), is proven to be effective, since the owners accept the results. The theory of rational expectations in economics argues that once you can not escape the punishment you will ensure you pick up after your dog since the fine is automatic and unavoidable. Thus the culprits self-monitor themselves - picking your dog's steaming pile becomes more attractive if you know that it will cost 100 euro if you do not. I imagine well to do women explaining the process of picking up ones dog waste to confused Vietnamese girls...

Of course theory and practise diverge - this scheme can only work if all the dogs of Cyprus are included, and many will find the fact that communal dogs will need to be given an owner (who will pick up their fines) or be destroyed as offensive, and their concerns are valid. But the issue of dog waste is a serious problem in parks and public ways in Cyprus, which local governments can not solve without the active participation of dog owners.

From "strovoliotis" - Do you want to be talked down to by old presidents?

2010-11-24T23:38:00.000-08:00

AS part of the celebrations of 50 years of the Republic of Cyprus the museum service has launched telephone lines with extracts of all presidents talking to you (no vice-presidents i.e. Dr Koutsiouk i see...).

Thanks to Amazing blogger Strovoliotis for this!

Για όσους λοιπόν θέλουν να έχουν μια εμπειρία στενής επαφής με την ιστορία τα νούμερα είναι εδώ:

22444951 Δημήτρης Χριστόφιας.

22444952 Σπύρος Κυπριανού.

22444953 Γλαύκος Κληρίδης.

22444954 Αρχιεπίσκοπος Μακάριος

22444955 Τάσσος Παπαδόπουλος

22444956 Γιώργος Βασιλείου.

There is no sand in Malta!

2010-11-24T02:52:00.000-08:00

I was always proud of the film industry in Malta, ever since I saw Spilberg's "Munich" and kept been gob-smacked on how the set location manager managed to portray different aspects of the island as Cyprus, Lebanon and Peireas in Greece. Being Cypriot it took me quite some time to persuade other Cypriots that the scenes of "Nicosia" were actually shot in St. Pauls Bay in Malta - it was so believable right down to the Makarios posters on the wall!

Ever since i have looked at the success of Malta attracting foreign film productions with interest. Although the raod was bumpy and government support waxed and waned, there were some notable successes that brought income in relatively remote areas of the tiny island. I was always jealous since the last great film to be shot in Cyprus was in 1973 staring Peter Sellers, and it was so bad it never made it into the cinema theatres (my uncle worked as an extra on it)!

Thus I have been very upset to hear that one of the most beautifull wild areas of Malta, Dwejra, has had its ecosystem shot to pieces due to the insistence of a director to add sand to a scene. Malta has no sand - even its most famous beaches usually import the sand from the middle east - that is waht gives this islands it wild beauty - against all odds a rock in the middle of the sea is overpopulated by people, flaura and fauna. Ok having a film industry visit and give money is nice but just say no - the destruction of a habitat is not worth the $ given by an HBO miniseries.

Even more disgusting was the fact that the head of Malta's Environment and Planning Authority (MEPA)called the affected area, "just a bare Rock" after approving for effective breaches of environmental security procedures for the area. Well look around you Mr. Martin Seychell, head of MEPA -the whole of Malta is just bare rock and species have managed to live on it.

The only positive is that the EU is now involved and silly practises like this will stop - not only does it destroy the enviroment but it raises concerns over the whole future of filming in Malta - no company was to be lalbels as anti-green in hollywood.

Cheating "a la Greek": Illegal government slaughterhouse

2010-11-24T02:27:00.000-08:00

Phileleutheros reported yesterday (23/11/2010)that the government had given a loan of 500,000 euro to the government slaughterhouse through the union of municipalities, effectively breaking EU rules about government funding to companies. The issue is serious since the government is committed in paper not to aid the government slaughterhouse without the EU commission's approval, and now a request for the government to become the guarantor of a loan given to the slaughterhouse by the Bank of Cyprus is in jeopardy. A fine or a suspension of EU payments could be in order since there was a clear attempt to undermine the basic principles of the EU - that it is illegal to sponsor national companies.

Although the amount is relatively small, this once again highlights several issues that are limiting our economy's potential. The slaughterhouse is a monopoly so by definition it is capable of rising prices to the point that it makes a profit. Yet the fact that it has been a government monopoly for so long leads to extremely high wage costs. Overtime payments and over staffing resulted to the slaughterhouse not being profitable at ANY price; its arrears of 30.6 million euros just for the first 9 months of 2010 is set to rival the urgent 35 million loan to the now defunct Eurocypria.

The approach of all governments towards government sponsored companies was not to solve their problems but give them enough money to limp on. The 500,000 euro loan was not going to save the slaughterhouse, but it just pushed the issue 6 months down the line; do that enough times until hopefully another government has to deal with the issue and you are clear of any negative repercussions. This is not new - this has been the state's approach towards other government sponsored companies for decades, including Eurocypria and Cyprus Airways.

What we have failed to understand is that now the economic crisis, combined with the EU rules, have led to the futility of this practise. The hidden 500,000 euro loan can result to fines against Cyprus running to the millions, while the huge debts of these government companies are a damaging drain at a time when the Cyprus government is been warned by all that it should reduce its budget deficit. The issue facing all these government sponsored companies and the government sector as a whole is the relatively high wages and inefficient practises when compared to the private sector, and unless something is done fast about this issue, more government sponsored companies will be in trouble. The time of passing the buck is over; only rapid action will save us from perhaps having to slaughter our own animals for easter souvla.

The slide is on: Down Down Down...

2010-11-17T00:24:00.000-08:00

I was interviewed on the 22nd of October about the potential repercussions of a downgrading of the Cypriot Economy by credit rating agencies. Back then I argued that the downgrading could be avoided if urgent action is brought to bear by the government to resolve the spiralling budget deficit. I also argued that any downgrade would not be dramatic, as most agencies would wait to see if the new 2011 budget introduces radical steps to redress the balance between government spending and expenditure before launching a more radical reduction to our credit score.

However, the argument went unheeded and we have been downgraded. Some investment assets which are required by law in the United States to only hold top rate bonds will sell some of our assets, but the immediate repercussions are much more subtle as we make switch in investors' minds from one of the "safe" states of Europe to one of the "worry" states of the EU.

This change affects international business based in Cyprus. The investment report of Cypriot banks published just last week by Moody's argues that the negative prospects of the economy are clouding the banks ability to preform well, as the majority of their exposure is in Greece and Cyprus. This was surprising to me since our banking sector has weathered the financial crisis surprisingly well, and one is loathe to think that the worries about the government's financial position is hampering the efforts of the Cypriot banking sector to secure better credit abroad.

One can not but worry that a self fulfilling prophesy has started to affect us: If we are seen as a potential future "Greece" and "Ireland" of Europe, people will start to withhold investments or demand a higher interest for loans to the Cypriot government and Cypriot companies, in effect forcing Cyprus in an ever darkening future.

The response to the government was to announce measures that are frankly not radical enough to convince us of their commitment to reduce the government wage bill, let alone convincing any credit rating agency not to further downgrade the republic. The efficiency drive and wage reduction promised are so timid that they are not enough to reduce the government wage bill, and as a result the government will once again starve the economy of much needed investment in order to try and keep the civil servants satisfied but also contain the increase of the budget deficit. We all know what needs to be done in terms of efficiency and wage cuts in government, but we seem to prefer to slide towards a future that looks increasingly similar to Greece rather than do something about it today. My prediction: Look forward to a further downgrade of our economy after the timid budget is passed by parliament in December.

Economic theory suggests an investigation of the milk market

2010-11-10T23:15:00.000-08:00

One of the most common complaints by students when teaching economics is the fact that the government has not done anything to reduce the price of milk in Cyprus. The government has first tried by suggesting an unwise maximum price and then has done nothing over the issue as it is unsure if the high price is due to illegal price fixing.

Yet economic theory suggests that the government should do more to pressure the milk firms. The milk market is an oligopoly market: there are very few firms and their revenues are directly influenced from each other. As a result firms in an oligopoly market are directly dependent to each other in terms in terms of their pricing policy and profitability.

Thus, oligopolistic firms, such as the milk companies, face a dilemma. They dislike competing on price: if they decide to reduce their own price, it might lead to the reduction of the competitor’s price, reducing the profit of all firms in the market. However in such markets there is keen non-price competition as firms they strive to convince the consumers that their product is better in order to make consumers loyal even if the competitor has a price advantage. A good example of a successful loyalty campaign is by coka-cola: how many people do you know that would not drink Pepsi if “Coke” was not available?

Oligopolistic firms in Cyprus do compete using non-price means through mass advertising and product differentiation. You can pretty much bet that 9 out of 10 advertisements on the TV are from firms in oligopoly markets, striving to convince consumers that their products are different and better: banks, diapers, sanitary pads, broadband services and supermarkets in Cyprus spend massively on advertising but are less keen to compete on price.

This is where the milk market is suspect. The non-price competition of the milk market has been lukewarm at best; when was the last time you remember a two for one special offer on milk? There is some advertising and some product differentiation for premium products, but its intensity is nothing like the other markets under oligopolistic competition in Cyprus. Thus an investigation by the government would be suggested by the theory as milk companies might be co-operating in illegally fixing prices as suggested by the relative paucity of their non-price competition.

Other factors also point out that the Cypriot milk market is a ripe contender for collusion. The limited number of companies makes secret price fixing negotiation easier. In addition unlike other oligopolistic markets, the milk market is quite isolated from non-Cypriot competition. Our lack of rapid direct access to other European markets means that the Cypriot companies are not facing the same level of competition than in other Cypriot markets by foreign companies: we buy Danish and Greek cheese as it does not spoil as easily as fresh milk, but it is difficult to see Cypriot consumers preferring Greek fresh milk as there would be valid doubts about its freshness.

The wise solution is not a maximum price of milk as this could lead to chronic shortages of such a basic commodity. The solution is the beginning of an formal investigation, in a national or EU level, with the promise of immunity from damages to any company that first provides evidence of a price fixing cartel. This will reduce the incentives of anyone in the cartel, and allow companies to damage the competition by admitting to price fixing. This common practise of the EU might provide the answer to whether there is collusion, of the market, and give the possibility to firms to clear their name and satisfy my students that the current price of milk is the lowest these companies can aspire.

Sleepwalking into a major crisis: 1931, 2010.

2010-11-10T22:52:00.000-08:00

In 1931 the colonial government of Cyprus was facing an unprecedented problem: possible bankruptcy. Having used up its meagre reserves during the economic recession, the government found a market that was unwilling to lend to it and a domestic population that was already squeezed hard by the combined calamity of declining global prices and exceptional drought. The colonial government attempted to raise taxation, but it was denied by the Cypriot legislative council, which was demanding that the government first reduced its wage expenditure. The governor did not want to be in conflict with the organisation he relied for in order to govern, and thus he decided that inactivity was the best policy. The result was a further slide in recession, social upheaval and rioting.
The similarities with the current situation are striking. In 2009 the current government was faced with a similar choice – the possibility that the unsustainable budget deficit would lead to future bankruptcy. Having attempted to raise taxation, they found their way blocked by the parliament, which was perhaps indirectly requesting that government expenditures (of which wages is the largest share) where first contained. The government’s response was to wait and borrow, unwilling to be in conflict with the powerful lobby of government officials that PASIDY represents. The result is that we are sleepwalking through the recession: shops are being shut, unemployment has reached record levels and not performing debts are mounting. The issue of this "wait and see" policy is clear:the government is not active in any major way to help the economy find its way to prosperity.
Like in 1931, the present government, is faced with the choice of either increasing investment to help the economy (which it can only do without borrowing only if it reduces government wages), or reducing investment and keeping those who help it rule satisfied. I worry that it has chosen the latter. The result is an economy that has no government helping hand while our public debt is still creeping towards the danger zone. Let us hope the parallels with 1931 end soon, before it is too late.

Unemployment in Europe: UK, Cyprus and the success of Malta

2010-11-02T03:08:00.001-07:00

The latest budget cuts in England made by Cameron, were made on the assumption that the private sector will pick up the slack in the labour market. However a recent report by the Chartered Institute of Personnel and Development (CIPD) launched a devastating attack on this suggestion by announcing that the spending cuts and VAT rise to cost 1.6m jobs. This is apowerfull a call to action against the excessive "slash and burn" cuts proposed by the conservative party.

Up to now the only silver lining in Britain recession was the fact that it managed to keep unemployment levels lower than the US or other European countries: Unemployment peaked at 7.8% when larger economies are facing a recovery with stubbornly high unemployment such as the Case of the USA (9.2%) and France (10.1%). These cuts, in their rapidity and suddenness, along with the rise of VAT will cause a leap in UK unemployment undermining the only positive news since the recession was officially ended with the recovery of GDP to positive levels.

On another note is the alarming and meteoric rise of unemployment in Cyprus which began in the end of 2008. It is noteworthy that our rise has perhaps one of the most sudden in the EU outside the former eastern block countries. Malta has managed to ride the recession in terms of unemployment quite well, and once again it shows us how small open economies that are good in exploiting the opportunities offered by the EU (both in terms of competitive service provision and absorbing EU funds) can do very well for themselves.

The British Defence Spending Review and the Cypriot Bases

2010-10-19T22:13:00.000-07:00

David Cameron announced a substantial defence review. Although the review was dressed up as a review of tactical priorities the fact was that the aim of the review was to substantially cut the defence budget by as much as 8%-10%.

The review has made some truly silly choices. The hugely expensive redevelopment of a more updated nuclear deterrent to replace trident and its submarines stayed, but the UK has effectively has killed all the units that gave it the capability of intervention in the Faklands, Sierra Leone and Iraq. If anything the UK military will be ever more dependent to US military power, and completely immobile in terms of offensive airpower: the surviving aircraft carrier and its harrier jets will be axed long before the two replacement aircraft carriers are ready. Even if the new carriers are pushed through the aircraft for them are not ready, unless the UK buys off-the-self carrier aircraft from another country. At an age where agility and surveillance is key, the UK airforce is being grounded - the Chinese news agency could not hide its joy.

This spells the end of the UK policy of increased intervention initiated by the Blair government, at for at least a decade until the new aircraft carriers are in place. Interestingly this may increase the importance of Cyprus (Akrotiri) as a base from with to handle the logistical network of operations in Afganistan. Although British troop presence in Germany will be winded down the report said nothing about Cyprus, whose role as a land based foreign airbase becomes more important as the air fleet looses all its carrier capability.

It is a loosely held secret that the UK offered Decelia to the G/C during some of the rounds of the Annan negotiation as it is considered it superfluous to requirements. However the UK presence in Akrotiri is here to stay, with the Acrotiri airbase becoming the only option for planes and men heading to Afganistan other than the hugely expensive in-flight re-fuelling process - this can be seen by the map below - which shows 1,100mile radii from Gibraltar, RAF Akrotiri, Al Udeid Airbase in Qatar, the French airbase in Djibouti and Masirah Island in Oman.

Lastly the role of the Cypriot Bases as a centre of surveillance is now as important as it was in the height of the cold war as the middle east surveillance is quite high in US and UK agendas.

A cold war U2 surveillance plane lifting off from Acrotiri

Change of name and focus!

2010-10-19T09:19:00.001-07:00

Following the advice of friends and readers i have decided to make the blog more general and talk about issues other than Economics. Economics will still be one of the main focus points but they will also be posted on the syndicated blog of Cypriot economists. and those who are interested in just receiving the economic updates could unfollow this blog and follow the syndicated blog, although I will still post some of the economics comments here.
I need a help with the name of the new, broader blog, so leave your suggestions on the comment box.
God Bless,
Alex

Boys who cry wolf…

2010-10-15T01:47:00.000-07:00

Boys who cry wolf…

I have been impressed with the complete silliness of discussion on the TV lately over the Cyprus issue. There has been a huge (and from what I gather popular) fuss over the issue of rotating presidency and the fact that the federal republic will have a qualified majority voting.

A little explanation of the two issues will show that this is a non issue since we have already surrendered our rights in both principles in the European Union, without a fuss. The decision making rules in the European council and the council of ministers the policy making bodies of the EU, are based on majority voting, more specifically qualified majority voting (QMV). This means that more populous members have more votes, but less votes that their total population. The republic of Cyprus has readily accepted this as the new Lisbon treaty changes on the QMV actually increase our voting power way beyond our population share. The democratic principles of “one man one vote” does not apply in the EU - a Dutch voter “matters” more than a Spanish voter since his nation’s representative in the EU has greater voting power than the population suggests through the QMV system. Below shows the change in power that the Treaty of Lisbon will enforce in 2014; notice the increase of voting power for microstates like Cyprus, which is over and above what their population entails.

This also is in place in the USA. Despite being a strong federal state with large central powers (something that Greek-Cypriot negotiators aspire to), the votes of each individual has different power depending on which state he resides. Florida voters have more power since they almost always elect so many electorates that it is irrelevant who wins in Rhode Island.

At the same time we have very enthusiastically agreed to rotation presidency of the EU. If we agreed to follow democratic principles of population we would have the presidency approximately once every 150 years. Yet the presidency of EU and of the European Council rotates among members every 6 months, meaning that Cyprus will be the president in 2012, just 8 years after our entry in the EU.

Thus in many ways the rotating presidency and the fact that the Turkish Cypriots will have voting power above their population are issues that we have already surrendered without a fight during our entry in the EU to other EU states. They are frankly non-issues as all federal states work on some sort of principle that has either of both of these policies in order to function properly.

The politicians who cry “WOLF” over these issues are trying to whip up the people against federation in general without suggesting anything else but a continuation of this situation, which eventually leads to a totally undesirable two state solution (without a single refugee of either community going back!). I hope that people will understand that these people cry “wolf” to get attention and that it is our duty to ignore them.

Ανάλυση: Κύπριος Οικονομολόγος κερδίσει το νόμπελ οικονομικής

2010-10-15T01:04:00.000-07:00

Η απονομή του νόμπελ οικονομικών στους τρίο Peter A. Diamond, Dale T. Mortensen και του κύπριου Christofer A. Pissarides είναι ένα σπουδαίο παν-Ελληνιό και παν-Ευροπαικο επίτευγμα. Είναι αξιοσημείωτο ότι είναι από τις λίγες φορές που δίνετε νόμπελ σε άτομο (Δρ. Πισσαρίδη) που γεννήθηκε και εδρεύει εκτός Αμερικής, και συνεχίζει την σπουδαία παράδοση του London School of Economics αφού το σχόλιο έχει κερδίσει 15 νόμπελ οικονομικών και ένα νόμπελ λογοτεχνίας.

Οι Diamond, Mortensen και Pissarides επικεντρώθηκαν στο θέμα της ανεργίας και το γεγονός ότι η αγορά εύρεσης εργασίας έχει επιπτώσεις στο βαθμό και την περίοδο ανεργίας. Το σημαντικό αυτής της βράβευσης είναι το μήνυμα που στέλνει η επιτροπή οικονομικών Νόμπελ στον ευρύτερο κόσμο. Μέσα σε συνθήκες χρηματοοικονομικής κρίσης η επιτροπή έχει απονέμει το νόμπελ σε άτομα που έχουν σαν πρωταρχικό στόχο την ανεργία για να φέρει το πρόβλημα της ανεργίας στο προσκήνιο. Μέχρι τώρα τα μέσα μαζικής ενημερώσεις έχουν επικεντρωθεί στις επιπτώσεις της κρίσης στον τραπεζικό τομέα και τους λόγους της κρίσης, και έχουμε εν μέρη αγνοήσει την σοβαρή επίπτωση της κρίσης – ο ψηλός βαθμός ανεργίας. Η επιτροπή έχει κάνει κίνηση ματ και φέρνει πίσω στο προσκήνιο το πρωταρχικό κοινωνικό θέμα της κρίσης που δεν είναι άλλο από την αύξηση της ανεργίας.

Η βράβευση του Δρ. Πισσαρίδη δεν προκαλεί έκπληξη έκκληση κανένα οικονομολόγο. Σύμφωνα με την ιστοσελίδα ακαδημαϊκών δεδομένων “ideas” ο Δρ. Πισσαρίδης είναι στο τοπ 5% οικονομολόγων σε θέματα επιρροής σε όλη την υφήλιο. Το έργο του έχει αναφερθεί σε πάνω από 7,000 αλλά ακαδημαϊκά άρθρα και βιβλία. Οι αναφορές είναι αξιοθαύμαστες, καθώς η ανεργία δεν είναι ένα από τα καυτά θέματα στα οικονομικά.

Ο κ. Βασιλιού ανάφερε ότι είχε προτείνει το Δρ. Πισσαρίδη για διοικητή της κεντρικής τράπεζας της Κύπρου προ δεκαετίας, μια κίνηση που πιθανών θα απότρεπε το σκάνδαλο του χρηματιστηρίου (έχουμε ακόμα το ρεκόρ για την μεγαλύτερη αύξηση και πτώση χρηματιστηρίου μέσα σε ένα χρόνο). Δυστυχώς η θεωρία του Δρ. Πισσαρίδη θεωρείται άκρος επικίνδυνη από πάσα φιλολαϊκή και φιλοσυντεχνιακή κυβέρνηση, αφού η ερευνά του καλεί κυβερνήσεις να μείωση της ακαμσίας της αγοράς εργασίας. Καμία Κυπριακή κυβέρνηση δεν έχει εναντιωθεί στα πεπαλαιωμένα συμφέροντα οργανωμένων εργαζόμενων στο κυβερνητικό τομέα. Αυτό είχε σαν αποτέλεσμα την αύξηση της ανισότητας του κυβερνητικού και ιδιωτικού τομέα, τόσο σε θέματα δικαιωμάτων και μισθοδοσίας αλλά και με τον ιδιωτικό εργαζόμενο να έχει επιβαρυνθεί το συνολικό βάρος της παρούσας οικονομικής κρίσης. Αυτός είναι ο κύριος λόγος που η αξιοποίηση του Δρ. Πισσαρίδη από την Κυπριακή δημοκρατία ήταν περιορισμένη παρά που ο ίδιος ήθελε πάρα πολύ να έχει περισσότερη επαφή με την χώρα του.

Το λινκ είναι η συνέντευξη του Δρ. Πισσαρίδη μετά από την ανακοίνωση. Είναι αξιοσημείωτο η συγκίνηση του προς την Κύπρο και τους Κύπριους.

http://richmedia.lse.ac.uk/publicLecturesAndEvents/20101011_1400_nobelPrizePressConference.mp3

Cypriot wins nobel in economics!

2010-10-11T05:28:00.000-07:00

Professor Pissarides, a Cypriot and an LSE man, has just win a shared nobel in economics. Rumour has it that he tried to have an involvement with the University of Cyprus but politics left him out. What a shame that we can not seen to capitalise on brilliant Cypriots making wonders abroad.
the blurb from boolberg.

Another death of a brilliant young artist.

2010-10-05T09:43:00.001-07:00

Ever since i was young i was shocked to hear that someone i admired has recently passed away. It was as if them being alive made a difference, even though i had no contact with them. I locked my self in my room for a day when i heard the Issac Asimov has passed away 3 months previously, and was sad to hear that James Brown passed away a few months after he played in London where i was studying.

The death of Lhasa de Sela has left me inconsolable. Such a brilliant singer, who at the age of 38, lost her fight with breast cancer in January. I haven't heard this at the time and it has really shook me up - it may sound naive but I know there is a part of me that thinks young, brilliant persons are indestructible. Events like this always bring up the issue i bury deep about my self - my mortality. Will i ever manage to achieve as much as i want before i pass away?

Her first album was the reason my (now) wife started talking to me, and i proposed while listening to this song. Who knows what she could achieve if she was with us for much longer. Rest in peace.

The stupidity of the IMF in Greece

2010-10-01T07:12:00.000-07:00

So the Greek debt is 125% of GDP. What is the solution the IMF is forcing the Greek government to implement? Make everyone dislike it by liberalizing the trucking business, as the resulting strikes have led to goods running out in the country's periphery.

It is very interesting that the ideal solution is quite obvious, while is very hard to implement. With the informal economy being estimated as large as 40% of the economy, the interception of such "under the table" activity should be the prime focus of any recovery plan. However doing this is hard: it upsets established corridors of power, it reduces nepotism, and affects the upper middle classes more than the poorer classes. Other economists argue that to reduce corruption and informal trading is impossible. The truth is that economic history teaches us that change is possible - the 12th to 16th century government positions in England where some of the most corrupt in the world, yet England champions its self a a bastion of clean governance today. The efforts to bring this informal economy to bear have been weak at best, partly as the IMF has not focused so much on this aspect of reform.

So what is the second-best solution actually dictated by the IMF? - A huge painful and bitter array of reforms, some of them necessary and some dogmatic. Up to now all efforts have been to reduce the government deficit, ignoring that this also reduces the GDP thus increasing the Debt to GDP ratio. In addition some reforms are being pushed along with the necessary reforms that are just causing more harm that good right now.

Exactly how much GDP growth would liberalizing the trucking business give to Greece? 3-4 % of GDP over 5 to 10 years? The current strike wave caused by such measures that could wait is at least causing negative fall of GDP (at maximum ) of 0.5% - 1% GDP today aggravating the main issue today - debt to GDP ratio.

So why do it now? Because now the IMF still believes that the hard shock therapy of the "Washington consensus" that was given to former communist countries is right - don't solve the issue - just introduce capitalism in all forms and the rest would be taken care off automatically.

In the mean time Greece is being plunged to further crisis, and the reforms seem increasingly unfair to the average Greek person, who hears stories and stories of corruption and government incompetence.

Hooliganism and the birth of Agia Sofia Church

2010-09-10T06:53:00.000-07:00

I used to think that hooliganism, especially in the form exhibited in Cyprus (political connections of fans with teams and parties), was a 20th century phenomenon. I can now say that hooliganism and political connections in sport are as old as sports themselves, since they all started from the Roman Empire.

The chariot races were divided usually in four factions: Blues (Vénetoi) and the Greens (Prásinoi) had come to overshadow the other two factions of the Whites (Leukoí) and Reds (Roúsioi). These factions began operating as teams, collaborating to deny others victory. By the Byzantine period the Green and the Blues began to look like clubs, and then started to have violent gangs while also working like political parties. Their power gradually extended outside the sport arena and into the political sphere, with Emperors or aspiring Emperors being supported (and giving patronage and support to) one of the two factions. The Emperors tolerated and even tacitly supported the growth of the two factions as centres of political and factional allegiance above and beyond the realm of sports, as they could ask their faction to support them in various political crises that erupted from time to time.

The results for the empire were disastrous. Justinian I, perhaps the greatest Byzantine emperor, decided that although he was once a fanatic supporter of the blues he would try and curb the violent hooliganism that occurred during chariot races. In 535 this decision left the centre of Constantinople burned to the ground, with tens of thousands of citizens killed.

On January 10th 532 the two groups started fighting after a race; there were many injuries and some deaths. The Emperor sent in the troops to calm the situation, and they arrested the ringleaders on both sides. Some were hanged but one Green and one blue escaped, and a mob of both Green and blues (who had up to that time, killed each other in street violence) surrounded them, asking for their pardon from the Emperor, who ignored them.

Three days later at the next chariot races the Emperor was faced with 30,000 blues and greens all shouting “NIKA (WIN)” in defiance to the imperial rule. Riots erupted from the stadium (hippodrome) and spread in the whole city by the angry crowd, who released prisoners, looted and burned churches, including the original Agia Sofia Church. In addition the organised mob, now united against the forces of authority, demanded an end to the harsh taxation and the death of the chief taxman of the empire, and went as far as electing a rival emperor. Justinian responded by bribing some of the blues into submission, as well as sending the army, who butchered the 30,000 crowd to a man.

As a result of the riots the capital of the greatest empire was a burned shell. Justinian, in an attempt to bring the empire to its former glory, constructed the Agia Sofia church as it stands today, on top of the ruins of the riots.

One wonders if our tolerance of hooliganism can lead to such extreme results. It is certainly plausible that the economic crisis increases the need to belong in extreme groups that aim to be violent, and that the political parties, and even the government, is far too comfortable with the football executives than is considered healthy. I just wish that the Nika riots are a historical warning towards appeasement with the violent thugs who ruin sports.

The Truth about the damage done by CDO's desks to their Banks

2010-09-05T07:32:00.000-07:00

It's time to kick out the complicated finance desks out of banks. If anything this amazing podcast - which is a part of Pro-publica and NBER radio to uncover the real jerks in the financial system who knowingly made the financial crisis worse, shows how the desks worked against the system and their banks for their own private gain.
The podcast focuses on the CDO desks of the banks who essentially cost their own banks billions so that they could keep getting commissions. The resulting bailout did not come out of their pay-checks, but was picked up by the world's taxpayers.
The global financial system needs a radical re-haul, and unfortunately those doing the restructuring have been made rich by it, and thus unlikely to push for radical change. Very depressing stuff.

May you live in interesting times?

2010-08-30T01:09:00.001-07:00

Terry Practhet wrote a fantasy book whereby two characters that had a different view of the world: One thought the title above was a curse and the other thought the ability to live in interesting times was heaven.

What fascinates me most when I switch between Malta and Cyprus is how reassuringly boring Maltese news are. Coming from a country that has seen, felt and is still experiencing the fruits of war and communal violence, I am struck by the fact that a great many of the social and economic problems of Cyprus are held behind due to the massive and continual exposure to the Cyprus problem.

A case in point: The front line in the times of malta was that "Birdwatchers return to look out for illegal hunting and trapping", while in Cyprus the front page of Kathimerini was about the possibility (if the hard negotiations work out) that famagusta might be returned to its citizens, who have been displaced since 1974.

We in Cyprus are being constantly ignoring issues that are just overshadowed by our collective national tragedy. I am struck at the potentially huge benefit that the society and economy that a solution would bring: we can finally then concentrate on the issues that have not been resolved not because of the their direct connection to the Cyprus problem but due to the fact they have been sidelined for over 40 years.

While the issue remains unsolved, we all suffer the consequences of a society with one tracked mind. Pyrgos, who followed the general trend of Greek Cypriot in voting no in the 2004 referendum, has remained dependent on government handouts for survival, while a solution would have solved the area's problems of communication and employment near instantly.

So give me boring news, over interesting times any day, and lets hope that there is a solution imminent in order for us to shift our attention on things that affect the everyday lives of Cypriots.

Stories that give me hope

2010-08-10T00:16:00.000-07:00

I believe passionately in the solution of the Cyprus question - i feel we are so close that political will from both sides is all that remains to solve it. However events recently have resulted to me being pessimistic. The story below is verbatim and it is from Politis (in Greek)- stories like this give me hope to keep trying.

Μετά από 36 χρόνια, ο Ανδρέας βρήκε την 9χρονη Τ/Κ που έσωσε από βέβαιο θάνατο το 1974
"Βρήκα την κόρη μου"
Η ιστορία που μας αφηγήθηκε ο 64χρονος Ανδρέας Χαραλάμπους είναι ίσως μια από τις πολλές πράξεις αλτρουισμού που εκτυλίχθηκαν παράλληλα με τις πράξεις κτηνωδίας του 1974, αλλά παρέμειναν μέχρι σήμερα άγνωστες

Την ημέρα που τα αιματηρά γεγονότα της τουρκικής εισβολής και η προέλαση του τουρκικού στρατού την 20ή Ιουλίου του 1974 σκορπούσαν τον τρόμο και το θάνατο χωρίζοντας οικογένειες κι έναν ολόκληρο λαό, τα νήματα της μοίρας έδεσαν με έναν περίεργο τρόπο έναν 28χρονο Ε/Κ και μιαν 9χρονη Τ/Κ. Το βράδυ της 20ής Ιουλίου ήταν που ο Ανδρέας Χαραλάμπους έπαιρνε στα χέρια του την Ισμέτ, που βρίσκονταν ένα μόλις βήμα από το θάνατο έχοντας δεχθεί τρεις σφαίρες στο μικρό της σώμα, και τη μετέφερε στο νοσοκομείο Λευκωσίας. Έμεινε στο προσκέφαλό της για πέντε σχεδόν μέρες μέχρι να βεβαιωθεί ότι η κατάσταση της υγείας της είχε σταθεροποιηθεί, αλλά δεν κατάφερε να τη δει να ανοίγει τα μάτια της και να της μιλήσει. Για 36 ολόκληρα χρόνια αναρωτιόταν για την τύχη της μέχρι που πριν λίγες μέρες, πάλι από ένα παιχνίδι της μοίρας, κατάφερε να την εντοπίσει και να βρει στο πρόσωπό της την τρίτη του, όπως λέει, κόρη που στερήθηκε. Ο Ανδρέας και η 45χρονη Ισμέτ αποκαλούν σήμερα ο ένας τον άλλο "κόρη μου" και "πατέρα μου" αντίστοιχα και θέλουν μέσα από την εξιστόρηση της προσωπικής τους εμπειρίας να στείλουν μήνυμα ειρήνης και συναδέλφωσης. Ο Ανδρέας μίλησε στον "Π" και η Ισμέτ στην τ/κ εφημερίδα "Χαβαντίς" προκειμένου η παράλληλη -σήμερα- δημοσίευση της ιστορίας τους, όπως τη βίωσε ο καθένας τους, να αφυπνίσει στο μέτρο του δυνατού τις δυο κοινότητες.
Τρεις σφαίρες
Τον μαύρο Ιούλιο του 1974 η είδηση της εισβολής βρήκε τον 28χρονο τότε Ανδρέα Χαραλάμπους, κάτοικο Κυθραίας, να βρίσκεται μαζί με τη σύζυγό του και το εννέα μηνών παιδί τους στην Κακοπετριά. Τα αιματηρά γεγονότα ωστόσο της 20ής Ιουλίου τον ώθησαν να μεταβεί στο νοσοκομείο της Ευρύχου για να βοηθήσει τους συνανθρώπους του επιστρατεύοντας την προηγούμενη εμπειρία του στο τμήμα πρώτων βοηθειών του νοσοκομείου Λευκωσίας.
Εκείνη τη μέρα έκανε τρεις φορές το δρομολόγιο Ευρύχου - Λευκωσία μεταφέροντας με το ασθενοφόρο συνολικά δέκα εθνοφρουρούς. "Ευτυχώς όλοι τους επέζησαν", μας λέει και θυμάται ότι γύρισε εξαντλημένος γύρω στις 10 το βράδυ στην Ευρύχου όταν κάποιοι έφερναν στο νοσοκομείο ένα μικρό κοριτσάκι που έχανε συνεχώς αίμα από τις τρεις σφαίρες που είχε δεχτεί, δυο στην κοιλιά και μία στο πόδι. Ήταν η εννιάχρονη Ισμέτ από το χωριό Ελιά. "Ο γιατρός στην Ευρύχου έκανε ό,τι μπορούσε αλλά η αιμορραγία δεν σταματούσε. Το κοριτσάκι έπρεπε να μεταφερθεί στη Λευκωσία και, παρόλο που το βράδυ οι μάχες είχαν ζώσει και είχαν κλείσει σχεδόν κάθε πρόσβαση προς την πρωτεύουσα, προθυμοποιήθηκα χωρίς δεύτερη σκέψη να κάνω ακόμα μία μεταφορά", μας λέει ο Ανδρέας.

Το πρώτο θαύμα
"Μόλις είδα την κατάσταση του κοριτσιού βρέθηκα σε αμηχανία. Τους είπα όμως ότι παίρνω το ρίσκο", συνεχίζει και θυμάται ότι, επειδή δεν υπήρχε διαθέσιμο ασθενοφόρο, "πήρα το καινούργιο αυτοκίνητό μου, έριξα τις πίσω μαξιλάρες και βάλαμε το κορίτσι. Είχαμε ενημερωθεί ότι στο δρόμο για τη Λευκωσία υπήρχαν παντού μπλόκα. Έκανα συνολικά τρεισήμισι ώρες για να φτάσω, γιατί έπρεπε να κινούμαι με χαμηλή ταχύτητα και με σβησμένα φώτα. Ευτυχώς είχε φεγγάρι και κατάφερνα να μένω μέσα στο δρόμο. Κάθε εννέα μίλια είχε μπλόκο και οι στρατιώτες μας μου έλεγαν συνεχώς να γυρίσω πίσω. Μόλις έφτασα στο αεροδρόμιο, διαπίστωσα ότι και εκεί οι μάχες είχαν ανάψει. Οι σφαίρες έπεφταν βροχή, οι εκρήξεις ήταν συνεχείς. Σταμάτησα λίγο πιο έξω, προσπαθώντας να βρω τρόπο να περάσω. Είχα παγώσει από όσα έβλεπα. Εκείνη την ώρα έγινε ένα μικρό θαύμα. Ο θόρυβος από τα όπλα σίγησε για μερικά λεπτά. Ήταν λες και έγινε μια μικρή εκεχειρία για να τα καταφέρει αυτό το κοριτσάκι. Εκμεταλλεύτηκα τη στιγμή και με μεγάλη ταχύτητα πέρασα".

"Είναι νεκρό"
Οι σκηνές στο νοσοκομείο Λευκωσίας μαρτυρούσαν τα τραγικά αποτελέσματα της εισβολής. Παντού υπήρχε αίμα και σε κάθε γωνιά υπήρχαν τραυματίες. "Ένας γιατρός πήρε το παιδάκι στα χέρια του. 'Είναι νεκρό', μου είπε, εξηγώντας ότι έχει πάρα πολύ αίμα. Δεν ήταν δυνατόν να έχει πεθάνει. Σε όλη τη διαδρομή μού ψέλλιζε συνεχώς στα τουρκικά 'νερό, νερό'. Εκείνη την ώρα όμως, πάλι ως εκ θαύματος, το κοριτσάκι άρχισε να έχει σπασμούς και ο γιατρός έτρεξε ζητώντας να του φέρουν αίμα. Του βάλανε συνολικά πέντε μπουκάλες. Αμέσως μετά την 'ανάστασή' της οι γιατροί τη βάλανε στο χειρουργείο. 'Υπάρχει κανείς να περιμένει για αυτό το κοριτσάκι', φώναζε μια νοσοκόμα και ανταποκρίθηκα εγώ. Οι ώρες που διήρκεσε το χειρουργείο μού φάνηκαν αιώνες. Δεν ήμουν τακτικός καπνιστής, όμως πρέπει να κάπνισα εκείνες τις ώρες δυο πακέτα από την αγωνία μου. Έβγαλαν το κοριτσάκι από το χειρουργείο και το έβαλαν στο θάλαμο. 'Η κατάστασή του είναι κρίσιμη. Είναι καλό να είναι συνέχεια κάποιος μαζί της', μου είπε μια νοσοκόμα και τότε πήρα την απόφαση να μείνω δίπλα της. Δεν μου έκανε καρδιά να την αφήσω. Έμεινα στο πλευρό της για πεντέμισι μέρες. Την τελευταία μέρα η κατάστασή της σταθεροποιήθηκε και θεώρησα ότι είχε ξεπεράσει τον κίνδυνο. Πήγα στο σπίτι μου στην Κυθραία για να αλλάξω ρούχα και να ξεκουραστώ. Κοιμόμουν για 18 ώρες. Η πρώτη μου σκέψη μόλις ξύπνησα ήταν να πάω να τη δω. Ωστόσο, μόλις έφθασα στο νοσοκομείο είδα ότι το κρεβατάκι της ήταν άδειο. Με έπιασε πανικός. Ρωτούσα τις νοσοκόμες, αλλά δεν ήξεραν τι είχε απογίνει. Ήμουν σε κατάσταση σοκ και έκλαιγα. Με τα πολλά βρήκα μια γνωστή μου νοσοκόμα η οποία μου είπε ότι είχαν έρθει τα Ηνωμένα έθνη και την πήραν. Οι δικοί της είχαν ζητήσει να την πάρουν μέσω του Ερυθρού Σταυρού".

Η πρώτη επαφή
Ο Αντρέας δεν ξαναείδε τη μικρή Ισμέτ για 36 ολόκληρα χρόνια. Τα όσα είχαν γίνει τότε ξυπνούσαν μέσα του κάθε Ιούλη και με το πέρασμα των χρόνων τόσο μεγάλωνε η περιέργειά του για την τύχη της μικρής. Όταν άνοιξαν τα οδοφράγματα ρώτησε Τ/Κ, αλλά δεν έπαιρνε απαντήσεις. Πριν λίγους μήνες ο Ανδρέας γνώρισε στο υπουργείο Υγείας έναν Τ/Κ ο οποίος είχε φέρει για θεραπεία τη μητέρα του. "Τον βοήθησα με τη συμπλήρωση εντύπων και γνωριστήκαμε λίγο καλύτερα. Τον ρώτησα κι αυτόν αν γνώριζε την περίπτωση της Ισμέτ. Μέχρι τότε δεν ήξερα το όνομά της οπότε η αναζήτησή μου ήταν δύσκολη. Μετά από λίγες μέρες έλαβα ένα τηλεφώνημα. Η γυναίκα του Τ/Κ που γνώρισα έτυχε να είναι συγγενής με το σύζυγο της Ισμέτ. Στην άλλη άκρη της τηλεφωνικής γραμμής ήταν ο Οζκάν, ο σύζυγος της Ισμέτ, ο οποίος προσπαθούσε να μου εξηγήσει στα αγγλικά ποιος είναι. 'Θέλουμε να σε συναντήσουμε', μου είπε και δώσαμε ραντεβού για την επομένη", λέει ο Ανδρέας.

Το συναπάντημα
Οι σκηνές που ακολούθησαν στο Λήδρα Πάλας ήταν φορτισμένες. "Η κοπέλα που έβλεπα απέναντί μου ήταν σε κατάσταση σοκ. Το ίδιο και εγώ. Έτρεξε και με αγκάλιασε. Κλαίγαμε για πολλή ώρα, χωρίς να λέμε τίποτα. Πήγαμε στο σπίτι τους στην Κερύνεια, όπου εκεί με περίμενε η μητέρα της. 'Παρακαλούσα το Θεό να σε δω, να σε ευχαριστήσω και μετά να πεθάνω', ήταν οι πρώτες κουβέντες της γερόντισσας. Ο καθένας μας εξιστόρησε τα κομμάτια της ίδιας ιστορίας έτσι όπως τα βιώσαμε. Η Ισμέτ, 45 χρονών και μητέρα δυο καταπληκτικών παιδιών σήμερα, θυμάται που της έδινα νερό, θυμάται επίσης και που την πήρα από τα χέρια του γιατρού στην Ευρύχου. Της πήρε έξι μήνες να σταθεί και πάλι στα πόδια της. Από τότε μιλάμε σχεδόν κάθε μέρα στο τηλέφωνο και με αποκαλεί 'πατέρα'. Και εγώ πλέον θεωρώ ότι έχω τρία παιδιά. Την βλέπω σαν κόρη μου. Στις 20 Ιουλίου με κάλεσαν και πάλι. Δεν ήθελα να πάω λόγω της μαύρης επετείου, όμως με παρακάλεσαν λέγοντάς μου πως έχουν μια έκπληξη. Πήγα και είχαν ετοιμάσει μια τούρτα με 36 κεράκια. 'Είναι η επέτειος που γνώρισα τον δεύτερο πατέρα μου', εξήγησε η Ισμέτ".

ΒΑΓΓΕΛΗΣ ΒΑΣΙΛΕΙΟΥ
Κωδικός άρθρου: 962626
ΠΟΛΙΤΗΣ - 09/08/2010, Σελίδα: 33

Another worrying development for Obama - The economists fleeing his economic plans

2010-08-06T00:43:00.000-07:00

Blomberg reports that Christina Romer, most notable for reconstructing the GDP of the USA during the Great Depression to tell a more controversial story, has also resigned Obama's economic team and is set to go back to teaching.
Although it is perhaps uncertain if Romer was a supporter the slightly Kenysian "spend spend spend" stimulus package of Barak Obama, the failure of the stimulus package in providing job growth is apparently making academics distance themselves from the effort.
I personally think academics should chose which side of fence - abstract academic thinking or policy making, and once they make their choice they should be made to carry their repercussions through. Oh and on a silly note, Mr. Obama, i am quite happy to take over Ms. Romers position, since i have also reconstructed GDP during the Great Depression.
Happy Holidays Everybody!

Economic Podcasts

2010-07-13T12:17:00.000-07:00

While waiting for my phone to finally stop having one of its many (unessential) updates I though I would tell you about two shows that are absolutely free to listen and download.

Planet money brings economics in the day to day life - it is not afraid to ask audacious questions, and has had a great success by being one of the first shows to get an interview with the head of the New York fed, a first in the New York fed's history!

A more general radio show which is perhaps one of the best of its kind is this American life. It has some excellent shows about the economy, for which they won an Emy for.

Both free, both excellent, both worth for you to check out...

Krguman hits back!

2010-07-08T00:24:00.000-07:00

Two great back to back op-ed by an economist that deserved his Nobel price in economics, unlike his president who did not deserve his for peace.

When i met Krugman in 2008 he confessed he was ignorant of economic history, although he appreciated its relevance. Now it seems the recession has made him more aware that history can help us in making better policy decisions.

The first called "the third depression" is a condemnation of IMF sponsored policy in reducing government budgets in the middle of a very serious depression.

The second is a heartfelt attack on the cowardice of congress, who has left the American unemployed with no other alternative than to cheat and steal after their 26 weeks of unemployment relief runs out.

We need a new economist that can put the issues of social fairness back in the agenda.... and personally i would love to see Krugman lead the way.

The triumph of dogma: the IMF in Cyprus

2010-07-05T13:43:00.001-07:00

I went to the IMF press conference on the Cypriot economy today. Mr. Bernard J. Loran was quite evasive, but the true intentions of the IMF where outed in the end.
What annoyed me was the way the complete conviction of their belief was clouded to prevent a fall out, while at the same time any other idea was dismissed as immaterial.

Mr. Loran kept stressing that a rapid reduction of the budget deficit is necessary, but kept stressing that this would "lead to growth". He did not manage to explain how exactly a fall in GDP that would lead to the economic growth - and that was intentional as any policy to reduce the government deficit will worsen the current recession. Mr. Loran did not have to explain it to anybody - dogma was more important that actual economic analysis on how a negative shock to aggregate demand lead to its growth.

Mr. Loran also used "wage flexibility" to hide the fact that the IMF demanded a significant reduction in public sector wages. It slipped out arguing that the government plan was not really urgent enough and the plan to reduce the budget deficit needs to be set in place immediately.

However in the end anything that was contrary to what the IMF version of events was dismissed out of hand. When I asked him if the IMF has conducted a study to see whether the reduction of government wages would lead to a rise in non-performing loans and thus jeopardise the Banking system, Mr, Loran dismissed me out of hand, despite the fact that the IMF has admitted that this was never a consideration and that such a study did not take place.

My second question was also dismissed out of hand. I explained that the large deficit is in part due to the very optimistic IMF forecasts of the Cypriot economy, which indicated the Cyprus having growth in 2010 and rapid growth in 2011, while in fact the crisis turned out to be most severe. I pointed out that by trusting overinflated GDP forecasts the Cypriot government got into a financial mess and is now is paying the price, but the IMF has never accepted its role for promoting government expenditure through very wrong forecasts. Mr. Loran sadly refused to even see the logic of the argument, or even discuss that the IMF might have had its small negative part to play in this current economic press.

It is so sad to see that IMF impose generic solutions without really modifying its advice to fit to the economies it monitors. What is worse is that the current dogma, even when it has proven to have errors, is still the only game in town for the IMF - and all other valid questions or approaches are dismissed out of hand.

Greek debt and the stock market

2010-06-30T21:39:00.000-07:00

Great Humour on what is happening lately....

Keep your hands of my school!

2010-06-24T03:26:00.000-07:00

Disgusted to hear how my old school (The English School Nicosia)is once again being blackmailed for its forward thinking ideas. What the school is proposing to do will take place after a solution of Cyprus anyway, and i am wondering if the nationalistic show-offs who are withholding the government grant will ever have the guts to come out and say that they do not want any solution as they do not want to live in proximity with Turkish Cypriots.
The article is reposted here, from today's Politis:

Παραμένει σταυρωμένο το κονδύλι προς την Αγγλική Σχολή
Το Μπαϊράμι τρώει τη χορηγία
Καθυστερεί η αποδέσμευση του κονδυλιού της ετήσιας κρατικής χορηγίας προς την Αγγλική Σχολή. Αιτία... η θεσμοθέτηση της γιορτής του Μπαϊραμιού και η καθιέρωσή του ως σχολικής αργίας

Σε νέες περιπέτειες φαίνεται να εισέρχεται η Αγγλική Σχολή, με αφορμή τη θεσμοθέτηση της γιορτής του Μπαϊραμιού και την καθιέρωσή του ως σχολικής αργίας. Παρότι το θέμα δεν ηγέρθη μέχρι σήμερα δημόσια, κοινοβουλευτική πηγή ανέφερε στον «Π» ότι υπάρχει διαφωνία βουλευτών ως προς τη συγκεκριμένη ρύθμιση και αυτός είναι ο λόγος που το κονδύλι της ετήσιας κρατικής χορηγίας προς τη Σχολή, ύψους 341.720 ευρώ, παραμένει σταυρωμένο και δεν αποδεσμεύεται από την κοινοβουλευτική επιτροπή Οικονομικών.
Το αίτημα της σχολής για αποδέσμευση του κονδυλίου έχει τεθεί αρκετές φορές στην αρμόδια επιτροπή και, παρά τις εκκλήσεις του διαχειριστικού συμβουλίου, αλλά και τη συγκατάθεση του υπ. Παιδείας για αποδέσμευση, η συζήτηση του θέματος παίρνει συνεχώς αναβολές, με αποτέλεσμα η Σχολή να μην μπορεί να υλοποιήσει συμβατικές και άλλες υποχρεώσεις της. Όσο για τους λόγους των αναβολών, γονείς καταγγέλλουν ανοικτά ότι σχετίζεται με αποφάσεις της διοίκησης του σχολείου και αφορούν την καθιέρωση της γιορτής του Μπαϊραμιού ως αργίας. Σημειώνεται ότι ανάλογη ρύθμιση είχε ισχύσει και πέρσι χωρίς να προκληθούν οι οποιεσδήποτε αντιδράσεις.

Εκβιάζουν τη Σχολή
Οι λόγοι της μη αποδέσμευσης του κονδυλίου προς την Αγγλική Σχολή συζητούνται έντονα τις τελευταίες μέρες μεταξύ βουλευτών, αλλά και γονέων και καθηγητών της Σχολής, ενώ για το θέμα πραγματοποιήθηκε την περασμένη Δευτέρα και συνάντηση γονέων κατά την οποία ενημερώθηκαν ότι ζητήθηκε από τη Σχολή να ανακαλέσει την απόφασή της για το Μπαϊράμι, έτσι ώστε να αποδεσμευτούν τα κονδύλια. Ο «Π» επικοινώνησε με μητέρα μαθήτριας της Σχολής, οποία παρέστη στη συνάντηση, και επιβεβαίωσε τα όσα κυκλοφορούν τις τελευταίες μέρες ως φήμες. Όπως χαρακτηριστικά ανέφερε η κ. Μαρία Εμμανουήλ, στη συνάντηση παρέστησαν 60-70 γονείς και κατά τη διάρκειά της «μέλος του διαχειριστικού συμβουλίου μάς ενημέρωσε πως στην τελευταία συνάντησή τους η διευθύντρια της Σχολής τους πληροφόρησε για συνάντηση που είχε με τον πρόεδρο της κοινοβουλευτικής επιτροπής Οικονομικών, Νικόλα Παπαδόπουλο. Στη συνάντηση τέθηκε το θέμα του «παγώματος» της κυβερνητικής χορηγίας, ενώ έγινε αναφορά σε «λανθασμένες πράξεις» της Σχολής και δόθηκε η «συμβουλή» να ανακληθεί η απόφαση για την τήρηση της γιορτής του Μπαϊραμιού του χρόνου». Σύμφωνα με την κ. Εμμανουήλ, «οι γονείς που βρίσκονταν στη συνάντηση ξαφνιάστηκαν από την είδηση και θεωρούν αυτή την πράξη εκτός αποδεκτών πλαισίων. Πρόκειται για ξεκάθαρο εκβιασμό εις βάρος της Σχολής, αναγκάζοντάς την να κάνει διάκριση βάσει θρησκείας, ούτως ώστε να αποδεσμευτούν τα κονδύλια».

Φήμες
Ερωτηθείς για τα όσα ακούγονται τις τελευταίες μέρες, ο πρόεδρος της επιτροπής Οικονομικών, Νικόλας Παπαδόπουλος, ανέφερε στον «Π» ότι «στο παρόν στάδιο δεν θα σχολιάσω φήμες», και τόνισε ότι «θα τοποθετηθούμε ως κόμμα όταν κληθούμε να αποφασίσουμε για την αποδέσμευση του κονδυλιού της Σχολής». Όσο για τους λόγους για τους οποίους αναβάλλεται συνεχώς η συζήτηση του θέματος, ο κ. Παπαδόπουλος εξήγησε ότι «πολλά από τα κονδύλια δεν αποδεσμεύονται ή αναβάλλεται η συζήτησή τους επειδή δεν υπάρχει χρόνος να τα εξετάσουμε ή επειδή ζητούνται περαιτέρω πληροφορίες. Το θέμα αυτό θα τεθεί σε επόμενη συνεδρία της επιτροπής». Σημείωσε, ακόμη, ότι «υπάρχει επικοινωνία με τη διοίκηση της Σχολής και ζητήσαμε κάποιες περαιτέρω διευκρινίσεις και για τις οικονομικές τους δραστηριότητες, αλλά και για τον τρόπο με τον οποίο χειρίζονται θέματα του σχολείου».

Επαφές με κόμματα
Στο μεταξύ, δυσαρέσκεια για την καθυστέρηση που παρατηρείται στην αποδέσμευση του κονδυλίου εξέφρασε χθες στον «Π» ο πρόεδρος του διαχειριστικού συμβουλίου της Αγγλικής Σχολής, Κυριάκος Βασιλείου. Όπως ανέφερε, «επίσημα από τη Βουλή δεν λέχθηκε αν υπάρχει κάποιος συγκεκριμένος λόγος για τον οποίο καθυστερεί η αποδέσμευση του κονδυλιού, το οποίο είναι απαραίτητο για να συνεχίσει τη λειτουργία της η Σχολή». Υπογράμμισε, επίσης, ότι «η απόφαση του συμβουλίου για το θέμα είναι να προσπαθήσουμε να δούμε τους αρχηγούς των πολιτικών κομμάτων, να μας πούνε ποια είναι η θέση τους και γιατί η επιτροπή δεν εγκρίνει το ποσό».

A dedication to a true gentleman scholar

2010-06-16T07:35:00.000-07:00

I have just finished my Ph.D. and I have realised that although I have thanked many people who have helped me over the years in the thesis, there is a more general debt which i will not be able to repay as Professor Angus Maddison (1926-2010) has past away.

Maddision was an economic historian of the old school - the school who thought that it was important to (to paraphrase David Landes) had to "think big". Many doubted his vision when he painstakingly started estimating the historical GDP of the world, bit by bit, country by country. Now over 45 years latter the world is indebted in having a huge dataset of the GDP of the world (broken in countries) from the birth of Christ until the present day. In that way he blew our blinkers away and forced us to look globally, long before the word "globalisation" became popular. It is one of the most cited sources and his vision enabled a tremendous amount of research as well as providing comparative context. He even estimated the GDP of Cyprus and Malta, proving to me that it can be done. It took me 5 years to prove that his estimate was 34% higher that what it should be for Malta/Cyprus; in the same amount of time he estimated the GDP of the world form the 1700's to 1AD. My phd was based on him and other pioneers who wanted to know in numbers the conditions of the past.

A polyumath and bit nosy, he stuck his head in all issues , from Chinese development to the moguls in India and Latin America. His dynamism, intelligence and restless spirit meant that he spread controversy wherever he went, not helped by the fact that he decided whether he liked you or not on first impressions.

His instinct on numbers and on "what was going on" was immense; his drive even more so. While quite unwell he finished a book which chronicles the history of the world since the roman empire in a qualitative way. I met him at a dinner to commemorate his new book less that two years ago. When he heard i was estimating the GDP of Cyprus and Malta for the interwar period he eyes shone "its a great research project, but you need one more country" he said excitedly, "why don't you do China?".

The exchange shows both his immense and global way of looking at things, and looking back it also shows his lament that he would not survive enough to complete such a grand project of getting robust estimates for china. I am so sorry to have disappointed him with my limited outlook.

I had asked him if it was possible to separate his data for small countries in order for me to able to better compare my series with his. I found out at my viva yesterday that despite being very ill he started separating his estimates so i could do just that, but he was never able to complete it.

Thus today i also dedicate my completed thesis on Angus Maddison - economic history is much poorer without him.

When you think Greece reaches rock bottom...

2010-06-15T03:35:00.000-07:00

The basic principles of a nation are also undermined. In the middle of the worst recession in Greece's living history, were the poor and middle class have their income severely curtailed, the most honoured warship in Greek History was given (I am guessing without a fee or a very limited fee but many underhand "contributions") for the wedding party of a rich shipping magnate.

The armoured Cruiser "Georgios Averof" was the key to victory in the Agean in the Balkan wars, ensuring that the Land forces could continue their advance in securing modern Greece without fear of naval re-supply. To honour its role all ships salute the ship as they enter harbour:

Τα πλοία του Πολεμικού Ναυτικού που εισέρχονται στο λιμάνι του Φαλήρου πρέπει να τιμήσουν το "Γ. Αβέρωφ". Ο κυβερνήτης διατάζει το πλήρωμα "προς το Θωρηκτό Αβέρωφ Ακινησία Αριστερά (ή δεξιά ανάλογα με την πλευρά του πλοίου που φαίνεται το θωρηκτό)" και με το σχετικό σφύριγμα το πλήρωμα στέκεται σε στάση προσοχής πάνω στο κατάστρωμα κοιτώντας προς την πλευρά του θωρηκτού και οι αξιωματικοί χαιρετούν το θρυλικό θωρηκτό.

I am not a nationalist, and many others who are not nationalist seem to agree that this is a very low blow. Even Stathis Panagiotopoulos, not known for his liking of authority, has found this contemptible. It shows that even at the worst of times, there are different rules for the rich than for the poor - undermining the government's effort to convince the average Greek that the rich will pay their share of the burden for the upcoming years of hardship.

The most dangerous and silly move by the Cypriot government

2010-06-15T01:43:00.001-07:00

In one fell swoop, the government has managed to undermine the economy and our standing in international credit rating agencies. The government has moved the jurisdiction of the national debt out of the central bank, which is independent, and into the ministry of economics, which is not.

This is exactly the type of thing that led to the mess in Greece. The appointment of Dr. Orphanides as the director of the central bank was an inspired choice that affirmed the independence of the central bank from the government for the first time. This independence upheld the standing our our banking system at times when real political pressure was placed on the Bank by the government to accommodate a looser regulatory framework for banks (remember the pressure applied to the Central bank of Cyprus by the Minister of Economics in order for the Central Bank to give in to Marfin's demands for it not to move out of Cyprus?).

Yet the government now is sick and tired of having an independent authority challenging its decision and has devised a scheme to remove the handling of debt from the central bank. Once under the jurisdiction of the ministry of economics it is easier to place political pressure on the ministry than the bank. It a very short step from being able to place pressure to trying to fiddle the books - once the debt servicing is removed from an independent authority and it goes to a political authority where you boss is a politician the incentive to massage the figures is very large.

This decision takes us back 20 years. This government has now completely lost my confidence in being able to handle the economy of Cyprus - rather than tackling the issues that have led to a structurally unsound economy, the government is browbeating the defenders of sound monetary principles. Alas, I get the feeling that more poor decisions are on their way...

The Economics of Gaza Tunnelling

2010-06-11T23:46:00.001-07:00

There was a great interview with a person who is perhaps one of the main Gaza tunnel bosses. The tunnelling system has now reached a certain level of maturity after the prolonged blockage of Gaza by Israel.

The man very unusually sold his land to have enough capital to open a tunnel and there is free entry in the tunnel market, as long as the local authority, Hamas, is notified and a tax on all goods is paid to them. So it sounds like the market is operating in near-perfect competition terms. I am guessing that some tunnels may well end up coming too close to each other and collapsing, since the strip of land that connects Gaza to Egypt is pretty narrow.

What is very interesting is the fact that the tunnel's construction workers have a rudimentary welfare system in place. You get paid a certain sum of money for injury or death that seems to be set by nobody other than the social custom. Most ingeniously though is that when the tunnel is up and running the original construction workers get a share of any goods trafficked through it. This solves two problems:
1) running a tunnel needs less workers and so the other workers now left without a job can act as very active agents for business for the tunnel
2) The majority of the wage cost for building the tunnel is differed in the future rather at the beginning when cash flow is nil.

I found it interesting to note that the interviewers did not believe that weapons did not get smuggled through but they failed to grasp what the tunnel boss was saying: they were so many weapons that had already been smuggled through that their price was too cheap. This is explained by the fact that guns have a very high value relative to their bulk - making them perfect for their transportation through tunnels. High value low bulk goods are perfect for the tunnellers as there is great profit for minimal problems of running them through the dangerous Egypt/Gaza border strip. Thus too many weapons have been carried through, making them cheaper than in the Egyptian market.

What is much more difficult to smuggle is low value bulky goods such as cement, sand, piping and automobile parts (engines ect). Such material have been banned from entering Gaza by Israel, but because they can only be carried in limited quantities and they give limited value per kg, there is an insufferable scarcity of such goods in Gaza.

Τι λένε γνωστοί οικονομολόγοι για την ελληνική οικονομία

2010-06-04T06:36:00.000-07:00

From Today's Kathimerini (Cyprus)
Τι λένε γνωστοί οικονομολόγοι για την ελληνική οικονομία
Ο Νουριέλ Ρουμπινί δεν αποκλείει έξοδο της Ελλάδας από την ευρωζώνη ενώ ο Πολ Κρούγκμαν μίλησε για ενοποίηση των δημοσιονομικών και φορολογικής πολιτικής της.
Στην ελληνική οικονομία αναφέρθηκαν οι γνωστοί οικονομολόγοι Νουριέλ Ρουμπίνι, Αμάρτια Σεν και Πολ Κρούγκμαν κατά τη διάρκεια ομιλιών τους τις τελευταίες μέρες στην Ελβετία, όπως περιγράφονται από τον ελβετικό τύπο.

Σε συνέντευξη που παραχώρησε στην «Tribune de Geneve» ύστερα από ομιλία του στη Γενεύη, ο Νουριέλ Ρουμπίνι υποστήριξε ότι οι επιθέσεις που δέχεται η ευρωζώνη αποτελούν το δεύτερο στάδιο της κρίσης, που ξεκίνησε από τις μεγάλες επενδυτικές τράπεζες. Για την Ελλάδα πιστεύει ότι θα προβεί τελικά σε αναδιάρθρωση του χρέους, ενώ δεν αποκλείει έξοδο της χώρας από την ευρωζώνη.

Κατά τον κ. Ρουμπίνι, στην ευρωζώνη, περισσότερο από τον πληθωρισμό, η ευρωπαϊκή οικονομία απειλείται από τον αποπληθωρισμό: κρίση, στη συνέχεια ελαφρά ανάκαμψη, που ακολουθείται από μία νέα ύφεση, που οφείλεται στα προγράμματα λιτότητας που εφαρμόζονται για τη μείωση του ελλείμματος.

«Η Ελλάδα ίσως χρειαστεί να εξέλθει από το ευρώ και κυρίως να προβεί σε αναδιάρθρωση του χρέους της αναγκάζοντας τους πιστωτές της να συναινέσουν σε μεγάλες απώλειες.

Το σχέδιο σωτηρίας της Ελλάδος μεταθέτει απλώς το πρόβλημα. Όλες οι χώρες, συμπεριλαμβανομένων των ΗΠΑ, της Μεγάλης Βρετανίας ή της Ιαπωνίας, θα πρέπει να τακτοποιήσουν τα δημόσια οικονομικά τους, να μειώσουν δηλαδή τις δαπάνες και να αυξήσουν τα έσοδα από τους φόρους. Επίσης, η Ευρώπη πρέπει να αφήσει το ευρώ να διολισθήσει έως την ισοτιμία 1:1 με το δολλάριο, για να γίνει πιο ανταγωνιστική».

Στην ομιλία του Nouriel Roubini αναφέρεται και η εφημερίδα «Le Τemps» που σημειώνει ότι ο γνωστός οικονομολόγος αμφιβάλλει για τη δυνατότητα των χωρών, όπως η Ελλάδα, να υλοποιήσουν σχέδια λιτότητας τόσο αυστηρά.

Σύμφωνα με τον γνωστό οικονομολόγο, η Ελλάδα μπορεί να αποφύγει τη στάση πληρωμών προς τους πιστωτές της, τύπου Αργεντινής, αλλά να προτείνει στους δανειστές της να ανταλλάξουν τους τίτλους που κατέχουν με άλλους που λήγουν αργότερα, όπως έκανε η Ουκρανία και το Πακιστάν.

Για την ομιλία που πραγματοποίησε προχθές στη Λωζάννη ο νομπελίστας οικονομολόγος, Αμάρτια Σεν γράφει η εφημερίδα «Le Temps». Αναφερόμενος μεταξύ άλλων στην Ελλάδα δήλωσε ότι οι προηγούμενες κυβερνήσεις της Αθήνας είναι οι κυριότεροι ένοχοι της ελληνικής κρίσης, όμως οι αγορές την ενίσχυσαν στοιχηματίζοντας στη χρεοκοπία της.

Σύμφωνα με τον Αμάρτια Σεν, «ο πανικός που ακολούθησε κατέστησε πολύ δύσκολη την πρόσβαση στα κεφάλαια και αύξησε το κόστος δανεισμού. Και αντί ορισμένες χώρες της ευρωζώνης, κυρίως η Γερμανία, να φανούν αλληλέγγυες, άρχισαν να δίνουν μαθήματα. Κι έτσι χρειάστηκε να επιβληθεί στην Ελλάδα ένα πρόγραμμα λιτότητας πολύ πιο αυστηρό από αυτό που θα ίσχυε, εάν είχε ληφθεί εγκαίρως, με αποτέλεσμα η χώρα να βυθισθεί στην ύφεση».

H εφημερίδα «Le Temps» δημοσιεύει άρθρο για την ομιλία που πραγματοποίησε χθες στο Ιντερλάκεν ο Πολ Κρούγκμαν, κάτοχος του Νόμπελ Οικονομικών 2008, προσκεκλημένος του Ελβετικού Οικονομικού Φόρουμ.

Αναφερόμενος στην ελληνική κρίση, ο Αμερικανός οικονομολόγος δήλωσε ότι υπάρχει 50% πιθανότητα η Ελλάδα να χρειαστεί να εγκαταλείψει τη ζώνη του ευρώ, αφού είναι δύσκολο να κατανοήσει κανείς πώς το πρόγραμμα λιτότητας, που επέβαλε το ΔΝΤ στην Ελλάδα, θα μπορούσε να λειτουργήσει. «Το ελληνικό χρέος, παρά τις τεράστιες θυσίες των Ελλήνων, θα συνεχίσει να αυξάνεται έως το 2015 και θα φθάσει το 150% του ΑΕΠ. Ακόμα και αν η Αθήνα αποκήρυττε το χρέος της, όπως έκανε η Αργεντινή το 2001, τα προβλήματα θα παρέμεναν στο ακέραιο εφόσον οι δημόσιες δαπάνες ξεπερνούν κατά πολύ τα έσοδα και οι μεγάλες ανάγκες προσαρμογής θα εξακολουθούσαν να υφίστανται».

Η Ελλάδα συμπεριφέρθηκε με ανεύθυνο τρόπο και εξαπατούσε για μία δεκαετία, αλλά τα προβλήματά της οφείλονται επίσης και στο προβληματικό οικοδόμημα της νομισματικής ένωσης, πρόσθεσε. Η Ελλάδα θεωρούνταν για χρόνια ως ενταγμένο μέρος ενός συνόλου και μπορούσε να δανείζεται με πολύ χαμηλά επιτόκια, όπως και η Πορτογαλία, η Ισπανία και η Ιρλανδία. Όμως, ούτε η Μαδρίτη ούτε το Δουβλίνο «εκτροχιάστηκαν», όπως η Ελλάδα, ανέφερε χαρακτηριστικά

«Πάντως, η κρίση της υπερχρέωσης βρίσκεται ενώπιον μας. Και εάν δεν καταρρεύσει το ευρώ - ίσως με την έξοδο της Ελλάδας από το κοινό νόμισμα -η λύση θα ήταν η ενοποίηση των δημοσιονομικών και φορολογικών πολιτικών της ευρωζώνης. Η αγορά εργασίας θα πρέπει να εξελιχθεί προς μία μεγαλύτερη ευελιξία, ενώ η ΕΚΤ θα πρέπει να λειτουργεί όπως η αμερικανική κεντρική τράπεζα αγοράζοντας τίτλους, που κανείς δεν επιθυμεί», κατέληξε.

www.kathimerini.gr με πληροφορίες από ΑΠΕ-ΜΠΕ

Μα περιπαίζουν μας?

2010-05-27T06:31:00.000-07:00

Κατά την παρουσίαση του πακέτου μέτρων στης 14/04/2010 για δημοσιονομική εξυγίανση ο υπουργός οικονομικών κ. Σταβράκης υπολόγισε ότι κατά το πρώτο τρίμηνο του 2010 το δημόσιο έλλειμμα για ήταν 55 εκατομμύρια εύρο. Την ιδία μέρα η στατιστική υπηρεσία ανακοινώσε το έλλειμμα που στάλθηκε στην Ευρωπαϊκή υπηρεσία EUROSTAT ήταν 76.5 εκατομμύρια εύρο. Δεν αμφιβάλω τα στοιχεία της στατιστική υπηρεσίας αλλά το γεγονός ότι ο κ. υπουργός έκανε παρουσίαση με λάθος στοιχειά, που μάλιστα βοηθούν την κυβέρνηση, με έκανε να ρωτήσω αν εν εμάς, την Ευρώπη η εν τον εαυτόν του που περιπαίζει ο υπουργός.

The Shareholders of Apoel FC - LTV and KYKKOS are major shareholders

2010-05-26T06:14:00.000-07:00

Since there is practically nothing going on in the premier league until after the world cup, I took the opportunity to see the list of the major shareholders of Apoel FC. This is certainly interesting as the club kitty is bursting with Champions League money, and thus it can be in a position to remunerate shareholders.

The list is here:

Some of the most noteworthy names is the fact that Kukkos monastery owns 1.67% of the company. It seems that our Church is not only tax free but it also loves its football!
More serious is the fact that LTV owns the majority share at 8.99%. This is not illegal, but it raises questions about the ability of football teams to bargain their TV contracts when the TV company is a member of the board and owns a substantial part of the company - there are huge conflict of interest considerations that have not been raised before.

If anyone knows if sky sports owns a part in premier league teams please let me know.

Economics Talk and the Technical University of Cyprus

2010-05-25T09:13:00.000-07:00

On Thursday the 13th of June 11:30-12:30 there will be a talk organised by the Cyprus University of Technology, Department of Commerce, Finance and Shipping.

The topic is Accurate and Robust Indirect Inference by Professor Elvezio Ronchetti
(University of Geneva)

More details can be seen here