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Κυριακή, 13 Ιουλίου 2014

Why France is the new domino effect victim of the Eurozone collapse..

In a recent edition of atlantico.fr there is a very interesting article about the new patient of the eurozone, France. Not a surprise for whoever read my previous blogs or understands the basics about macro-economics. France is obviously collapsing and this is not a surprise. Al least is you are not another boiling frog.. The majority of the eurozone members are currently facing situations between the "Bubble" and the "Ponzi" pattern and this proves that the collapse of the Monetary Union is much more possible, due to the continuity of the past mistakes. But, why is it so obvious, especially for France? France is currently extremely expensive, as a destination, has low productivity and offers overvalued quality in most sectors. So, the only possible way for France is to rightsize. The rule of the economy pattern is stability, growth and normality while correct measures are adopted, becoming a bubble when you fail to act effectively on time and if you still pay no attention to the problems it is converted to a Ponzi scheme and finally collapses. This is the fact and France is currently between the "Bubble" and the "Ponzi" since no correct measures are adopted.

After the the Latin Monetary Union and the Scandinavian Monetary Union break up, the Eurozone collapse is for me so obvious due to the irregularities the monetary systems create to their members. Different countries, adopting the same currency but still choose to act individually, enhancing inequalities within their borders and within their trades. The truth is that today's eurozone, instead of a single currency, still has national euro currencies "pegged" and every time each country fails to follow the rest needs to find ways to debase the national euro. As the member countries of the 19th and 20th century needed to have enough gold and silver to support their national currency and circulation and forced to leave the union the time of the shortage, today we still haven't realised that nothing has changed since then. We need a surplus to support our inner economy or we need to sell something (such as the public property) in order to find new income, the time we fail to achieve a surplus or at least a break-even point.

Cyprus had serious macro-economic problems for decades, especially due to the increase in salaries and benefits. Being "pegged" with the British pound had to keep harmonizing the local economy with the British, in order to have the British tourism and real estate investors, two of the island's most important incomes. Every time the cyprus pound was becoming expensive, for the island's major visitors, Cyprus was losing tourists and investors, forcing the country to find some ways to become more attractive again and, of course, cheaper. The cycle was doing the same round. Being cheaper, attracted more tourism, again becoming more expensive for a few years and need to follow the same patters once again. Until Cyprus entered the euro zone area and the basic rules changed. Cyprus continued to give raises to the public sector and benefits that couldn't afford in euro terms, any longer. Since the system was impossible to follow the local pound cycle, in 2013 after receiving loans that couldn't serve any longer, was forced to the bankruptcy, the haircut and the Troika memorandum. At that time, the only alternative was the return to the Cyprus pound. But, of course, it was not a serious solution since it could create the same pattern Greece followed during the Drachma period. That time, i remembered Karl Marx's statement, history repeats itself, first as tragedy, then as farce.. And within the euro area, too many farces will follow..

Greece had almost followed the same pattern, during the Drachma period. Unfortunately, Greece had higher levels of corruption and lower productivity within the past decades. Greece has a serial default problem because productivity was never positive, the public money vanished as the icebergs do and Figures were always misleading, as the Greek officials had to admit in the last years. So every few years Greece had to lower the drachma currency. The measure proved that Greece has no positive income, and continued transferring the massive debt to the people, without officially admitting it. The time Greece adopted Euro, nothing really changed but the rules, as happened in Cyprus after. Productivity remained low, corruption continued, donating even the european funding to specific people and finally Greece had to find new ways to rightsize the inner economy, remaining in the Euro area. Troika had no experience to understand what was really happening, as few years later also faced in Cyprus. The fact is that if any country has no willingness to fix the long-term internal problems, no Troika nor international institution is capable to do it. Instead of believing that Cyprus, Greece or any other country is today in austerity procedures, we have to admit that all these countries have to follow an one way road, the right-sizing procedure, away from the "Bubbles" and the "Ponzi" . Some people, in these countries, stole so much money during  the previous decades and today the rest of the population are forced to pay the bill.

So, as a general rule of economics, each country that creates or chooses a fake prosperity model, and designs a non viable environment, sooner or later needs to find ways to become attractive once again. And till that time, there is no alternative than the road to the bottom. The situation affects foreign investments to these economies, as well. The billions invested in the Cyprus banks by the Russians in the last decade and the billions invested to the Greek banks in the last two decades, by the Cypriots and the French, were transformed to billions of losses for all those foreign investors. Today Austria faces the same problem in Hungary and the story goes on since many other countries, banks and enterprises will follow. When the Cyprus and French banks entered the Greek market they did nothing to help the market become more efficient. They decided to copy the same pattern the greek banks adopted in the recent decades. High interest rates causing low or fake productivity, Bubble and Ponzi results. It was impossible to hide the truth for ever. It was impossible to keep that system live either. They kept lending the greek market with high interest rates, as they used to do in the Drachma times, enhancing inequality with the countries that adopted the real eurozone rates. That market was neither competitive nor profitable, it was converted to a bubble and then to a Ponzi, waiting for the collapse of the cycle.

Failing to harmonize the eurozone economies will continue creating bigger problems. Greek companies simply couldn't compete the German, in the long term. French markets can't compete the Italian at the moment, as well. After a few years, the current problem will be even bigger, more dangerous and definitely non viable. Returning to the local currencies is a kind of solution but not viable as well. Leaving the euro sends us back to the system that hides the problem and creates the serial default pattern of the Asian tigers and the Latin economies. The truth is that a common currency reveals and exposes the national fraud and illusions. So, as a primary rule, being in the common currency forces us to become transparent and efficient.What we hoped for European integration was a European Family where transparency and equal rights exist. What was created was a long-term party for very few organisations and banks. 

The most tragic issue is that i keep finding too many similarities between the Greek and the French administration and many other similarities between the Cyprus and the European authorities. Since we all know the current situation of Greece and  Cyprus we may easily simulate what follows for France and Europe as well.

Nicos Rafidhias (official page) is a political scientist and a corporate consultant at TANTAK Ltd (based in Cyprus). The above data are part of his upcoming PHD research for the possible collapse of the Eurozone.

Σάββατο, 10 Μαΐου 2014

The collapse of PONZI Schemes and PONZI countries

Getting closer to the European Elections of 2014 i realize how differently the most important European issues and data are presented to the voters, in each country, struggling to gain their individual support. Issues and data that a serious and educated person can find quite weird or/and funny if analyzed in the 28 country-members' perspective . And i realize that my major problem, trying to explain what is really going on, is mostly my friends' lack of knowledge. They give me plenty of space and time to explain them my researches since i am the only one who studied European affairs but at the end they don't really get it. After so many hours trying to explain them how the money is "legally" disappearing, in Cyprus and some other countries, and where it really goes, most of them find difficulties to understand it ! Who does it, why, why nobody pays and why if someone pays the rest don't.. They just don't get it since nobody gave them the data, as it happens in the most countries..

When you create a non viable system (either it is a company or a country) sooner or later it will collapse. It's simple maths, otherwise called as the rule of sustainability or the law of nature or even as the invisible hand. But, until the day of the total collapse, few people (the elected people, the public staff, the privileged bankers, the high income staff) are legalized to receive benefits the same time the majority (the tax-payers in the most times) is unfortunately obliged to pay for them. After the collapse (the temporary Minsky moment), fewer will still receive a (reduced) salary and the other (fewer) benefits but the majority of the people will still have to pay for these salaries and benefits although many of them are jobless. Until the day of the total collapse comes, otherwise the ultimate Minsky moment. The collapse is an inevitable result due to greed, stupidity and corruption, the three factors that led Greece, Cyprus and many other countries to bankrupt.

First time i started separating normality from Ponzi schemes, while-collar crimes and bankruptcies was the Barings case, back in 1995. Numbers of that incident  fascinated me and after many years of searching i started understanding how easy is to bring collapse due to lack of regulation or willingness.. It helped me understand very soon that the Cyprus Stock Market was in a downgrade that finally led to a huge collapse. It is quite interesting that a few years later the same scenario of Barings has almost repeated at Société Générale where after the investigations had been completed just one trader was convicted ! Is is quite interesting that in a huge corporation like Société Générale an amazing fraud was developed by just one guy. And the most interesting thing was that too many people above Jérôme Kerviel (the convicted trader) received amazing bonuses based on his trades. So, those people above Kerviel had more interest not to see (or not to expose..) was Kerviel was doing because they received the bonuses for as long as he was trading that way. And when the Minsky moment appeared, Kerviel was the only one who paid the bill ! Lucky Société Générale, that Minsky moment was temporary, Barings totally collapsed.

The Cyprus Stock Exchange and the Société Générale case were proofs that some people have interests to keep illegal things going on. They enjoy too many benefits for as long as it continuous and when it will stop somebody else will have to pay the bill. If you simulate the same data to a country, Cyprus was last year the recent Barings, as Greece was some years before. Many people, mostly in the public sector and the banks, received fixed salaries, raises and COLA (Cost Of Living Allowance) benefits for decades, creating a huge bubble to the rest of the system. Nobody cared or worried when these amounts were received by those people, the most of the years based on loans and one-time taxes. They had absolutely no reason to "disturb" what was going on. The tax-payers paid the account the time of the temporary Minsky moments (that happened regularly within the period), the same tax-payers paid the total cost after the ultimate Minsky moment appeared, last year. A typical Moral Hazard.A typical white-collar crime !

A few years ago, as an MBA student, i was given as assignment regarding the Global Economic Crisis.
My main point (after 22 years of experience in the business sector) was that what really happened was because the law was not working properly. The law in Cyprus is manipulated for many years. A law that has gaps, allows to greed and stupidity to dominate the system as long as some legalized robber barons are able to find money to steal. The Madoff case, in 2008, reveals that even the countries that have enough experience in financial crimes, like the USA, are in many times not capable to understand what is going on, until it is too late. Although my essay amazed many of my friends and business partners, for my professor it was a failure for many reasons i tried to understand for several months. Firstly, although we had to deliver an essay limited around 2000 words, my professor accepted another essay of 4000 words, which named excellent and emailed it to the rest ! How is possible for a university professor to give an assignment of 2000 words and accept an essay of 4000 ? In Cyprus, everything is possible, especially something like this which it seems to be something regular ! Waiting for a re-evaluation i found out that my MBA had no re-evaluating procedures although the whole university had. So i had to accept that a part of my university was allowed not to follow the official university procedures. Simulating this to the ground of Eurozone, some countries believed that they were legalized to develop an individual strategy, against the interests of the rest countries, and if they run out of money they rest would pay the bill. 
What an illusion !

A quick answer to the issue "why the problem is repeated" is that the people who analyzes a short term behavior or event are in most cases not able to understand the long term effects of it, especially  if they don't have the experience of what was going on the previous periods, in order to see it happening and understand  that something is caused due to previous failure. After months of demanding for a re-evaluation and a decent grade (and still examining my possible failure the same time) i finally received two more failing reports from two other professors of the same university ! But, until then, another university professor, from a highly respected private business school had already published an article to support my theory, pointing out why there is no investigation and punishment, especially if you are part of a local elite. Same issue happened some years ago in the United States where Bernie Madoff developed and run an incredible Ponzi scheme. For more that a decade Bernie Madoff was legalized to run his system, based to the fact that he was an important part of the local high society ! Nobody wanted or tried to investigate him because it sounded ridiculous to do it !

The problems countries, like Cyprus, Greece or even USA, have to deal in the recent years are transparency and legitimacy. Two factors that always help the white-collar crime "legally" expand. For example, back in 2011 i noticed that the European funding that came to support the small and medium size companies of Cyprus couldn't reach the beneficiaries, for some reasons.. Since our banking system was able to block the money and keep it to the banking treasury it finally "contributed" to our official bankruptcy in 2013. The banks received "cheap" money and they had no reason to deliver it since their profit was too low.. These banks failed to do their job, the same time the most of the other 17 member-countries were working and providing better results for their community.. So, the gap was unavoidable. And a more recent and personal case. Last year, i was accepted in Paris for one year as Erasmus student.Till the day i left Cyprus nobody gave me any rules regarding the Erasmus program. That was a first clue that something was going wrong. The only available data was the names of the European institutions i could choose from and that i was going to receive 600 euros per month for a partial cover of my expenses. For some reasons (still under investigation by Cyprus and European authorities) my home university firstly prepared me a half year contract with less funding than they should. That was the second clue that something was going wrong, since less funding was an essential key factor to force me abandon my studies, since i couldn't afford the costs in Paris without that funding. After demanding the full year contract and the proper funding for the period, so i could go for the Erasmus studies, i finally got the contract but my home university never honored the obligation to give me the funding on-time. So, the time i went to Paris to start my classes (without the funding) i obviously couldn't stay. And after that, (the ultimate clue..), my home university asked me to pay for my Erasmus studies in Paris, although the Erasmus studies have no cost ! These people couldn't think that i was able to receive the official rules from anyone of the rest 27 EU members or any European institution and see what is really happening ? 

So, if we accept that some European countries are allowed to adopt transparency for their people and some other don't, we have two different results, a positive for the transparent and a negative for the corrupted. So, after the EU officially put Cyprus to the corrupted countries list of the Union we can no understand that these countries, like Cyprus, either must change their attitude soon or exit the European family. 

Although the procedures were obviously manipulated and illegal,  an obvious white-collar crime, nobody seriously investigated or analyzed the data i still keep, not the Cyprus government, nor the European Union ! And here there are the similarities of Barings, Société Générale, Cyprus and EU.. They really don't want to know.. They find it better not to know.. Was my home university using the European funding for other purposes? Quite possible, since all my mails verifying my story were distributed to the local and European authorities, showing what it is still going on in Cyprus by a local university as it happened some years ago by our banks .. But, until the day somebody officially, seriously and carefully investigate and provide me with the results of the investigation nobody can tell for sure (except the only fact that we already bankrupted, and we still examining why..). And it will be convenient and "legal" for everyone who follows the existing procedures to repeat it ! So, in a European family of 28 member countries it is quite obvious that, even today, each country that follows a normal and transparent procedure creates a positive effect. Any other country, like Cyprus, creates a Minsky Moment. Temporary or ultimate..

A few nights ago, in a talk-show of our public television, it was declared for first time, by a member of our national parliament that the people that caused the collapse of the Cyprus Stock Exchange back in 1999-2000 seem to be the same that created the bankruptcy of our banking system last year. It is quite obvious that if our parliament and governments took serious measures in the part fifteen years, just after the Cyprus Stock Exchange collapse, last year's bankruptcy could be avoided. Unfortunately, the corruption of our system was led to reach a level that could not be viable any longer. In Chrystia Freeland's book "Plytocrats" the same thing is described to happened in the USA, for many years. People with advanced knowledge and experience are able and "legalized" to create a domino problem from one financial sector to the other and since public authorities don't have the expertise and knowledge, they keep doing it. The subprime mortgage crisis was just a newer step..

As a citizen, 2013 was my first year to realize the levels of corruption and the similarities than a government has with Ponzi schemes.There is absolute no possibility to enter a public hospital for exams, except you know someone inside. If your situation is urgent you either pay a  private hospital or you die. Public hospitals and other public services (such as public schools and public universities) are vital parts of a Ponzi finance. Paying only few people to cure or educate thousands of people makes the system not viable. These people receive continuous raises and benefits but in order to do it, the way you want, you finally exclude the younger generation from entering the market since all funding is distributed to few. You could hire more doctors, teachers and professors but the system can't afford paying them. Because existing people earn too much and you decide to keep it that way !!! So you either minimize the wages or you increase the taxes. If you refuse to do it, you become Greece or Cyprus. And a Troika comes to do it.. When it is already too late because your Ponzi already collapsed..

All these Minsky scenarios and recent actions allowed me to create deeper analysis in order to examine the levels of efficiency and corruption in the European countries. A research that revealed what today's EU really is ; A group of 28 nations, some with full transparency, some partial and some without. Few countries, most of them in the North and Central Europe goes well, due to transparency and legitimacy, the majority of the countries in the center are in a break-even point, the countries of the south part collapse easy due to the lack of transparency and legitimacy, just as the most of the African countries do. Many previously serial default countries are today part of the European Union and/or the Eurozone. Some fixed their problem permanently, some other still try to hide it as long as they can, some are still bankrupt, officially or not. Countries with no previous experience, such as Cyprus and Greece, might be easily transformed to a Ponzi Scheme and collapse, otherwise create the Minsky moment.

It is quite obvious that the recent subprime crisis, in the USA, the Madoff Ponzi scandal, the epidemic of bank failures the previous decades (and the upcoming..) , proves that too many countries (even the USA) are always vulnerable due to the lack of information, education and regulation. Charles Dickens' "Little Dorrit" is today a classic evidence that bad things happen, in every time, for people and countries without a wide dispersion of investments and danger. You need authorities to regulate and these regulators need the proper education. The continuous and serial failure of our system proves that there is a huge gap between those two. If the USA suffered recently from a huge failure like subrime and ponzi how is possible for a country like Greece or Cyprus to prevent it and protect their people when the leaders and the regulators have no interest or no experience to do their job ?

The basic goal, at the beginning of the European Union was to help all member-countries achieve higher levels of quality.You can't have the same levels of quality, information and education in Greece, Cyprus, Italy and the United Kingdom, especially when the public personnel of any country uses every possible way to obstruct their people from having equal rights to search for answers and finding solutions. If regulation doesn't work as it should, it is very easy to expect the collapse. Either we suffer from greed, stupidity or corruption, citizens need to have healthy institutions, capable to investigate, prevent and punish at early stages. The adopt of Euro was a dream and a nightmare. It helped some of the countries to harmonize their economies and increase trade and business but it exposed the corrupted members and forced them to collapse since there was no alternative to their "elite" individual interests.

European Union could become a body that will help the European Nations to work better and efficient, otherwise they will let the growing inequality to give an end to the Union. My personal opinion, after so many analysis, is that since it is easier to export our local corruption to the European Institutions, instead of importing knowledge and expertise, the most possible result is a European divorce, sooner than you imagine.. 

Countries that respect sustainability and countries that never did are today part of the same family, creating a lethal cocktail, since the low-income countries that receive the European benefits don't honestly and fairly distribute them to the majority of their people. Countries working as Ponzi schemes are much worse that companies working as Ponzi schemes.Ponzi companies collapse because they run out of money, sooner or later. Ponzi countries transfer the debt to their younger citizens and they create new and higher levels of debt. So, Ponzi countries are worse that Ponzi companies because the countries can't collapse as the companies do. So the final decision is too obvious.. We have to fix the existing problem.. OR.. We leave  the whole EU collapse..Because as things work these days, it is better and much more safer to pray for a collapse, if there is no willingness to fix the hidden problems..

In the next publication we will examine why France is the next Eurozone problem..

Κυριακή, 6 Απριλίου 2014

Ponzi schemes, white-collar crimes and the Eurozone failure..

A few days ago, an old professor of mine posted the following message on her facebook page :

" Those who don't study history are doomed to repeat it.
Yet, those who do study history are doomed to stand by helplessly while everyone else repeats it. "

It is quite easy to enter the second group by reading Paul Kennedy's masterpiece " The rise and fall of the great powers ". Although, you have to be prepared that you pass to a group of a distinctive minority, the people who know but can't fight the majority in any way..

One year ago, Cyprus got bankrupted. People lost huge amounts of money, younger generations lost the majority of their pension funding and the island's economy might recover sometime but only after many decades. For the majority of the people this was something strange and unexpected. Those people never investigated what was really happening in the last fifteen years or what the norm in small and isolated societies like Cyprus is. I believe that it was not a surprise for everybody. It is totally different to say that it was a surprise and totally different to pretend that it was a surprise..

Last year, we were officially bankrupted. But in the last fifteen years we had two other, "unofficial" bankruptcies. It is quite impossible that last year's incident was a surprise since an important number of people in Cyprus have Bachelors, MBA and/or PHD degrees. Although, it is quite possible that people in charge pretend that everything was ok since those people were receiving huge salaries based on their degrees and expertise. But it is also totally different to have the expertise and totally different to pretend that you have the expertise. You can separate the two by reading Paul Krugman's classical article "A country is not a company". Krugman remarkably separates a person capable to do the job from a person that pretends to be capable to do the job. Last year's bankruptcy reveals that we had more actors and less skilled people in our government.

People of my age (39 years old, more or less) were raised in prosperous times. For many years, we had enough money, really good money.. It was just after the Turkish invasion (1974) that the new Cyprus miracle started to happen. At least that was what we thought we had.. An important number of British tourists were bringing part of their profits and prosperity to Cyprus for many years, enhancing our as well. During my Bachelor degree studies, in Athens, and the collapse of the Cyprus Stock Exchange bubble i learned how to discover the healthy environments and separate the Ponzi schemes and the white-collar crimes. I was lucky because i used this knowledge to protect my friends and family from time to time. They still believe that i am extremely smart. The truth is that even some people can separate healthy economics from fraud nobody dares to notice it in public.. During my MBA studies and my Erasmus period experience in Paris i was lucky to separate the healthy environment of studies in a european country from the fake and over-priced knowledge of an isolated island. It is totally different to truly study a field and be capable to notice and fix a problem from buying a degree in class where the professor is not able to be listened if she forgets her whistle at home (this is how things are in Cyprus..)

How can you separate a healthy environment from a Ponzi scheme or a white-collar crime ? In a company, you just count the earn per share, whether it is a repeated pattern or a one-off profitability. Additionally, you observe whether the company has enough reserved profits for an unexpected situation. In a country, it is not that simple. You have to compare the salaries, the taxes, the pensions, the quality of life. A simple measure is the "homeless factor". In Cyprus, we had no homeless people. At least, in the recent decades.. This is a proof that the country can manage their people, rich and poor. First time i saw homeless people was in Athens, in 1995, then in UK, Germany and France. Seeing homeless people is for me a proof that a country is not able to handle a simple problem ; create prosperity for their people. Because (in a political scientist's mind) if you can't find a solution for a few people, the problem becomes bigger until the whole system collapses.

In the existence of the "homeless effect" you have to decide whether you fix the problem or you hide it. By fixing it, you create stability and you put these people back to the circle of economy. They produce and they spend. By hiding the problem, many people (mostly in government and big corporations) are allowed to get huge salaries and bonuses. The problems is not so obvious or important for them. You get the extra money by hiding the problem, you exclude the homeless, you dot't count them so one day they become a mass. Some years ago i was shocked watching on TV people putting fires in every corner of Athens. But i knew what was going on there and that that the consequences revealed.. Some months ago i was shocked watching on TV people putting fires in every corner of Paris. After my last trip there, it was obvious that they copied the steps and results of Athens.

In the recent years, the public sector and the big corporations of Cyprus used to receive raises and bonuses that the system couldn't handle any longer. Especially in the annual reports of the public companies, it was more than obvious.. In the recent years we faced the fact that many higher government directors received around 100.000 per year, some of them 160.000 and more (bonuses excluded). How reasonable is for a small country like Cyprus paying monthly salaries of 10.000 euros or even 5.000 the same time an important number in the private sector were losing their jobs or part of their salary? What if we were in the middle of a crisis no-one could really imagine or care for. It is more possible than you can realize, but only if you know how to observe and analyze the numbers. Even worse, the merge of Bank of Cyprus and Laiki Popular Bank last year, as a solution to the problem ! Since those two institutions were both dangerous for the stability of the financial system, how was possible for anyone to decide that their merge was a healthy step and a vital solution ?

Why the above data remembers me the PONZI schemes? Because the PONZI schemes use other people's money to get their salary and a raise as long as they can.. But.. PONZI schemes always collapse as Cyprus did..

Why it remembers me the white-collar crimes? Because the white-collar crimes use other people's money (in this case, the taxpayers social insurance funding) to pay their debts and legalize their illegal actions in a country that the financial crime is legal. 

Our banks used to give huge salaries and bonuses their annual reports couldn't justify, our governments used to give raises our National Audit report office couldn't explain and one year before the Cyprus taxpayer had to pay the bill for them.. Even worse, the european funding, designed to improve local competitiveness and expertise can't always go to the beneficiaries. They remain in the government bank accounts and the banks as interest-free cash! Hyman Minsky described perfectly the development of a PONZI economy in the '80s. He was unlucky to describe it in a period of prosperity so nobody paid attention. It took us three decades to accept the existence of the Minsky moment and that "IT" happens all the time and everywhere, all over the world!

Another extreme PONZI method in Cyprus was the COLA (Cost Of Living Allowance) bubble effect. COLA was designed to give extra financial support to low income people and not to people already receiving thousands of euros as monthly salary. COLA in the beginning was supposed to protect people that needed food, milk and bread for their daily needs. At the end of the PONZI, COLA was a financial benefit for high income people who wanted to buy a new beach property.

What is the biggest problem in modern societies? Corrupted people, or even worse, corrupted governments or / and parliaments. Political parties dealing with unions in order to buy their vote and become government, banks financially supporting political parties in order to protect and legalize their individual interests, political parties dealing with black money, parliaments refusing to vote against it. The last fifteen years, the Cyprus house of parliament tried to create openness to the parliament parties funding (revealing who - how much - how often was giving financial support). These last fifteen years, our political parties couldn't (or wouldn't..) vote for the openness for their income! Even though we can't say that specific members of our parliament are corrupted it is quite obvious that the House of Parliament in the majority tends to cover and protect corruption ! Even worse, our Government. In the Cyprus constitution, both the government and the parliament are entitled to pass a legislation. Both denied !

Cyprus was a prosperous country as long as the inequality was managed. The time the governors decided to allow few people to become the robber barons of the 21st century (see "Plutocrats" by Chrystia Freeland), the time they decided to give extra raise to people that had no need by stealing from the people that needed support the new Ponzi scheme design and collapse was unavoidable. Cyprus became Greece as France is nowadays becoming Cyprus.

The current Cyprus administration has to deal with a very serious dilemma, fix the problem or hide it. Based on my experience, every new administration covers the problem. The majority of the government and parliament can't (or won't..) understand it so the problem is always there until the next official of unofficial bankruptcy.One year after the new administration took over, they problem is still there. One year after, nothing was fixed. So we know what will happen again, sooner or later..

This distinctive white-collar crime is a reason why the Eurozone can't be vital for long. Since some countries tend to support and protect corruption more than others and the Eupopean Union as a body pays no attention to the issue, it will enhance the inequality withing the members until it will lead to the Eurozone's "perfect storm" day.

In the next post, we will examine how the problem is created and why nobody wants to fix it..

Nicos Rafidhias (official page) is a political scientist and a corporate consultant at TANTAK Ltd (based in Cyprus). The above data are part of his upcoming PHD research for the possible collapse of the Eurozone.

Τρίτη, 5 Νοεμβρίου 2013

Still looking for sustainability..

Hello. I am Nicos, blogging again but.. tonight i feel like a writer !
Since i joined Coursera i am a little bit of everything and honestly, i love it.
I feel that life-long learning helps you complete a puzzle that can't be completed if you are not well prepared and ready to accomplish it.

At present, i study "English composition" and as the instuctor states, if you write then you are a writer.. Well, actually i am a blogger for about three years, blogging in Greek for whatever happens around me, critisizing governmental policies, local (district) issues happening in my municipality. Since last March i decided to share my knowledge in English. The bankrupcy of Cyprus was something i expected but since i have some answers for what happened i have to share this knowledge with people that might find the same problems in the future. Like the French..

Bankrupcy in the Eurozone countries is something that should be expected as norm due to the inequalities of the Euro-system. For example when Greece joined the Euro, was forced to devaluate the national currency by 15%. This was the start for the collapse of the whole Greek system due to an obvious fragility nobody analysed. They entered the Eurozone but kept the lending interest extremely high. Imagine that you are a company that produces jams in Greece. You have a bank loan with 10% interest rate. Now imagine your uncle who lives in Italy owes a factory that produces jam in Italy, working with a bank loan of 7%. And to make the case more ineresting your cousin who lives in Germany, works for a factory producing jam (WOW!) and they have a loan paying just 4% interest. You all are part of the Eurozone but someone is lucky to have a low interest and be more competetive! Well it's just a case study.. but.. it seems that the factory in Greece will start loosing clients due to lower cost prices in Cyprus and Italy. After a few years, the factory in Italy will start losing clients due to the fact that the German factory sells cheaper. Finally, the German factory will be the only one that sells the jams but.. the people will not be capable to buy jam since they are unemployed ! So... they import jam from Bulgaria. It's cheaper due to the currency difference.. Let's pause the case study for a while..

The first exersice of this class was to create my timeline and by creating my timeline, i realised that my life makes circles. In 1995 i went in Athens for studies. I wanted to become a political scientist. Actually, i remember that when i asked my school councellor, back in 1992, whether i should study political science she replied that it was the best study she could think for me. What a normal wannabe political scientist does? Well for me was to ask for a meeting with my favoured politician which was Antonis Samaras (back in 1995 he was a wannabe prime-minister..). I was happy the day i was finally meeting him. Big disappointment followed since i was informed that our appointment should be postponed due to a funeral of a lady. I couldn't understand why he had to go to the funeral or who the dead lady was.. As i realised a few days later that lady was one on the most powerful and respected newspaper editors in Athens. Eleni Vlachou was a legend in the country but.. a 19 old year boy, living far away never heard of her..

Days later, i finally met Antonis Samaras. I was amazed. He seemed a nice guy. I still believe he is. But.. after i started analysing the Greek political system i found out that you can't really change anything.. The system was so complicated designed that it was already half dead. It was too obvious that this system could never work so i decided to study but not to enter politics. That time the Albanians gained the priviledge to enter the Greek market and work. Greek businessmen could hire Albanians insted of Greeks and pay them lower wages due to the huge black labour market Greece had. Well.. eventually, this gave to the Albanian people money and sent Greek people to unemployment. Ten years later the same pattern was adopted in Cyprus. After entering the Eurozone, Cypriot employers could hire cheaper hands from Bulgaria and Romania. Those people came to Cyprus and entered every sector since they were cheaper labour. The same result happened to Cyprus. Cypriots were unemployed, they stopped spending and the system crashed.

As it appears nobody analysed what inequalities cause. The people designed the Eurozone hoped that they could achieve higher quality in living and education but... they forgot to create the proper legitimate system in order to make the vision successful. In countries where law is not respected, you have to expect a continuous downgrade. A downgrade that will be spread all around the rest of the same system countries.

I left Greece in 2007 knowing what will happen. In 2013 i decided to leave Cyprus and move to France.. Cyprus is dead because of those hidden inequalities no one wanted to fix. The stockmarket collapsed in 2001. Nobody wanted to discover why. That was a sign of corruption. The scandal was forgotten and nobody found guilty for the crime.. The bubble party moved to the real estate and the banking sector for a few more years.. BUT.. when you hide or backsupport the criminals, the crimes continues..

In Paris, i tried to contact the politicians i hoped they cared. This time, i was not so lucky. I got no appointment.. But.. i found a similar system, like in Athens and Nicosia. Inequalities in Paris are too obvious. Too expensive accomodation cost, expensive transportation, average salaries.  Is France the next victim of the domino effect? It is extremely possible.. Why? A significant explanation is because they have too many homeless people. As i saw in Athens, back in 1995, nobody cared for homeless people. Nobody cared to find a solution for them, a house, a bed, a way to make them useful again even in order to help them start spending again. Paris in 2013 gave me the same picture as Athens in 1995. Many people live in luxury, other just handle it roughly. But.. if you lose your job, you are just another homeless guy and nobody cares about you.
Last shock was the collapse of Fagor. This was something i couldn't really imagine of although it is part of the domino effect. Having no extra money, having no savings, you have no luxury to buy a new fridge.. So.. since a country can't give a solution to simple problems like finding solution for the homeless people, what will do in a more complex situation as the increase of unemployment?

Don't think of it.. Because it is a nightmare scenario.. In my experience, people without strategy and vision eventually lead to a mess. Especially the "leaders".. So.. It's the time to find a solution for the problems or.. the time to expect the upcoming nightmare..

* Nicos Rafidhias, is a corporate consultant. He studied political science and international affairs and continues studying business administration. He is a member of the Cyprus Green Party and his personal positions are given to the party’s committees of Commerce and Tourism, Transportation, Communication and Finance. This article was written hoping that some "leaders" will read it..

Τετάρτη, 23 Οκτωβρίου 2013

Managing failure..

Failure is something totally acceptable in life. Everyday, we fail in short term or long term period due to wrond decisions we take. They say that every failure teaches you how to become more successful. I believe it's more than correct because it gives you the wisdom to avoid the past mistakes. Failure for some other is a choice and a tradition. Analyzing the Greek Public sector, i remember that you could never find a solution on any of your problems. They never had a solution, so they were continuously creating more complex problems until they collapsed.

As an undergraduate student, i was studying at a University where you could finally earn a worthless paper. Nobody could find a serious job since nobody believed in the study we had chosen to follow. I used to say that i earned an extra toilet paper, although deeply inside of me i felt that i chose the most important studies of the world! If you can separate the difference between studying and buying the paper, you can predict the future of the countries and the whole political system as well. If you study and search for mistakes, inequalities and failure, you can finally understand what goes wrong, what must be changed, what will happen if not..

Cyprus never invested in lifelong studies or strategies, as well. As a postgraduate student, i was lucky and cursed to live the same issues once again, studying a new subject, just to spend my money in an institution that focused on increasing the number of alumni but not the critical mind. Very few really got the message of what they were studying. The majority (many of them coming from the public sector..) took an extra degree to get an extra increase in their salary. Nobody could see the upcoming bubble they were part of except myself and few others. Many are facing unemployment right now due to the perfect storm they caused..

A simple example of the creating bubbles was what happened in the banking sector in the recent years. Banks used to give extremely high deposit interest and ask even higher for the loans. Every depositor seemed to earn a good profit but the truth was that the banks had no healty sector to put all these deposits. The same time, the borrowers (mostly the companies) lost every competitive advantage they may had since every other company within the EU had lower borrowing costs. Imagine a pasta factory in Germany working with 3% loan interest, a Cypriot one working with 9% interest and a Greek one working with 12% interest. All of  them in euros, one currency with different interests! The result ? Someone will bankrupt shortly, a second one after a while and somebody will remain and sell their production all over Europe. That is what is really going on in the Eurozone today.. But how many do they get it ? Even after the domino effect that make the countries collapse..

Transparency is the major key for solution, among with innovation and entrepreneurship, for the success of the European idea. Wherever there is transparency (mostly in Northern Europe..) people live in prosperity or even better than the Souths. The absence of transparency is a sign that you should avoid this organization, company, sector or even, country. Cyprus chose anything else than transparency. Cyprus collapsed  because their leaders chose to remain to the past practices. If any other countries will follow the same strategy, we know the result.. Simple maths..

As an Erasmus student i now realize the European failure much more. A northern student is capable to come to Paris and rent an apartment for 1000. A southern one, comes only with the Erasmus grant (and only if given on time..) and few extra money. The first one is capable to remain because the cost is almost the same as in his country, the second one might have to leave due to the higher cost of living he finds here. Europe still has no strategy for the inequalities within as Greece and Paris have no strategy for their homeless people. If you can't or don't want to find a proper solution, the problem still exists and increases..European Union is closer to the separation as long as the national leaders don't realize what all these inequalities cause. Starting to find solutions for the homeless people and the Erasmus students might be the first step..

* Nicos Rafidhias, is a corporate consultant. He studied political science and international affairs and continues studying business administration. He is a member of the Cyprus Green Party and his personal positions are given to the party’s committees of Commerce and Tourism, Transportation, Communication and Finance. This article was written in Paris, hoping that some leaders will read it..

Σάββατο, 23 Μαρτίου 2013

Is a new domino effect, born in Cyprus ?

These last days are quite interesting for both Cyprus and Europe. Cyprus faces a haircut on deposits, the possibility of losing the competitive advantages had as a business center and exiting the Eurozone. Why? Because for many years local governments were spending more than they should, without worrying for the consequences. A significant annual amount was going to the huge public sector for raises and other benefits in order to secure their vote for the following elections. Was that fair or logic? Of course not. Money is scarce, coming from the public and should be managed for the public prosperity. It seems that the Cyprus politicians were so interested in buying votes that they finally left the rest of the island’s people broke. And now, it’s time for Cypriot people to pay an enormous bill.

Unfortunately, it seems that many other European countries are facing common (and possibly) worse issues. Politicians all over Europe failed to work, in the recent years, for their people’s prosperity. Greece is another example, worse than Cyprus. Adopting a political system where presidency has no real authority, having a parliament for both voting laws and executing decisions (against the Montesquieu’s tripartite system), Greece had to pay much earlier than Cyprus the lack in democracy and transparency. Even Italy, seems to follow the same path.

Both financial and public sector in Cyprus (and Greece) need restructuring. We desperately have to enforce law and elect visionary leadership since we failed to do it in the past years. As a reporter mentioned yesterday, Cypriot politicians (and Greek) were so interested for their public picture (in Radio and TV channels) that they finally didn’t do the job they were paid for. It reminds me Italy too, isn’t it? Is Europe responsible for this? Of course..

I was at High School when Toto Cutugno was singing “Insieme”, a song inspiring for a united Europe. I was dreaming for the day i could go across Europe, without my passport. The time has came but when i finally went, i realised the poverty, inequalities have caused for the majority of the european people. Dream had become a nightmare.. European people invested in a common future where their leaders never cared, designed or invested for. This, allowed international investors to manipulate the different regulations between Euro countries and create a huge systemic gap, finally leading to collapse.

It’s a common secret that Cyprus, Greece and many other European countries have to re-invent their model and strategy in the common market. For example, you can’t invest only on tourism and services for Russians and offshore companies. You need a much wider dispersion, in several other sectors, giving job and security to as many people as you can and allowing the others to innovate and create sustainable companies. Cypriot inhabitants need to have equal rights to remain and work in their island, for their island. So do Greeks, Bulgarians, Romanians, Spanish, Italian and Portuguese. The failure and inequality of the common market has to be eliminated in every European place, otherwise the gap will finally shake and the rest of the Eurozone.
The domino effect has started in Greece, created the PIGS effect, now passing over Cyprus and goes directly to the last two pillars, France and Germany. We can’t expect prosperity in European territory where Bulgarians are forced to work in Cyprus, Cypriots to England and Spanish to Germany or France for minimum wages. Fair labour should become a right for everyone and everywhere across Europe. In the recent years, people from Greece, United Kingdom, Bulgaria and Romania came to Cyprus, seeking for a better future. Cyprus gave job to almost 100.000 people from Europe but now many of them and around 60.000 Cypriots have no job and they must seek for new jobs in other countries.
Cypriot politicians, have their own, huge responsibilities for this. Counting so much on the Russian, British and other foreign capitals, they paid no attention on education, investments, entrepreneurship and innovation, for the local sustainability. Even know, many of them send their savings to other destinations, just before they voted for the haircut. The same lack of public interest is proven to happened to Greece, Italy, Spain and Portugal. Many countries are facing the same consequences due to their national lack of leadership. Even Ireland, which was the entrepreneurial leader,  the last decade! What is going on?

Europe has to re-discover a new model for the following years. Today, we need a strong answer, whether we should proceed to a common market by enforcing common laws and minimizing any inequalities were caused or, whether we should go back to our national currencies. It is not possible or acceptable to force the European people pay for their leaders’ mistakes, personal interests or/and stupidity. Neither we can accept this financial and social deregulation take us back to 1929. European people are demanding for answers. Everybody should have the right and chances for education, work and prosperity.

Now, it is the time to end the lack of supervisory and the increasing deregulation wherever was created and send whoever is guilty to the jail. Cyprus authorities found no guilties after the Cyprus stock market collapsed in 2001, vanishing billions of euros. What was saved then, having no other alternatives, was driven to the real estate sector, building a greater bubble. Now, we have pay the bill for those years. Billions of euros are also expected to leave Cyprus for other offshore destinations. I strongly believe that this is the least. A new systemic danger will occur because new territories are expected to welcome all these money and possibly repeat Cyprus’ mistakes.

After the years, where a common Europe was our dream, we discovered that today’s Europe has nothing common with what we expected. We have a place where the winners take everything and leave chaos for the rest. It is, today,  the time for Europe to create equal rules and measures for the European people, for the common future. If our leaders don’t or won’t, maybe it is the time for Europeans to return to their national currency and fight for their personal and national prosperity..

* Nicos Rafidhias, is a corporate consultant. He studied political science and international affairs and continues studying business administration. He is a member of the Cyprus Green Party and his personal positions are given to the party’s committees of Commerce and Tourism, Transportation, Communication and Finance.