Dynamics (Europe): Only Greece is Greece!

In the aftermath of Monday night's Eurogroup decision on Greece (a very complicated package/deal the elements of which and their between the lines not clear to the writer, still, 24++ hrs later, but my MBA does help, to a certain extent, to begin to try to understand this complex financial deal), some in Ireland (and I am sure in Portugal too) are wondering "what does Greece have" that they do not have (implicit in that is the working assumption that the deal Greece got was, after all is said (and analysed) a good one).

Well, for one, with all due respect, Greece did not have politicians arguing that their country is NOT Greece. That is if I recall well the case for Ireland and Portugal, at least. I only call it as I remember it, vividly with we "are not Greece" political chants of sorts still in my ears from many many months ago).

Yes, Ireland does not have sunshine. I love Ireland and I wish it did. Not a fan of humidity. Greece never had or claimed to have a Tiger, either. Nor does it benefit from a corporate tax regime that via transfer pricing seems to suck corporate taxable income from other national tax systems, in the EU, Eurozone and beyond (in a very "our taxpayers" age, eg in Germany, The Netherlands, Finland, UK even USA - see other blog posts for the folly of that "out taxpayers" argument though, at least inside the EU and Eurozone).

What Ireland and Portugal do not have, either, is a huge pile of mud that has been thrown at them in the last three years, in the form of "lazy" and other epithets.

It was almost clear to most from the start that the first deal Greece got ("Memorandum 1") was meant to be punitive and, what is more, discourage Ireland, Portugal and other Euro members from ever asking for one.

It also seems clear to at least some commentators of the Eurogroup decision that Greece got a good enough deal considering the potential events re Spain, Italy, increasingly (?), France. And the German political timing/scene (elections next autumn). One that may be revised when the time (in Euro and German politics) is "right". At least that is one way to look at things. There are others.

The UK - Ireland tie, post EU UK

If UK leaves can Ireland keep the free access to UK? Well, should be No, but see the Norway situation with EU Scandics. But NOR is member of the EEA and of Schengen.

But if UK is part of EEA then it will still have to let Greeks, Poles, Spaniards et al work in the UK! Are Cameron (and even Miliband after his recent apologies and other views re intra-EU migration) aware of that?

The "Vikings Invasion" model for SME led exports!

1. Intro:

Who in Europe has really cared to examine "sur-le-terrain" the real problems of SMEs and micro firms in the EU's or Euroland's periphery and find real solutions to them?

Greece's rebound in growth and jobs can come from a mass/pack of new exporting micros & SMEs that will "invade" with their products and in some cases services, the Euroland, the EU Single Market and world markets as the Vikings ships invaded Europe 1000 yrs ago.

Not via large corporations or large private investors.

2. Business as a revolution:

October 9, 2011: 44 years without Che!
Che, an Argentinian of Spanish and Irish descend, had concluded that Latin America's ingrained economic inequalities were an intrinsic result of capitalism, monopolism,neocolonialism & imperialism.

Which of these variables apply in Europe today?

What would a European Che do today? IMO go to Greece or Ireland or Portugal or the Baltics, the EU's periphery, and start an exporting SME. To the Eurozone/Euroland, to the EU Single Market or even to the global one!

Because I ask you, what is more revolutionary and heroic than starting an exporting SME in the Euroland of 2011, especially its periphery?

Plus: Not tolerating monopolies, oligopolies, monopsonies and oligopsonies is not a Leninist monopoly! Real free market fans share this POV!


3. Scope

It is true that most SMEs are occupied with local and national regulatory, redtape and other issues.

That is precisely the main problem of SMEs. Their local "worldview". That is why I call the model I propose "Vikings invasion"!

The EU27 even EZ17 spaces are alas a bureaucratic swamp where mainly large companies and corporations can "work"/operate! The swamp is created mostly by local/national regulations/polynomy and resulting red tape.

Almost 18 years of BS re the EU Single Market is enough!

SMEs need a REAL Single Market now!

The Europlus Six-Pack is no solution to Europe's growth and job creation problems.

The "Vikings Invasion" SME pack-exporting model is!

4. The "Vikings Invasion" model for SME led exports (and growth and jobs creation)

Look into history texts on how (method) the Vikings invaded and dominated Europe for 3 centuries! The key success factor was the independence of each vessel. Yet these vessels formed a "loose" pack that because of its non-coordinated nature it made it difficult for others to defend against! Viking "SME" vessels, due to their size, used Europe's inland waterways to reach all parts of Europe.

This model is what Greek, Irish, Spanish, Portuguese SMEs and their economies need today!

The "Vikings invasion" model for exporting micros & SMEs can be a solution not only for Greece and Ireland & but other EU/Eurozone economies too!

EU: political union or economic colonisation by world powers?

Especially in our era, few if any local issues and dynamics are not intertwined with regional (eg EU) or global issues and dynamics. Unless humanity goes back to countries-fortresses.

In our era's volatile global systemics, a country can always build walls ie become a fortress in an effort to preserve its sovereignty and its distinct ID, be that in culture and "values", laws and their underlying philosophy. Opt out of the global trade "game" and preserve the ownership of its key industries, rely on its own "capital", be it monetary or any in any other form. Not have to rely on the views of the global financial community or follow the rules of the WTO or other international bodies. Every country should have and has that right. But how realistic is that? How can it be self-reliant on energy, foods (at least the basic ones), security, economics, capital, etc? And what size (land, population, GDP, internal market) does this option require?

Shared sovereignty (via a real political union USA or FR of Germany style) is a better option than being colonised (economically etc) by one of the world powers, ie China, India, USA, Russia. This IMO applies to the countries of Europe, South and Central America, and other parts of the world. And the EU and UNASUR (in South America) are "vehicles" of such "shared sovereignty" but which has yet to materialise via proper political union.

Everyone is different, But that is a relative term. To a certain extent every country is different and to a certain extent all countries are the same. Which is more feasible eg a political union between eg Ireland and Greece or one between Ireland and eg South Korea? To a certain extent neither is feasible and to a certain extent both are feasible! We do live in "nothing is impossible" times.

Local, national, regional (eg European) and global citizen identities can well co-exist. The issue is at what level, local, national, regional (EU) or global the Polity is formed. Continent-state is an emerging model in terms of having the potential, via shared sovereignty, to provide an adequate level of self-reliance in energy, foods, defence, have a large enough internal market, economies of scale in many utilities and social welfare (eg a Health Service).

People have indeed tended to group around ethnic, geographical and cultural ties. But these are not static over time. Plus melting pot models have always existed (see eg my post "Globalisation, today and in 300 BC"). The US or even just NYC (or London) is a place where nationalities, languages etc can co-exist in a melting pot under a common polity, currency, laws and language spoken at work. Dozens of languages (337 according to Wikipedia) are spoken in US homes or even homes in NYC, one of the key metropoles of the era (138 languages spoken in Queens, NY)

The alternative is colonisation, driven by economics, by one of the real world powers of the era (China, USA and maybe Russia and shortly, India (*)). A balkanised Europe, with a minimal EU and each member "sponsored" by one of those powers.

(*) Could one count the global financial system as one of those powers?

Systemics: If Greece, Portugal and Ireland formed a political union

Food for thought:

If Greece, Portugal and Ireland formed a Political Union, the resulting polity would have a combined population (1/1/2009 Eurostat data) of

26.4 million

making it the 7th largest member of the EU (see here)

the 5th in the Eurozone and the 6th in the Europlus.

Its nominal GDP (2009 World Bank data) would be 784,884 million USD ie 6.3% of Eurozone nominal GDP (2009).

Hence:

5) Spain 45.8

6) Poland 38.1

7) Romania 21.5

8) Netherlands 16.5

Would become:

5) Spain 45.8

6) Poland 38.1

7) Greece + Portugal + Ireland 26.4

8) Romania 21.5

9) Netherlands 16.5

Here is a rough comparison with the NL:

Netherlands

Pop (2009) 16.5 million

GDP (2009) 792,128 million USD

GDP per capita 48007

Greece+Portugal+Ireland

Pop (2009) 26.4 million

GDP (2009) 784,884 million USD

GDP per capita (USD, 2009) 29730

Based on the 2009 World Bank nominal GDP data the G+P+I would have the 6th highest GDP (size of economy) in the Eurozone (after Germany, France, Italy, Spain and the Netherlands).

Onviously, a theoretically "exercise", but IMO "systemically" insightful.

Eurozone systemics: GIIPSB 44% of pop 39% of GDP!

Recent ECB Pres & some BoD members' comments re rate hike potential raise IMO the issue of what kind of economic governance the EA17 need & by whom!

Eg. see "ECB's Gonzalez-Paramo: April rate hike possible" and note the argumentation:

"... Asked about the impact of a rate hike for Spain, whose economy is recovering at a slower pace than others in the euro zone, Gonzalez-Paramo said the ECB must think about the euro zone as a whole rather than individual countries. ..."

The Eurozone as a whole? This prompted me to table some insightful Eurozone statistics & systemics.

Today, I present the first part, that covers Italy, Spain, Ireland, Greece, Portugal as well as Belgium:

Country ... % pop .... % GDP (1) ...... Q4 growth (2) .. Inflation (3)

Italy ......... 18.21% .... 16.94% .......... +1.3% ............... 1.9%
Spain ...... 14.25% ..... 11.71% ......... +0.6% ............. 3.0%

Greece .... 3.41% ........ 2.64% ......... -6.6% ............... 4.9%

Portugal ..3.22% ....... 1.83% .......... +1.2% ............... 3.6%

Ireland .... 1.37% ........ 1.82% ........... N/A ................. 0.2%

Sum

% of Eurozone population: 40.46%

% of Eurozone GDP: 34.84%

plus:

Belgium .... 3.25% .......... 3,76% ................. +1.8% ............... 3.7%

So BPIIGS

% of Eurozone population: 43.71%

% of Eurozone GDP: 38.60%

So PIIGS + BEL: 43.71% of the Eurozone population, 38.6% of nominal 2009 GDP! Quite larger than most would expect or think off hand!

Thus the strategic policy question: Do economic conditions in Spain + Portugal + Italy + Greece + Ireland + Belgium (6 Euro members, 43.71% of the Eurozone population and 38.6% of Eurozone's nominal 2009 GDP) justify Euro rate hike "thoughts" recently expressed by some central bankers in the EZ?

3 of the PIIGS plus Belgium have a January inflation rate above the 2% ECB target: Greece 4.9%, Belgium 3.7%, Portugal 3.6% and Spain 3%. The Greek rate that comes in spite a 6.6% reduction in nominal GDP in Q4 of 2010, is probably driven by new taxes (raises in VAT, etc) part of its budget consolidation effort.

Tomorrow: The full picture of the Eurozone 17 and more insightful data and syllogisms!

Footnotes

(1) Nominal GDP (2009), Source World Bank

(2) Q4 2010 GDP compared to Q4 GDP 2009. Source: Eurostat. Estonia and NL based on not seasonally adjusted data

(3) Eurostat - Inflation rate annual rate Jan 2011/Jan 2010

Inflation etc!

1) Tomorrow is another day. But so is today. And so was yesterday.Uncertainlty & volatility abound. Are these the best of times or the worst of times for policy makers? Depends on the policy maker! It's in times like these in Europe, US, the world tht good (& proactive) policy making is most needed. But how many can rise to challenge?

2) Paul Krugman's NYT Op/Ed: Inflation Theorists
There are plenty of inflation hawks in the Eurozone as well!

3) According to the RTE, the Irish national totals stand at: FG 76; Labour 37; FF 20; SF 14; SP 2; PBP 2; Greens 0; Independents 15.
So: 166/2+1 = 84 so FG needs 8 more min majority? Labour's 37 would give it a +30 majority in the Dáil?

4) The EU Council conclusions on Energy 2020: A Strategy for competitive, sustainable & secure energy

5) According to the US DoL: Unemployment Insurance Weekly Claims:

In the week ending Feb 19, the advance figure for seasonally adjusted initial claims was 391,000, a decrease of 22,000 from the previous week's revised figure of 413,000. More

6) According to Reuters, the head of the US FDIC has called for big bank restructuring
Why am I so not surprised?

IMO an even bigger overhaul of the global financial system, as a whole, is needed. Do the US or the EU have the policy guts to do it? The public opinions seem to be ready for such bold policy changes after the events of that last 3 years!

Irish economy +0.3% in Q3 2009

Ireland's GDP (gross domestic product) +0.3% in Q3 compared to Q2 (but -7.4% compared to Q3 2008).

This means that the Irish economy, until recently considered a "tiger" due to its dynamism in recent years, is now technically out of recession.

economic modeling: What happened to the Irish and Spanish economies?

Ireland + Spain: Both are both experiencing jobless rates reminding of the 80s!
Does it mean that super growth of recent years lacked fundamentals?

More on economic modeling:
Was the Celtic Tiger model that many sought to copy in recent years, faulty in its fundamentals?

Plus: What happens when an economy over-depends on construction (US, subprimes, Spain, etc) or financial services (NYC, London)?

Irish unemployment in June

11.9%, the highest in more than 13 years!