Greek Financial Crisis - The Solution
How to solve the Greek financial crisis within 18 months
The basic intent of the following idea is to create growth for Greece and I think that I shall prove that the idea will:
- ·create productive, export oriented and highly profitable ventures
- ·which create JOBS,
- ·which will create WEALTH,
- ·which will create PURCHASING POWER,
- ·which in turn will create INDIVIDUAL TAXES,
- ·which will reduce the cost of living,
- ·which will create ADDITIONAL GOVERNMENT INVESTMENT and GOVERNMENT SERVICES,
- ·which will supplement the COMPANY TAXES generated by the business itself, which creates GROWTH,
- ·which in turn will encourage wealthy private investors to emulate the project, for their own self-interest.
Before proceeding with the description of the idea itself, it is imperative that the reader be aware of the following facts:
a) During the 2011 E-Coli panic in Germany, it was repeatedly and extensively reported by the news media that Spanish producers of cucumbers were losing over €200 MILLION PER WEEK, which is equivalent to €10 BILLION per year. In fact, Spanish producers were threatening to sue the German government for compensation for this amount.
b) Dutch and Belgians are also producers and exporters of cucumbers and tomatoes (and in fact export to Greece).
c) It should be noted that the Dutch and the Belgians are competing with the Spaniards in the international markets, despite the fact that they have no serious sun to speak of and are forced to bear the serious cost of heating their hothouses.
a) There are literally dozens of popular pharmaceuticals (such as ‘Simvastatin’ and Acetylsalicylic Acid, aka ‘Aspirin’) whose patents have expired and anyone may manufacture them without paying any fees to the original inventor.
b) Such pharmaceuticals are known as ‘Generic’
c) There are many pharmaceuticals factories around the world which exist exclusively on the manufacture of such generic products.
d) Israel exports $1.5 billion of generic pharmaceuticals annually.
e) India exports about $12 billions’ worth of generic pharmaceuticals per year. The majority of Indian pharmaceutical factories are not licenced to sell to Europe and the USA because they cannot afford the high investment required to meet the health and safety requirements of those two regions.
f) The National Health Service of the United Kingdom uses ONLY generic medication whenever possible.
France is one of the world’s main exporters of chickens, despite its high wages and high cost of living.
The following is a simple and effective way for Greece to at least double its exports over the short term, create jobs, create long term wealth for its citizens and reduce its cost of living at the same time.
Very simply put, the foundation of the idea is how the State – without any actual financial outlay - can play an active role, not only in encouraging, but in actively taking a leading role in creating the productive, export oriented ventures which will create wealth and growth for its economy. More specifically, for the State to actively ascertain the necessary ventures suitable for Greece and to instigate such ventures by providing the necessary bank guarantees to make them a reality. Ventures which will subsequently be placed on the stock exchange and/or sold back to the tax payers at considerable profit, as it will be explained below.
Possible areas of Government support to business in Greece
1. Horticulture: The production of cucumbers and tomatoes for export to Europe, Russia and elsewhere, a market potential valued at over €100 billion. This will provide jobs for the unemployed manual workers (taking advantage of Greece’s favourable weather conditions). Unbelievably, Greece is currently a net importer of fruit and vegetables.
2. Poultry Farms: The large scale breeding and slaughtering of chickens for export, with a potential market of over €10 billion. Again, this will provide jobs for the unemployed manual workers. (NOTE: China and India have an annual growth of about 8%. The resulting wealth for the countries’ citizens means that more people are eating meat. In consequence, Australian and N. Zealand meat exports to these countries are increasing substantially each year, with the result that meat prices are also increasing and will continue to increase). Unbelievably, meat prices in Greece are currently higher than in the UK, which has a much higher per capita income.
3. Manufacturing: Pharmaceuticals to provide work for the more educated section of the unemployed. Unlimited market potential. The reason for this industry being chosen is that it is high tech but does not require research facilities and also because the raw materials required are of low shipping volume and of high profitability.
Ordinary Greece-size private investors either cannot afford or have not considered the large investments necessary to make such ventures possible on the scale necessary to achieve the required results. But the State can.
PART I of the idea
Because the EU will probably not permit the direct involvement of the government in making the large financial investment necessary to create the huge-size ventures needed to compete with other existing similar ventures in Europe, the government can provide only the guarantees required to obtain the necessary bank financing which will make the ventures a success. There is a precedent for this and an EU acceptance of it.
In other words, this idea does not have to cost the government a single euro, other than a guarantee for the value of each investment/project. If EU rules prevent the government from directly creating such companies, the government could offer the necessary guarantees to respected organisations such as labour unions, old age pensioners’ unions, specialized producers’ unions or, indeed, to any Greek bank, which will act as a front for the projects. The unions et al will implement the project/venture PROVISIONALLY on behalf of their members, but subsequently also offer a large part of the shares for sale to all tax payers.
The chosen Unions could be the actual owners of one of the projects, with their commitment that they will sell the shares to their members (and other tax payers) at the point where the company becomes profitable. Alternatively, any bank could be the front, or any other suitable entity.
- ·A very large manufacturing plant for pharmaceuticals, approved and licenced to sell to Europe and the USA, will cost about €20 million. (The claim by a representative of the Greek pharmaceutical industry that they have invested €500 million in Greece should be carefully investigated, bearing in mind the investment related subsidies provided by the Greek State and the proven corruption in the relevant sector of the Greek State Machine).
- ·Such a factory would have such low manufacturing costs that it could successfully compete for every single UK NHS tender it decides to take part in. For example, in Greece, it will be able to sell aspirin at about 40 times less than its current retail price.
- ·Let us now suppose that, after a suitable feasibility study, any labour union, say the public servants’ union (at the instigation of the government) decides to invest €20 million in such a factory. (In place of public servants’ union, you can read the name of any union, the names of which I am not aware).
- ·In return for a commitment from the union to to accept salary reductions and not to have salary increases for the period of the crisis (for example – or for any other reason), the Government provides the Union with the necessary €20 million guarantee to make the project a reality.
- ·No Union member will be required to buy a single share, until after the construction, operation and proven profitability of the venture, unless they want to do so voluntarily.
- ·Note that up to this point no one has spent any money.
- ·18 months after the operation of the factory – and prior to registering the company with the stock exchange - the company’s shares are offered to all union members at their nominal value AT THE TIME.
- ·With the expected profitability of the venture, the shares will then be worth about ten times their face value, meaning that they will now be worth €200 million.
- ·Any shares not sold to union members will be sold to other tax payers (at market value) and the profit will go towards the union members’ pension fund, or possibly to the State’s pension reserves, .
- ·The immediate export potential for EACH such a venture will be at least €1 billion, with a potential profit of at least €100 million per annum.
Such a venture will not only provide wealth for the union members, but will also provide employment for their children, taxes for the government, lower pharmaceutical costs for the Greeks (thereby reducing the cost of living) and many other obvious benefits.
PART II of the idea
How to compete with Spain, Belgium and Holland for the production and export of cucumbers and tomatoes:
- ·The Greek Department of Agriculture already has on its payroll the professionals needed to plan a large, Spanish style production size investment, in producing competitively priced cucumbers and tomatoes (and not only) to flood the north European markets. Possibly near one of the large dams or rivers. The Dutch and Belgians are doing it, and they are doing it without any sunshine to speak of. With very little effort but a lot of foresight and love of its citizens, the Greek state can suddenly create an agricultural business to pass on to its tax payers with the potential of increasing its exports through a share in the €100 BILLION per year business.
- ·The retail cost of these products in Greece will be next to nothing, thereby reducing the cost of living.
- ·Farmers already involved in this business will be given priority to obtain shares in the venture and to work in it.
- ·France is a major exporter of chickens, despite its high salary cost. Greece can easily compete with France in this department, increase its exports to Europe, Russia and the Arab countries and at the same time reduce its own cost of living by providing a very low priced essential meat product to its citizens.·
- Australia and New Zealand provide the world with lamb meat, because of their green, open, luscious grazing spaces. Greece generally does not have this luxury to excess, but it can provide the world with chicken meat through suitable installations.·
- I estimate that in this area another €20 million investment will be required.
- ·All current meat producers can be co-ordinated to play the role of one of the unions, thereby creating jobs, wealth and secure pensions for all interested parties.
- ·The cost of meat in Greece will drop dramatically, thereby reducing the cost of living.
I have covered pharmaceuticals in the example above. This industry can provide work for the more educated section of the unemployed. The reason for this industry being chosen is that it is high tech but does not require research facilities and also because the raw materials required are of low shipping volume and of high profitability. Greece can easily become synonymous with pharmaceuticals, just like Switzerland is synonymous with banking.
And the Greek Government can do this for anything else you can think of, ad infinitum. A government which will use its power to guarantee in order to put up productive business units which will employ large numbers of people and then immediately afterwards get rid of those units by selling them to local households and employees.
THE IDEA AND ITS BENEFITS IN BRIEF
If the government itself can invest directly in the construction of such businesses, the benefits will be even greater.
- • Imagine the Greek government borrowing another €100 million from any friendly source and investing the lot in building (amongst others) our theoretical chicken production farm, our theoretical pharmaceuticals company and our theoretical cucumber and tomatoes growing export project, but ALWAYS with the clear intention of immediately afterwards selling it back to the taxpayer.
- • After the start up and the successful flooding of the European markets with cheap, but well-made Greek products (say within 18 months), the ventures are placed on the stock exchange with a value which is ten times the original cost of the investment (which is the norm – sometimes a lot more), meaning that the companies now have a value of €1 BILLION!
- • Note that the Greek government has automatically made a profit of €900 million, or ten times the investment of the taxpayer, which can go towards supporting its pensioners.
- • Up to 25% of the shares will be allocated for purchase by the employees of the company should they wish to exercise this right. This will ensure that the employees will have the opportunity to increase their future pensions through investment in the company in which they are employed.
- • No single investor shall be allowed more than 0.01% of the value of the company.
- • The company can operate on a ‘cost plus 10%’ profit margin, in order to assist in the control of inflation.
- • The high profit possibility of such an idea might encourage private investors to imitate the State, thereby encouraging unexpected investment in Greece.
Since the direct involvement of the government is likely to face serious EU obstacles, the option of using the Unions (or other entities) is also an excellent alternative and still maintains most of the benefits. It gives the government the opportunity to correct the mistakes of past governments, by exchanging this benefit with employee benefits and unreasonable annual salary increases which Greece cannot afford and which are killing the economy.
Communism and capitalism have failed. I have named this solution PRACTICALISM, and I truly believe that the political party which will introduce Practicalism to Greece will ensure its rule for the next 100 years.
So, the Greek State should repeat such productive ventures in all districts across the country with taxpayers’ guarantees and immediately afterwards sells them back to its taxpayers, creating wealth for its citizens.
With this system, eventually every family in Greece will end up being part owners of productive units of the economy, with a direct personal interest in the success of their investment and an additional means to seriously enhance its pension potential.
This proposal is offered in the hope that some political party will understand the concept and implement it. It is the only means for Greece to achieve growth, despite the growth-suffocating measures currently in place
Any potential EU obstacles may be overcome with judicious acts within the law and I will gladly discuss such with any interested party.
Think about it.
DIMITRIS MITA - DE GREEK