Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
Now imagine the perspective of a Southern European onlooker. The hypocritical divergence of the two directives being issued to the various groups must fill Greeks with disgust. European leaders, at the nudging of Germany, have pushed the complete opposite strategy for Greek and Spanish prosperity than those being promoted in Germany today. So which is the true path to prosperity, the one being promoted by the Germans for the Germans or the one being promoted by the Germans for the Greeks?
Obviously, the issue is more complex than that, given the debt and management problems of the Greeks versus the smooth operating German economic machine. The Greeks must adhere to the prescription of their emergency creditors in order to receive desperately needed funds. Still, why does the economic prescription contrast so sharply to the pill being recommended by Merkel for the Germans? It is after all for the same ultimate purpose, the betterment of the economy, and in Greece’s situation, the ensuring of debt repayment.
Perhaps the Europeans have it all wrong with regard to Greece, and instead of ensuring the repayment of their loans, are instead burying their money into a deep depression with the ruins of Ancient Athens. That’s what the esteemed student of the Great Depression now running the American Federal Reserve might suggest, given Ben Bernanke’s comments to U.S. legislators over the years. He would tell you that it was precisely the mistimed budget mindedness of American leaders that led our economy into the Great Depression. It turned an average recession into a once in a generation economic struggle.
A few voices, including from yours truly, have from the beginning warned that growth spurring initiatives for Southern Europe should precede and outweigh a graduated austerity program, and that Greece’s repayment program should have extended terms. We have been happy to see Europe more recently acknowledging the burdensome drag of its initial repayment demands.
Still, while Greece’s public entities reduce workforce, draw back pension benefits and raise taxes, they are constraining the Greek economy. This is something that the Germans can no longer dispute, given their own domestic policy push, though to be fair, Merkel’s opponents are calling her demands irresponsible. The repercussions of the actions in Greece are pushing away private industry, illustrated recently by the move of Coca-Cola Hellenic (NYSE: CCH), which is relocating its headquarters to Switzerland and relisting its shares in London. Merkel does not want to trigger that same sort of flight in Germany, but is asking for companies that face no foreign competition to pay an alternative energy surcharge from which they have long been exempted.
What drives German stocks, like those found in the DAX and the iShares MSCI Germany Index (NYSE: EWG), likewise drives Greek stocks, like those found in the Global X FTSE Greece 20 ETF (NYSE: GREK). For that matter, it’s what drives the iShares S&P Europe 350 (NYSE: IEV) and the SPDR S&P 500 (NYSE: SPY)! The rules of economic prosperity are indifferent to the language spoken or culture found within a given country; they are universal. Thus, the economic policy prescribed to Greece and Spain should be the same as that being recommended for Germany, or at least should stress growth over austerity.
It is ignorant closed-mindedness and ethnocentricity which has kept the groups of people within the euro-zone from fairly and effectively resolving their crisis together. The problem is most clear when the leaders of Europe go home to seek approval of international plans. We understand the cost of this issue through the observance of the most effective action taken to-date, which in my opinion was the brave plan of the Mario Draghi led European Central Bank (ECB) to support sovereign debt in a sterilized manner. When Europe can accept its unity on the streets of Brussels, Paris, Berlin, Athens and Madrid, then it will have the resources and the will to fulfill its brave dream. On that day, it can likewise stop lying to the Greeks and the Spaniards about what’s best today for their economies.
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