How Bad Is Greece? Worse Than You Think, Ross Says

Saturday, May 25, 2013 Last Update: 9:41 PM ET

Community
Greece
Sports
International
USA
Cyprus
Opinions
Culture
Obituaries
Social
Classifieds

How Bad Is Greece? Worse Than You Think, Ross Says

By: Jeff Cox CNBC.com Senior Writer • Though other parts of the continent are improving, Greece actually is worse up close than it appears from the outside, investor Wilbur Ross told CBNC. Ross, a vulture capitalist who seeks to turn around distressed companies and who has invested heavily recently in Ireland, toured the region and said he fou

Already a subscriber?
Sign in to read full article.
Not a subscriber?
Subscribe now and get full access!

Or... enter your email and start reading this article now:

August 17, 2012

Save article

12 readers comments


1. Niko Seretis wrote on August 17, 2012 8:06 PM	The problem is worse than he thought because of makeshift mosques being set up in the streets of Athens? The response from TNH readers has been the same. Remove them from Greece ! This will at least eliminate one problem.

2. Philip Vorgias wrote on August 18, 2012 9:26 AM	Leaving the Eurozone would be a catastrophe for Greece. Even Greece's worthless politicians know that. Greece would become Albania-2 were that to happen.

3. Paul Poulos wrote on August 18, 2012 2:09 PM	It's funny to keep hearing months of "they better not leave the Euro" or things will get worse. How much worse can they get with the suicide and employment rate skyrocketing. How hard is it to realize decades of any hard Socialist society is a futile and ultimately deadly utopian dream turned nightmare. To compare Greeks to Albanians is silly. Greeks always become their natural, entrepreneurial and productive selves once they leave Greece and turn to capitalist societies of U.S., Australia, Canada, etc. They're already showing up from Greece in my city and working two jobs at a time and making some money. I'm sure they'll own an establishment in time. My grandparents did it at the turn of the 20th century coming from Greece and history is repeating itself with the same mistakes of the past. Milton Friedman will have the last laugh from the grave as he famously told Robert Mundell (the ‘Father of the Euro’) back in 2001 that the Euro would fail, but that since the experiment had already been entered into, he hoped that he would turn out to be wrong. Friedman said “There is no historical precedent for such an arrangement. It involves each country’s giving up power over its internal monetary policy to an entity not under its political control." Nostradamus-like, wouldn't you say?

4. Nicholas Kostopoulos wrote on August 18, 2012 2:16 PM	All Muslims in Greece should be sent back to their respective Muslim countries, no exception should be given. This will solve one of Greek's problems, as far as increased crime, a disgusting Muslim presence in a Christian country. As far as what the rest of the world says I say F--k off to them and their liberal ideas. They have been a roadblock to Greece getting out of this mess. Also I say Golden Dawn should increase its power, while the other pro Muslim parties New Democracy and PASOK and others should lose power and be thrown out of government now and forever.

5. Philip Vorgias wrote on August 18, 2012 6:52 PM	I never said Greeks are like Albanians, I said 'Greece will BECOME Albania-2'. Read more selectively, Paul. As for the rest of your post, there is NOTHING wrong with the EURO. In fact, the EURO has appreciated against the Dollar since it's introduction. It's a strong currency. The fault in Greece is not the EURO, it's the level of debt Greek polticians foisted on their own nation by LYING. Were Greece to depart the Eurozone and go back to the Drachma there would be NO INCENTIVE for Greek politicians to introduce long needed reforms. They'd keep depreciating their currency to hide the nations lack of competitiveness-just as they've always done. Secondly, going back to the Drachma would result in a capital flight out of Greece of monumental proportions. If you think things are as bad now as they can get in Greece you're deluding yourself. There is a slight difference between 24% unemployment and 40% unemployment. As for Milton Friedman, I thought people stopped listening to him when he ran Argentina roughshod into the ground? What he has to say about currencies couldn't interest me in the least. The current par value of the EURO and the US Dollar has repudiated anything he might have added to the discussion.

6. Nicholas Kostopoulos wrote on August 18, 2012 7:53 PM	Gentlemen whatever the final figure of Debt is, Greece is and will be in deep trouble for the long term future. Whether they can survive until they get out of this climate is doubtful. Today I heard that the taxi drivers to avoid having to pay new taxes are not giving receipts and double charging tourists. If the Greek government doesn't come down heavily on such illegal activities, their tourist dollars will dry up as fast as this crisis started. The only thing they have left is tourism, they have already driven out businesses by their insane regulations and taxes. Greece has got to control its economy, and what its people do no matter what. If it can be done, only than can it hope to get out of this present circumstances. Personally, I don't think at this present time Greece has the stomach for what must be done.

7. Philip Vorgias wrote on August 19, 2012 1:44 PM	You may be right, Nicholas. But there is no alternative path, Greece will either introduce the necessary reforms or fall into economic irrelevence. You can't hide from grim reality.

8. Basil Zafiriou wrote on August 19, 2012 4:44 PM	Paul, you ask: how much worse could things get should Greece leave the euro? According to Bank of Greece Governor George Provopoulos, a return to the drachma would be “real hell”. A 50+% devaluation of the new currency would wipe out much of the country’s wealth, its banking system would collapse, shortages of basic staples that the country imports –food, fuel, pharmaceuticals- would grind the country to a halt and likely lead to social unrest. As for Friedman’s position on the euro, it was much more nuanced than the quote you cite suggests. What separated him from Mundell on the issue was that while Mundell expected that the euro would “provide a catalyst for increased political integration”, which would make the euro more successful, Friedman “feared” that it would not. (The full debate can be read at: http://www.irpp.org/po/archive /may01/friedman.pdf.) Under the pressure of the current crisis, the euro countries are now in fact moving precisely in the direction that Mundell expected and Friedman hoped --so it is hard to imagine Friedman laughing from his grave, particularly since he believed that it was “in the interest of Europe and America that [the euro] succeed.” Significantly, during the same F/M debate, Friedman also had this to say: “My own view has long been that for a small country ...the best policy would be to eschew the revenue from money creation, to unify its currency with the currency of a large, relatively stable developed country with which it has close economic relations, and to impose no barriers to the movement of money or prices, wages, and interest rates.” Seems to me, that’s what Greece did when she adopted the euro in 2001 (though she’s been slow to remove restrictions on wages and prices). Exiting the euro now would impoverish Greece further, reduce incentives to reform –without which the country cannot prosper- and probably bring SYRIZA to power. Under such a scenario, Greece becoming a new Albania is not at all far-fetched.

9. Paul Poulos wrote on August 21, 2012 1:21 PM	Sorry, but the musings of one in a long line of Bank of Greece Governors sympathetic to the Euro dream and parsing of words do not change the fact that political dream of United States of Europe and federalized common currency amongst sovereign countries is a Titanic a few feet from the iceberg, and few with ears are willing to hear the crow's nest warnings. The Euro was supposed to create growth and jobs is now killing both and accelerating economic suicide. Switching to a new currency, some variation of Drachma II would indeed likely start 50 to 60 percent lower to start than current Euro value, no doubt. It would be difficult medicine of a few weeks or so as import costs would rise, but slowly investment and innovation would cut into that and start the process to replace overpriced and expensive imports. Tourism? It will come roaring back in a dramatic way, then Greece will inspire Spain, Portugal and Italy to get the ball rolling. The EU is currently humiliating and punishing Greece for months now. Greek votes do not matter any more. Currently three foreign officials come into Greece and tell them what they can and cannot do as federalized nannies. The Finns are already making noise about leaving. Mr. Van Rumpoy and Mr. Barosso are both unelected and illegitimate overlords in terms of the average Greek and European citizen. It was anti-democratic to remove Papandreou, and drop the guillotine on him after 'suggesting' that he go to the people and let them decide whether or not to stay in the Euro via that terribly democratic idea of a referendum. Two democratically elected Prime Ministers of Italy and Greece removed and replaced by Brussels connected technocrats Monti (Former EU Commissioner and one of the architects of the Euro Zone utopian dream) and Papademos (Gee, wasn't he another all-knowing sage as former Governor of the Bank of Greece as well and also involved in Greece's transition to the Euro in the first place when the books were cooked after the failed first attempt?) and controlled by the puppeteers of international finance and tri-lateral commission. Greece will be out of the Euro and Euro Zone God willing within a year's time. Hopefully others will follow as Greece can be the first hostage waking up from Stockholm Syndrome and escaping. Sorry Keynesians, Milton Friedman was right. The Euro would not survive it's first recession.

10. ARMODIOS PAPAGIANAKIS wrote on August 21, 2012 2:01 PM	Paul! Where have you been all these years? You’ll notice that some NH readers will mention semi-relevant factoids while conveniently omitting others. For example while the Euro did in gain against the severely flawed USD, it lost value against most other harder currencies, including the Looney and Aussie since inception. In fact, the Swiss Central Bank was forced to intervene several months ago in the currency market to support the Euro vis-à-vis the Swiss franc. Others will conveniently forget to mention that while imports and only some foods, not necessarily all “staples” will certainly get more expensive, exports, including tourism, the largest part of Greece’s economy, will gain due to a cheaper currency. Indeed, while Greece defaulted 5 times after its independence, or once every 36 years, Greece managed to default for all practical purposes twice in 10 years under aegis of the Euro/EU…“the best thing to happen to Greece”.

11. Basil Zafiriou wrote on August 21, 2012 5:55 PM	Paul, the “musings” of Governor Provopoulos are based on extensive analyses by the Bank of Greece, which I would venture entail closer study of the issue than either you or I have been able to give it. The Governor’s position is in fact the consensus among knowledgeable observers. More important, according to opinion surveys, it represents the position of over 80% of the Greek people and even a higher proportion of Greek business persons, who want to keep the euro despite their current difficulties. Perhaps they are all benighted souls and we can appreciate better from a safe distance how anodyne a return to a new drachma would be. But if we respect democracy, shouldn’t we grant them the right to make their own mistakes? I don’t claim to possess the putative clairvoyance of Nostradamus, so cannot speak with your confidence about what will happen to the euro. I can observe what is happening today: the eurozone countries are moving closer towards the sort of union that Robert Mundell foresaw and Milton Friedman hoped for. Your “sorry Keynesians” comment betrays a serious misreading of the ideological alliances on the issue. Robert Mundell is at least as staunch a friend of free markets as Milton Friedman was, and his support for the euro is motivated largely by that fact. Here’s what he said in his fall 2000 debate with Friedman: “I believe that flexibility of individual prices will be fostered by the euro area and that, with exchange rate changes ruled out, policy makers will increasingly turn to deregulation and fewer controls.” Of all countries in the eurozone, none is in greater need of “deregulation and fewer controls” than Greece. Freer markets, fewer controls, a more flexible economy is also what the Greek bailout mnimonio seeks to promote. This fact explains as well the alignment of Greek political forces on the issue. Except for the loony Golden Dawn on the right, the mnimonio’s main opponents are the statist SYRIZA and the KKE (the Communist Party of Greece). If you favour free markets, as you seem to do, your bedfellows on the issue should at least cause you to re-examine your position.

12. Philip Vorgias wrote on August 21, 2012 6:01 PM	You can't deflate your way to economic growth, Paul. If that were the case nations like Albania and Argentina would be thriving economies. They aren't. The Byzantine Empire had the worlds most vibrant economy for almost a millenia, at the same time it had the worlds most stable and strong currency-the Gold Byzant. You don't need to weaken a currency to promote economic growth, you need to reform work rules and labor laws which choke growth. And you need laws which encourage investment, including foreign investment. Europe is not in trouble because of the EURO, europe is in trouble because they have half a century mindless socialists crafting anti-productive legislation and work rules. Greece is simply the worst example of that. If you don't understand that much you need to study the issues more.
You must sign in in order to post a comment.