Friday, December 30, 2011

Rescind membership of the UN

Portugal and a lot of other countries could save money leaving the wasteful organization called the United Nations.  United as in saluting dictators like Stalin, Hitler and Kim Jong-Il.

Personally, I would rather not be united with countries like North Korea.  Perhaps 10% of the population has been killed in concentration camps.  If you happen to be seen as critical of anything in North Korea:  You, your wife, your parents and your children are sent to concentration camps.  The population as a whole is starving.  In the concentration camp you starve to death.  It is cheaper than gassing, I suppose.
No wonder the North Koreans have learned to cry on demand.

And yet this is the reaction of the UN to the death of a monster:
UN offices worldwide lowered their flag to half-mast as North Korea began a 2-day funeral for dictator Kim Jong-il. Above: UN European headquarters in Geneva, seat of the UN Human Rights Council, Dec. 28, 2011. (Photo: UN Watch)
Hat tip: UNWatch

I find it distasteful.  It is nauseating political correctness, and the symptom of a wasteful unnecessary bureaucracy.

Last Friday Rant of 2011

I have been busy and on holidays - the blog has been neglected.

There are a few news worth reporting on.  Some are even good.  The speculation against the Euro and the countries in trouble in Europe seems to be lessening.  But perhaps it is because of the holidays and this is just the quiet before the storm.

Italy managed to sell bonds at a low interest rate compared to the 7+ percent of previous offerings.  Portugal and Spain still has high interest rates.

The mortgage interest is going down, which signifies lower payments on housing, which will help the people a little bit.  On the other hand hardly any houses are sold.

In Spain the news are not good.  The public deficit will not be 6% this year but a staggering 8%.  The cure, which is worse than the decease is more taxes as proposed by the government.  Let us not forget that unemployment in Spain is nearly double of Portugal.  In spite of a seemingly stronger economy, Spain is at risk.

The government in Portugal talks about structural reform.  We do not see much of that.  In fact nothing so far... Except for the fact that EDP (the electricity) company has been sold.  A Chinese company has bought the shares owned by the state (21.35%).  I wonder if the government now will have to find another way charging hidden taxes of which the electricity bill already contains 50%.  Also I am quite sure the Portuguese people has not gotten full value for this former common good.  That is how it goes in a public sale, not to mention a public fire sale.  I am quite sure that electricity will not get cheaper now - on the contrary.

Selling the country to the Chinese is not exactly my favorite solution to the problems.  On the other hand it is a viable one, there is not much choice, and better to be working for the Chinese than to starve...

Finally, it seems we will have a solution to the absurd rental law.  A large number of rental contracts have rents that are so low they approach zero.  This because rents have not been following the market price - in fact they were not allowed to.  It has been the policy of all previous governments to let property owners pay for rent subsidization.  This is obviously a government task and it has let to far to few homes for rent in Portugal.  Even wealthy people have abused this condition.  I have heard of people living in palaces paying 50 Euros a month.  The problem is the large number of poor people needing the low rent to get by.  They will now in five years probably have to live on the streets as the rents within five years supposedly will be actualized.  The proposed law is not quite clear at this point - in particular with regard to rent subsidization, which will be necessary.  I am in favor anyway, as a free market is better at regulating prices than any government, and a large number of people have no homes available for rent as the situation stands.  Building new and maintaining existing homes for rent, would be a nice help for the economy as well.  It could also clear up some of the ruins you see in each city in Portugal.

While talking rent - I nearly forgot.   One of the reasons the government is promoting higher rents is of course because of taxation.  Could it be the main one?  I would not be surprised as taxing has so far been the only remedy for the crisis applied by the government.

The number of children born in Portugal is the lowest since 1960, when the numbers started being registered centrally (by INI - National Institute of Statistics).  Apparently because of the crisis.  I will buy that as one explanation.  Another is the fact that the young are emigrating.  A requisite of child birth is a relatively young mother...   On the other hand perhaps the government is planning on grandmothers giving birth again using artificial means?  Perhaps there is plan behind the madness?

On Sunday going to the café will start becoming more expensive.  A number of intermediate VAT rates levied on diverse products will go up to 23%.  I can guarantee longer walks as a number of establishments will close.  Once you get to enjoy your coffee, it will only be until you see the bill.  Not only restaurants and cafés will become more expensive.  A number of products will see VAT raised from 6% and 13% to 23%.  Joy - more money for the state to pay back loans - whatever is left is for waste.  It goes into the black hole.  It will be interesting whether raising the VAT will actually give more income?  If the amount of business lost and the number of businesses actually closing down is large - then it will not - as I suspect.  But I do guarantee this:  The people will become more poor.

A young person going to cafés a lot asked me concerning the VAT:  For how long will it be more expensive because of the Value Added Tax?   My answer was easy:  Forever.  To my knowledge no VAT has ever been lowered.  A problem shared with most taxes.  The government assurances that the austerity measures are temporary are laughable.

In Portugal the police force called ASAE controls smoking and restaurants using Gestapo methods.  They are responsible for implementing all kind of regulations limiting the freedom of activities performed on private property.  I am talking about hotels, restaurants, shops and so on.  Don't let your customers dance in your restaurant as that will land you in front of judge.   And woe if you do not remember to put up the sign indicating that the sale of tobacco to minors is illegal.  The minimum fine is 30.000 euros and it can go up to 250.000.  Interestingly the fine for actually selling tobacco to minors is the same and in reality much lower.
Praised be bureaucracies.
Most of all the small gyms in Portugal have been closed down or will be soon.  They do not have sufficient ventilation, lockers, showers, toilets, separate toilet facilities for staff, or the money for several technical directors with a university degree in fitness (there must always be one on the premises).  The laws were made in a collaboration between the universities and the big (mostly multinational) gyms.  Thus the poor will now stop using gymnasiums as the cheap ones are dying out.
Praised be bureaucracies.

Tuesday, December 27, 2011

Who saves who?

A Chinese company will buy EDP (the electricity company) - at least 20% of it.  They won the tender.  Portugal is going to sell a number of public companies in the near future.

This is funny. I got it from the blog "Cachimbo de Magritte" (Hat tip!):

  • In 1949 - a majority of intellectuals believed that communism would save China
  • In 1969 - the same intellectuals believed that China (with its cultural revolution) would save communism
  • In 1979 - Deng Xiao Ping understood that only capitalism could save China.
  • In 2009 - the whole world believed that only China could save capitalism
  • In 2011 – Portugal understood that only Chinese capitalism could save it

Saturday, December 24, 2011

The mother of all tooth aches

Our dear prime minister has admitted that public deficit next year will be 5.2% of GDP.  In itself a staggering value of ~8.5 billion Euros.  Roughly 10.5% of the state budget.

I have even been generous here using the official EU numbers for the expected retraction of the economy next year of 3.4%.  The real retraction will be larger.

Our goal for the deficit next year is 4.5%.  This year it is 5.9%.  According to the minister of finance we will reach only 4% this year by magic by the creative accounting of throwing the banker's pension fund into the black hole of public finance.

The  pension fund was 6 billion euros i.e. ~3.5% of the GDP.  How that adds up to 8%, I cannot understand.  8% is was what the prime minister also admitted the deficit would have been this year with out the theft gift - and 3.5% plus 4% is only 7.5%...

To put everything a bit more into perspective.

  • The real deficit of this year compared to last year are not far from each other.  Last year was 9% and bit
  • The real deficit with a large number of austerity measures has thus only been lowered about 1%
  • The 6 billion euros bankers fund was around 7% of state "income" this year
  • The next 10 years (I believe it is many more), the state will have to find 0.6 billion euros to pay the banker's pension.  As the fund is in the black hole...  
  • BTW this is pointed to as one of the reasons the 2012 budget is already invalidated.
  • We are not even in 2012 yet!
  • If you looked at the pension fund as loan - as would be proper, then the interest rate is 10%.  And perhaps much more.
Of course added to that an untold number of debts will have to paid every year.  The Troika loan, the other state loans, the public companies continuing debt spiral and so on.  Just the interest rate that will have be paid every year is incredibly large.  The interests of the Troika loan alone will require 10% of the entire state budget.

Furthermore what about the problems of a systemic world wide crisis, an even worse crisis in the EU, a retracting Portuguese economy (and it may get real ugly), PPPs, a broke social security (the money for pensions has been spent) and zero measures to liberate the companies from the state - still no structural reforms?

Portugal is broke.  The country would be better off admitting it now (everybody but the politicians know it).  Portugal should seek help.  Get a hair cut like Greece (currently negotiations have reached 65%) and be happy it not called a default - a state bankruptcy - though I can personally see no difference.

Unless Europe gets it act together it would also be better for Portugal to leave the Euro entirely.  The Portuguese economy is simply not up to it.

It is like a tooth ache.  You can ignore and not go to the dentist but it will only get worse in the end.  The people has suffered sufficiently because of a small group of corrupt criminals.  It is a time for drastic measures.

Wednesday, December 21, 2011

The money trap

Today, we can read in the newspaper (hat tip: Correio de Manha) that the savings in 2012 on public servant salaries and pensions is 4.26 billion euros.  However the loss in income on taxes and social security means the liquid savings are only nearly half:  2.57 billion euros.

Salaries:
Savings: 3 billion, considering loss of taxes and social security: 1.62 billion

Pensions:
Savings: 1.26 billion, considering loss of taxes and social security: 0.95 billion

The savings are mainly due to cutting the 13th and the 14th salaries.

I doubt all lost taxes are included in the above.  What about VAT?  Or people buying a car?

The problem has been created as taxes taken all together already are extremely high.

The problem of firing existing public employees or retiring existing public employees is similar.  There are no real savings now.  They will instead of working, do nothing (which I assume is less than now).  On top of that the cost of the state in the short to medium term is the same (or more) due to penalties, unemployment benefits and pensions.

When you reduce money available to people they will obviously spend less. Hence, less companies will be created, some existing companies and businesses will fail, some families will go bankrupt etc.  The net income of the state due to these measures may in fact be close to neutral or even negative.  Due to the current state of affairs - with a generalized financial crisis, tight or no credit, the tightening or stop of spending by the public and private sector, zero incentives for companies, zero help to companies, added costs in the form of taxes to both companies and citizens, the maintained and even tightening bureaucratic barriers - this may in fact be the infamous drop, that will start an avalanche of misery.  Both measured in financial and human costs.

The only viable solution is to make the private enterprises more profitable and larger combined with creating more companies.   These companies need to produce and export.  Because we all live off their products.

We are still awaiting structural reforms.  Don't hold your breath.

Tuesday, December 20, 2011

Scoundrels

Must watch video.  Only three minutes.
Brilliant discourse by Godfrey Bloom.  Finally a gentleman using the right names for the crimes committed.  I could not agree more.

Hat tip to the great blog: Apodrecetuga

Comment on asking teachers to emigrate

I have left this comment on an article on the great blog Blasfemias.net.  The article defends the comments of the  prime minister concerning unemployed teachers should emigrate.


"I beg to differ. The idea of sending away qualified and educated Portuguese abroad, because there is no work here is in essence defeatist. It removes the focus from the important objective of creating conditions for companies to employ and produce more.
Concerning the teachers in particular, it is obvious there are too many now and in the future. But instead of asking them to emigrate they should be requalified for other professions. Already Portugal is one of the countries in Europe with the least educated working force. Also asking the teachers to emigrate will only make sure the smartest and most dynamic leave. They are the ones most needed.
Instead the teachers of no talent or mediocre talent should be fired. In fact, a small percentage should be let go every year. No matter the length of career. 20%-30% less teachers at a higher salary would not hurt Portugal. It might once again make teaching a profession of high status sought out by gifted people. Personally, I cannot think of a more important profession…"

Now, if you are a teacher and can get no job, and really want to teach - then the prime minister is correct.  There be jobs outside Portugal.

Furthermore, the old fashioned idea of a job for life or even the same profession for a life is no longer valid.  People should continuously seek education and requalification as necessary.  If nothing else for the pure pleasure of it.

Open letter to the EU

The Telegraph in the U.K. has published this open letter from 16 university professors:


Without radical deregulation, EU markets will never thrive


"SIR – As economists from 16 EU states, we don’t all hold the same view on whether the euro was a good idea, nor any particular view on David Cameron’s veto of a possible EU treaty. However, we are staunch believers in the free movement of goods, services, people and capital as enshrined in the Treaty of Rome.
Though only one person from each country has signed this letter, our views are not far out of line with those of many fellow economists. The EU should not focus on Mr Cameron’s actions. It should, instead, look at the underlying arguments about the future of the EU and the euro.
Unless there is radical deregulation of the labour and product markets and lower taxation, the euro can never work and the EU can never be a thriving economic area again.
These are the challenges, but the EU and its member governments are moving in the wrong direction. We see no sign that those discussing how to deal with the euro crisis understand the actions that need to be taken.
Whether or not the euro survives, this attitude will lead to gradual decline and increased social conflict within the EU. It may ultimately lead to the disintegration of both the single currency and the EU."


Until the politicians start understanding the root of the problem and commence on essential structural reforms we will see no progress.

Perhaps this crisis is necessary to open the eyes of the incredulous.

If Portugal were a company

An analogy

"If Portugal were a company it would be considered badly managed, broke, unable to get finance, with too many employees, of which many without qualifications, and unable to manage its employees."

Vitor Andrade, Journalist, Expresso on SIC Noticias

We can be happy it is not a company, otherwise it would have to be shutdown.


Monday, December 19, 2011

Joy, we will pay but not receive

Mr. Passos Coelho, our dear prime minister, has told us that in twenty years pensions will be half of what they are today.

He is right, of course.  The social security is broke.  The money has been spent.  People live too long and the thought of a pension equivalent to a full salary is preposterous.  In twenty years not only will the pensions be half - I think even less - also retirement will be ten years or more later.

Meanwhile, we the workers, can enjoy the pleasure of contributing to paying a full salary to the relatively young current retirees.  Already, 80% tax on the money paid by an employer for having an employee is not unheard of.  We can't even blame the majority of current retirees - they had their money stolen by thieves politicians working for their own the common good.

Joy.

Citizen - be gone!

Our dear prime minister, Mr. Steps Rabbit, has made various announcements.  Some amusing, some not so amusing. His standard answer to everybody:  Emigrate.   Principally for people with no options left in Portugal.  For now it is just the unemployed and the ones risking becoming unemployed.  Notably, as he so specifically mentioned, the teachers.  Of course it is obvious there are or will be too many teachers.  After all, Portuguese don't procreate much anymore.  In fact, Portuguese are presently the worst in the world at procreation.

But why stop at the teachers?  Why not ask all the troublesome to leave?  Why not the criminals?  They just make trouble anyway.  Instead of prison - give them a one way ticket somewhere else - Siberia?  And what about the retired.  They have to receive pensions and they get sick a lot.  Send them away too.  I am sure with a bit of subterfuge you could get rid of them easily.  Maybe one way - but free - cruise ships to somewhere else.  All the handicapped are also mostly trouble.  They need special schools, workplaces and medical treatment.   They will probably be happy to leave.  I don't know of any place in Europe where they would be worse off.  And what about the children?  They cost heaps of money and they make noise.  Child birth, vaccinations (even though we have started saving on those), sickness, nurseries, kindergartens and schools.  Think about all the teachers that would become redundant without children?  It is an austerity wet dream.   Lastly we have the young.  But no problem.  They have been asked to emigrate already - and boy do they ever.  But permit me to suggest they be send away before university?  Those universities cost heaps of money and are mostly just trouble.  And do you realize where all these troublesome intellectuals come from?  Some of them just have no respect towards politicians.  Finally that leaves just the company owners, the company workers and the public sector.  But worry not.  The companies are closing, any entrepreneur, who has not gone broke yet, with an iota of common sense is looking outside of Portugal.  The companies are all closing down, moving away or going broke.  The workers will all become unemployed and be sent away for emigration.
That leaves the politicians and the remaining public sector employees.  I don't know what they will do.  Frankly, who cares about the politicians any way?  Except themselves, of course.



Friday, December 16, 2011

Greek auto destruction

The info coming out of Greece concerning cheating with public funds are hilarious in a morbid way.  Greece will soon default.  Here I present some of the tragic-comic examples:

An ex police officer has invented 19 children with pictures and everything.  He has as a minimum managed to get 150,000 euros from the state in child subsidies.  But probably more.  He was arrested when waiting to pick up another 8,000 euros.  The man is 54 and has being working his scheme since 1996.  He quit as a police officer in 2001.

The case is extreme but not unique.  A farmer on a small island, claiming a lot of children and extreme poverty, had a Ferrari and a Porsche in his garage.

Los cuatro arbustos plantados a la entrada del hospital Evagelismos, en Atenas. | I.H.V

Hat tip: El Mundo:

This "garden" in front of a public hospital in Athens consists of 4 small "trees".  No less than 45 gardeners are hired to take care of them.  I wonder if they polish all the leaves every day?

Unmarried daughters of passed away public servants receive a lifelong pension.  There are 40,000 such daughters.  I believe they probably will not marry any time soon...

One public department has 50 drivers for one car.  That must be a sight to behold.

The Greek hospitals give their patients pacemakers 400 times more expensive than in the U.K.  I bet the pacemaker supplier is laughing all the way to the bank.

There is a public institute to take care of a lake: The "Institute for the protection of lake Kopais".  A small detail.  The lake has been dried out since 1930.

One out of 4 Greeks never have paid any tax.

Six hundred professions in Greece can retire early because of strenuous jobs.  Men at 55 and women at 50.   Hairdressers, musicians and television presenters are all included.


From other sources:


There is the example of an island of 35,000 people with 750 people receiving their pension for being blind.  We see this year that suddenly an additional 32000 more people have died than usually when the Greek state for the first time asked them to prove they were alive.  Thirty something thousand dead/alive people are still missing.  In fact Greece is the country in Europe, according to statistics, with most people alive above 100 years old.  

Tax evasion is everywhere - "Only the stupid pay tax,” one eye surgeon told a Greek state radio.  Eye surgeons are members of a profession earning up to 900,000 euros a year.


There’s now a burgeoning market in camouflage swimming-pool covers, as the tax man is flying in helicopters above Greek villas trying to determine who lives above their declared income.





And some people in Portugal question the legitimacy of countries such as Germany and international organisations such as IMF that demand more control of Southern Europe?  Conditions in Portugal, Spain and Italy are not quite Greek but they are not far off either...

Thursday, December 15, 2011

Firing public employees...


SNAFU in Greece.  Status quo.  Everything is going badly as usually.  FMI has just asked Greece to cut down on public expenditure by cutting down on the public sector by firing employees and closing public companies.  Otherwise the deficit will continue - to rise.

It is just a matter of time before the same will be necessary in Portugal.  Within a short time there will be probably 20% less people working for the state.  Either directly or indirectly in public companies.

But here is the problem.  Firing public servants of a certain age will be very expensive.  First of all they have high salaries.  Secondly, they will receive comparatively high unemployment benefits.  Thirdly, they will pass on to comparatively high retirements.  Thus the cost of having them working or doing nothing is grossly the same.

This makes the economic choice easy.  The elder public employees will have to continue working until they die and the young ones will be fired.

I wonder what the young will think about that.  Oops, I forgot, the young have been expelled from their comfort zone of all of Portugal.  They have been sent into exile - or will be sent soon.  After all the young are the guilty.  They have mismanaged this country since forever...

Portugal is doing well



Ms. Merkel is supposedly impressed by Portugal and the fact we this year will reach our goal of deficit.

There is no reason to be impressed.   Our debt is increasing by around 5.8% this year alone.  It will also increase next year.  Perhaps we should ask Mr. Socrates to come back from his hideout studies in Paris and advice on payment of the debt.  According to him there is actually a possibility to pay it in its entirety - even though it would be foolish.

Fools aside, we would probably not reach the goal this year without the absorption and spending of the banker's pension fund.

Meanwhile, the country continues to fall apart.  The number of families, small businesses and companies going broke is preposterous.  A large number of dynamic persons, including a lot of well educated young people are emigrating.  Next year it will be worse.  Who will in 2013 be left to produce and create growth?

Update:  At the least the prime minister does not try to hide all the sordid facts.  "Without the extraordinary income from the banker's pension fund the public deficit would have been close to 8% this year".
Exactly.  With all kinds of tricks and quite a few austerity measures we have managed to lower the deficit 1% since last year.  Next year we have to reach 4.5%.  That is nearly 4% less with the economy retracting a lot more... 

Monday, December 12, 2011

Debt unlimited, Inc.

Socialists have a hard time these times.

The new agreement in Europe will try to accomplish, what nobody has been able to so far:  To reign in the politicians so they no longer can spend the money of future generations.

Because of the new EU "fiscal compact":

"would entail establishing a new fiscal rule, under which government budgets would have to be balanced, which would mean that after stripping out one-off revenues and expenditures and the swings of the economic cycle, the structural deficit would not be higher than 0.5 percent of GDP."
The only exception would be for countries with GDP/debt ratio significantly below 60%.


I am not sure it is possible to make to politicians waste any less, but it sure sounds nice.

Behold Mr. Seguro, opposition leader and socialist, trying to keep it out of the Portuguese constitution.  It goes well with the
ideas of his pal: Mr. Socrates.  I also note that in my native country the socialists are pretty upset.  Denmark is not a member of the Euro.  The Danish prime minister, a social democrat, wants to adopt the measures.  Interestingly, the foreign minister is against the "pact".  He is a socialist.  The Danish government includes three parties.  Center left, Social Democrats and Socialists. 

The powerful against the small...

I hope Germany knows what it is doing.

«Now consider average current account deficits over 1999-2007. On this measure, the most vulnerable countries were Estonia, Portugal, Greece, Spain, Irelandand Italy. So we have a useful indicator, at last. This, then, is a balance of payments crisis. (…) If the most powerful country in the eurozone refuses to recognise the nature of the crisis, the eurozone has no chance of either remedying it or preventing a recurrence. (...)Ultimately, however, external adjustment is crucial. That is far more important than fiscal austerity. In the absence of external adjustment, the fiscal cuts imposed on fragile members will just cause prolonged and deep recessions. Once the role of external adjustment is recognised, the core issue becomes not fiscal austerity but needed shifts in competitiveness. If one rules out exits, this requires a buoyant eurozone economy, higher inflation and vigorous credit expansion in surplus countries. All of this now seems inconceivable. That is why markets are right to be so cautious. (…) The failure to recognise that a currency union is vulnerable to balance of payments crises, in the absence of fiscal and financial integration, makes a recurrence almost certain. Worse, focusing on fiscal austerity guarantees that the response to crises will be fiercely pro-cyclical, as we see so clearly.»

[Martin Wolf no Financial Times]

Euro is doomed?


Like it or not the Euro is doomed.  So goes the title from this CNN article.

Further quotes from the article:

"Three years after the first 'once in a generation' financial crisis, we may now be entering the end game for a euro of 17 countries,"

"It's the ECB or bust," Leach said. "Unless the ECB begins to operate as a sovereign lender of last resort function, with massive purchases of eurozone public debt, the inexorable logic is that the eurozone will break up."

"All of the harebrained schemes invented so far to resolve the crisis in euroland remain half thought out, unfunded and unimplemented...and therefore, still harebrained," 

"the ECB's balance sheet is already shot to pieces. It's massively over-leveraged."

As is pointed out later in the article, not all economists agree.  Personally, I have a hard time believing the Euro will disappear.  OTOH - that certain countries may have to leave the Euro is not implausible.

I have a hard time understanding why the ECB does not want to increase the money supply.  The Americans have been making fortunes simply by printing more money...  This hesitation seems extremely conservative considering the current situation.  Whether it is the correct attitude or not - only time will show.

Friday, December 9, 2011

Shut down the railroad companies



I am a huge fan of public transports, in fact the big cities and the population would be much better off with a lot less cars.  Traffic has broken down and the costs are humongous. I really enjoy it when I can go by train instead of by car.  It saves time and is cheaper.  I can work on the train - or relax.  Cutting down on public transports, as the government is planning - to save money - seems like idiocy to me.  However, there may be economic reasons that makes it imperative.  But, I believe I have a better plan:

The public train transport companies are all broke.  They have huge insurmountable debts, yet the strikes will continue.  Not even the threat of not being able to pay salaries from the administration of CP (Portuguese railroad company) will have any effect.  Perhaps the unions will do us a favor and close down the railroad companies (CP, Metro Lisboa, Metro Porto etc.) by more strikes.  Why just the the 23-25th. of December and the 1st. of January?  Do a whole month.

I think it is a wonderful solution.  Let the companies go broke.  Fire everybody - they were warned.  Close the companies for good.  Let the state keep the infrastructures and ask private companies to run the train service on two year concession contracts.  Make entry into Lisbon and Porto with a private car expensive with a payment system. The congestion charge in London is a good example.  Use the money earned to finance public transport in the two big cities.  A more modest model could be used in other smaller cities as well.

A lot of the fired people (excluding most of the bureaucrats and the corrupt managers) will get their jobs back in the new private companies winning the concessions.

However they will probably have to accept salaries at the market level - perhaps 50% less for some groups.

Until the labor laws are changed, the much criticized incentives of paying a bonus for going to work everyday and an additional bonus for complete months is pure genius.  As you can not fire people for not doing their jobs or being sick the whole time, the answer is to use bonuses instead of salary to make them perform adequately and everyday.

The one or two months it will take to get the trains up and running again, I will not mind to drive 6 people forth and back from Lisbon everyday for free.  It will cost me some money and a lot of time.  But in the long run I will save on my tax bill.  I am sure other volunteers can be found either to drive people or to help pay for some buses until train services can be reestablished.   The armed forces can help as well.  Presently there are no wars to be fought, no invasions of Portugal by foreign powers - au contraire, foreigners and natives are fleeing from Portugal - and training could be put on hold for a few months.

Worst excuse ever?

The former prime minister of Portugal has taken a short break from his propaganda tour and hideout studies in France.  He is there to study political science.  To call politics a science is of course ridiculous - as it belongs to the so called social sciences - aka the voodoo sciences.  So let us call it by its name.  Mr. Socrates is in France to study politics.  About time I would say.  Have they gotten to the part of "dangers of corruption?".  Or the part where you learn to lie properly?

Because Mr Socrates' excuse on public TV concerning his statement is among the worst I have ever heard.  He claims that the phrase: "The idea of paying the debt is childish" must be seen in context.

He claims he was referring to "paying the entire Portuguese debt in one go" as a childish notion.  By "one go" he meant next year or maybe in 3-4 years.

I would call it a godlike notion - as in needing a miracle - to be able to pay the Portuguese debt in one go.  Portugal cannot even stop increasing the debt, not mentioning paying it off...

Therefore the excuse is utter nonsense.

Instead it is for once a true glimpse into the soul of the "entitled" opportunists.  There is a strange ideology among us in the world.  It is an ideology of entitlement.  We are entitled to receive help, we are entitled to have everything paid, we are entitled to free health care - we are entitled to everything.  There is nothing mentioned of gratitude, hard work. paying back or taking responsibility.  No, instead there is a demand of rights.  A right to entitlement.

Mr. Socrates not only is a believer in rights.  He of course feels Portugal is entitled to eternal finance and no obligations.  He happily spends other people's hard earned money.  Without a glimpse he in 6 years doubled Portugal's debt, as the money earners capability of creating riches to be taken by the state was not up to the necessities of Mr. Socrates.  He completely ignored his duties as the head of government, not to mention as the head of the country.  He fostered an environment of extreme corruption and absolutely no accountability.

Rights are in my opinion something earned and rights always include obligations.

Now we must pay, and dearly, for the "entitled".

May the phrase , "The idea of paying the debt is childish", follow Mr. Socrates as a defining moment the rest of his life.  Another proof of ineptitude.  Perhaps then he will never be given a job of responsibility again.


Wednesday, December 7, 2011

Child's play


Mr. Socrates, the previous prime minister has found an audience in Paris.  I wonder how.  Did he pay them?

If anybody can be made personally responsible for the unpayable debts of the country - it should be Mr. Socrates.  Check out here.  With any justice, Mr. Socrates will one day have to answer in court concerning the mismanagement of the country.  Don't hold your breath while waiting.

Mr. Socrates has been known for a number of scandals.  One of the smaller ones being his degree as an Engineer.  He is still not considered one by the order of Portuguese engineers.

The country is insolvent going through the biggest crisis ever as a democracy and Mr. Socrates gives us a few wise words:


"The idea of paying the debt is childish."

I think I understand this one.  My children, my grandchildren and even my great grandchildren will be paying the debt.


"Debts of countries are per definition eternal"

Now I understand better.  If debts are eternal - then you of course need not worry much.  I will talk to my bank tomorrow.  I will ask for a loan - not eternal - after all I am not a country - but just 65 years.  I will guarantee to pay it in full in 65 years including all accrued interests.  Cross my heart...


"I have studied this during... (small pause) ...time"

Mr. Socrates has studied so many subjects.  I had never heard about this PhD in economy (and public finance?).  Impressive.  On the other hand, Mr. Socrates has learned something.  No definite time of study.  Just ...time
On the other hand when an engineering degree can be finished on a Sunday, then ...time gives limitless possibilities.


"The economy is managed, I have studied that"

In his extensive studies of economy and public finance, Mr. Socrates has discovered a truth.  "The economy is managed."  This is of course a small lapse of Mr. Socrates.  The economy is not managed.  The economy must be managed.  As in actively taking care of it.  I know this is what he meant.  I just know it.  Really!


"Of course you cannot get too much debt, because that can be difficult"'

Indeed, there is nothing as valuable as experience.  Creditors can become so tedious when you don´t pay them.  It is downright unpleasant.  It is a lack of education.  If you borrow money from the loan sharks they will crush your knee caps.  BTW did we get any loans from Russia?


"That is how I see things, but never mind this is a very technical discussion..."

Very technical, high level, at least one 4 syllable word, and down right philosophical.  I must say I have a hard time following you.  But then again I just have minor studies in economy.  Never did get that PhD.  I am just an ordinary (unrecognized!) software engineer. Other PhDs have a hard time following Mr. Socrates as well.  But then again there are PhDs and then PhDs and post docs of an extraordinary - indeed out of the ordinary - degree like Mr. Socrates.

The Government is corrupt

In Spain patients are now informed about the cost of the treatment
"The open heart surgery was a success.
However, when your husband saw the cost of the operation..."
A concern of the outmost graveness has arisen.

It was only a question of time.  The minister of health is corrupt or feeble minded.  Or both.

In a time where everybody is asked to make sacrifices, at a time of the worst crisis in Portugal in a generation, at a time where the government have let us know that in the future management positions will be filled by open and public selection, where the candidates must have the qualifications and must compete against each other - this happens:

Six members of PSD/CDS have been nominated hospital administrators in the first round of assignments

The old game of "jobs for the boys" is back.  After each election it is normal have an exchange of managers.  E.g. of hospitals.  The loosing party members leave and the winning party members enter.  Qualifications are not considered.

In the agreement,"The Ecomic Adjustment Programme", with the Troika it is explicitly written: "Improve selection criteria and adopt measures to ensure a more transparent selection of the chairs and members of hospital boards".This measure must be implemented by Q4 of 2011 ready for the third review.

The measure in detail can be read on page 78:

3.74. Improve selection criteria and adopt measures to ensure a more transparent selection
of the chairs and members of hospital boards. Members will be required by law to be
persons of recognised standing in health, management and health administration.

It is hereby clear that Portugal must fail the third review.

In that light the excuse from the governments is incomprehensible and feeble:

From the health ministry: "this only concerns public institutions and alike"

There is only one and immediate solution to this, if the government want to keep any credibility whatsoever.   The minister must resign and the nominated hospital administrators from PSD as well.  Today is better than tomorrow.  The day after tomorrow is too late.

If not we have the proof of corruption all through - not only in the ministry of health.  And then we all know what it means next time the government asks for sacrifices. The sacrifice is for "the boys".  I then suggest you do not.

Shame on you!  Hypocrites!

Update:
I forgot to write that 6 PSD/CDS are placed but also 6 PS are leaving.  The level of incompetence before and after is probably the same: Extremely high.

Tuesday, December 6, 2011

A beautiful land

Full screen HD is available from youtube

Portugal is a beautiful country with a wonderful people (some politicians excepted).  It is time the people claim it back.

BTW it is obvious tourism is a big industry in Portugal.  Watching the prize winning video it is easy to understand why the potential is even bigger.

Portugal most unequal in Europe

The OECD has release a new report:  Divided We Stand: Why Inequality Keeps Rising

In the three decades prior to the recent economic downturn, wage gaps widened and household income inequality increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth. This report analyses the major underlying forces behind these developments

Inequality in society is not necessarily equal to a bad economy.  The US has been an unequal society for a long time.  However, generally speaking, inequality is a sign of problems in society.  It is said about Henry Ford, when he was asked why he paid his workers so much more than other employers, that he answered:  "This way they can afford to buy my cars."

Economically speaking this is largely true.  A population with money to spend tends to be healthy for business.  

For me the much more important issue is one of social coherency.  Inequality, a large difference between rich and poor, usually also signifies a large number of poor.  This creates societies like Brazil, where the rich have to protect themselves by having bodyguards, bullet proof cars and hiding in special buildings.  A lot of Brazilians - and not only the poor - have left Brazil because of this.

Also societies tend to function better with a large middle class.  A high level of education tends to lead to a large middle class.  Most of the most wealthy and best functioning countries tend to have less inequality.  They are generally speaking more civilized and the perceived level of life quality is higher for all, poor and rich.

Thus this study is extremely worrisome looking at the numbers for Portugal.


Portugal is the country with most inequality in Europe.

Now, if you are a socialist, your way of fixing this is trying to redistribute wealth.  You take it from the wealthy and give it to the poor.  I think this could be catastrophic.  For the rich generate much of the wealth of society.  Of course there has to be some redistribution - but only the minimal necessary - in the the form of taxes to guarantee the functioning of the state. 

The main problem is not the rich being rich, it is the poor being poor.  I believe it is much better to focus on making the poor richer.  You do that, by giving incentives and possibilities to the poor to become middle class and giving the middle class incentives to become rich by becoming entrepreneurs.

In Portugal's case some of the rich are a problem as their wealth has been generated illicitly by participating in corruptness.  The money has been stolen and the wealth generated has not been of much benefit for society.  These rich we can live without.  Tax them to death if possible and instead give the licit rich job makers incentives to make more.  Pay them if necessary!

You have perhaps in my writings noticed I do not care much for socialists.  That is a fact.  But on the other hand I do not care for inequality to a degree seen in Portugal.  A true socialist I see as a somewhat naive "do-gooder".  An idealist believing in the communist utopia.  We humans may one day get there and will be able to live according to the teachings of religion.  But for now, we must work with what we have.
The reason to why I mention my socialist phobia is because it gives me a chance to criticize the so called "Socialist Party" of Portugal.  Despite 20 years of socialist presidents and nearly as much of socialist governments - there sure is not much equality in this country.   The same goes for the partner in crime, "The Social Democratic Party".  The two parties of the nearly pure two party system are anything but social and have created one of the most unequal and most unhappy countries - and not very rich at that!

Shame on you!

Update:  Article from Portugal Daily View

Reign in the local authorities

Municipality of Cascais
"Proud" owner of 11 public companies
Yesterday I suggested diminishing the number of municipalities to 40 and closing down every single "freguesia" in:

Close to 5000 local authorities in Portugal?

I continue to think so.  But I forgot to mention that it would be the ideal moment to close down every single municipal company.  There are a very large number of them in Portugal and they cost everybody a great deal.

Just in my municipality, Cascais, we have eleven (*).  These kind of "companies" are more often than not used to get jobs for "the boys" at salaries much above the public sector.  They often loose money and need to be resupplied by the municipalities.  It is completely impossible to find out whether they are cost effective or not.  They are in effect a monopoly in their area (the municipality).  I have a postulate.  The degree of corruptness in a municipality is directly proportional to money spent on (e.g. number of) municipal companies.

In my humble opinion all the employees should be counted as public employees and their passives should be added to the public debt.  It will not be easy as nobody even knows the exact number of municipal companies in Portugal.

So shut them all down.  If a municipality is not able to handle, say garbage collection, then make a public tender for the service for two year periods.  Nobody in the municipality should be allowed to choose the winning company.

A so called white book with an analysis of the sector has been made public (hat tip "O Público).  There are at least 14000 employees and 334 of these companies.  They have a debt of at least 2.4 billion (1.5% of the GDP).  The only problem is that the real numbers are much larger.  We just don't know how large.

I am not really surprised.  After all even the state does not know its exact number of employees...

(*)  One of the companies in Cascais is called EMAC, "Empresa Municipal de Ambiente de Cascais", Municipial Company of the Environment of Cascais.  Do notice the PC name of the company.  A great way of misdirection if necessary. We call it the Municipial Company of António Capucho ("Empresa Municipal de António Capucho").  Mr. António Capucho is the former president (**) of the municipality of Cascais.  I have no idea whether the company was created by him or the former crook, president of Cascais, Judas.
What I do believe is that we loose money because of that company.
What I do know is what I have seen in the past.  I often run on the beach in Carcavelos in the morning.  Usually, I and the fantastic cleaners (***) are the first on the beach.  Quite a while ago they were redoing part of the beach walk and at a large expense building an ocean breaker to keep the sand from disappearing from the beach.
Several mornings I saw large trucks from EMAC driving away truck loads of sand from the beach.  It is illegal to take away sand from the beach and I wonder who came to benefit from all that sand...

(**) Presidents of municipalities have far too much power, just as their inflated title suggest.  A reform of the municipalities should curb this power as much as possible.  A good start of psychological value would be a new less imposing title.

(***) They are also from EMAC, I believe, and actually do a great job.  It must cost a fortune.  A lot of the public using the beach are swines and pollute.  Some civic lessons would be nice and could save money...

Monday, December 5, 2011

Madness: cutting down on tourism


Projection:  Sector recommends external promotion
It is good the government knows better
Who dared write this magazine?
Oops - the government...
Pure madness.  The government is cutting down (hat tip: portugal daily view) on support for the single largest viable industry in Portugal with a possibly bright future:  Tourism has the possibility to grow to 15% of GDP the next years.

The sub-minister of tourism (belonging to the über-ministry of economy) using the reverse logic and defeatism known from the ministry of parliamentary affairs (the one asking young people to emigrate) announces:

State Secretary for Tourism Cecília Meirelessaid that the government’s tourism promotion agency would face a 30% budget cut worth about €230 million in 2012.
However she gave assurances that a smaller budget would not affect tourism investment and promotion.

They must live in an alternative reality.  I am waiting for them to ask the tourists to leave us alone.  The raised VAT levied on most tourism is of course an indirect invitation to do so.

In fact she may be right concerning her assurance as the promotion is close to zero anyways.  The investment will probably soon approach zero because of the bureaucratic program of sabotage: also known as anti tourism, anti investment and anti business in general.

Close to 5000 local authorities in Portugal?

There are 308 municipalities ("conselhos, câmaras") and 4359 local administrative units ("freguesias").  The latter are a form of an administrative parish.

In the old days (20 years ago) a trip to the North from Lisbon could easily take a day.  A trip of 40 km into the countryside could sometimes take two hours because of heavy traffic and miserable roads.

However the roads and public transports are very good now and the country seems much smaller.  Considering the Internet there is in fact no longer a reason for so many entities in Portugal.

Thus the only real structural measure implemented by the current government to diminish the size of the public sector:  The civil governments ("governos civis") have practically been closed down.  They were a kind of representative of the central government locally.

The government has talked about shutting down "freguesias".  First there was talk about 1000 now the number is much lower as the "freguesias" are protesting.

In 20 years in Portugal we have visited our "freguesia" once or twice.  They do however have a number of local activities, which we have attended.  They have a building, employees and thus spend money.

We have visited our "câmara" a few times.  First to get married and the afterwards to get a building license.  But otherwise never.  They have lots of buildings and employees, and spend a lot of money.  They also have created an enormous wasteful structure of companies owned by the municipalities.  Lots of "jobs for the boys".

I would suggest a more radical change than the government proposes:

40 municipalities and 0 "freguesias".  The "freguesias" could continue, but then only with voluntary workers and a building for meetings.  There are lots and lots of countries without" freguesias".

There are cities in the world with "câmaras" the size of Portugal.  With modern technology and other modern infrastructures it makes no sense with so many local authorities as we have today.

I would furthermore suggest that the "câmaras" no longer would receive income from constructions.  That is no fees for building licences and no income from property tax.  This should all go to the state.  The state could then redistribute to all municipalities.

Additionally, the "câmaras" should no longer be allowed to decide on what land is for construction or the degree of permitted construction density without getting the direct approval of the population and one or more state agencies.

Considering all the bureaucracy, waste and corruption associated to local authorities this is the only sensible plan of action to take.

The other day on TV a sad truth was revealed.  There are only two kinds of business in Portugal that has more than a 1000% profit.  Drugs and the manipulation of land value.  The latter must be stopped as it is easy to do and it is more harmful than the former.

Pension fund robbery or a poisonous gift?

Portugal has to me an unknown number of pension funds.  Social security was only created after the revolution and all large companies had their own pension schemes.

When social security was created, for reasons beyond logic the separate pension schemes were kept.

Perhaps for the best as the social security has spent some of the money reserved for pensions (and "bought" Portuguese state debt of dubious value) and count on current and future income to be able to pay future pensions.  Until eventually absorbed by the social security the pension funds had money in them.   Friday, one of the last?, the bankers pension fund was handed over to the state.

For once I actually feel a little bit sorry for the bankers.  They will eventually as everybody else live from one day to another, as their pension money will be devoured by the state.  Also they will in the future see drastic cuts in their pensions - just like everybody else.  For now, though, they are fine as:

  • For the state to be allowed to take the money the bankers have been guaranteed pensions are not touched by austerity measures
  • The banks will continue to decide how much the bankers going into retirement will receive.  This point is incomprehensible as it suggests the banks will continue to stay outside the normal rules of society and social security.

The banker's pension fund had an amount of around 6 billion euros.  I.e. more than 3% of the annual GDP.

It is difficult to get a clear answer but the following are the apparent facts
  • Without this one-off injection - Portugal would not be able to meet the max 5.9% state budget deficit demand.
  • Some of the money will be spend right away
  • Some of the money will be spend to assure then bankers pension the coming year
  • Once again the politician state and swear:  This will be the last time we do this trick (perhaps because there are few pension funds left - but the military still has a large one...)
  • Some of the money will be saved for future expenses
The last fact is stated by the Portuguese prime minister.  It is doubtful in my opinion.  Because the statement infers a third will be saved.  I do not believe it as the money is needed now.

What is interesting and extremely worrying:
  • The payment from the banks (the pension fund) includes government bonds.  I.e. debt owed by the Portuguese state.  They will probably just be absorbed - the effect will be to absolve the debt.
  • If the max. deficit of the state could not have been met without this injection - the public debt would then have ended up with an additional 9% (5.9% plus 3%+) of the the GDP this year?
  • The requirement for next year is 4.5%.  There will be no more pension funds to rob.  The effort is not only one from 5.9% to 4.5% but actually from 9% to 4.5%?  A draconian cut.  No wonder the prime minister speaks of possible further austerity measures in 2012.
  • The 6 billions euros correspond to nearly 10% of the annual income of the state.
  • Robbing the money from the banker's pension fund will leave little money to pay future pensions.  Consequently, the next 80 years or so - money will be missing from the budget and will have to found elsewhere through taxation or by not paying (as much) pension. We have now a new debt for the state.
  • I wonder why the banks handed over the pension fund without a peep from the banks.  They are usually extremely loud when not satisfied. Obviously because they will save money by doing it.  Ergo the public will now have an added burden here as well.  This is analogue to a loan with interest - probably a high one.
What a mess.  It looks bleak for 2012 and beyond.

Two sources (Portuguese): Passos: "Não há folgas, nem almofadas" and Ricas Pensões

Friday, December 2, 2011

Nightmares instead of solutions

Seguro: Passos dá "pesadelos" em vez de "soluções"

translated:

Seguro: Passos provokes nightmares instead of providing solutions.

Hat tip to "O Expresso"

Seguro, is Mr. Seguro, the chairman of the Socialist Party.  Passos is Mr. Passos Coelho, the Portuguese prime minister.

For the first time Mr. Seguro says something that makes sense to me.  It probably happened by accident, but let us give the gentleman the benefit of uncertainty.

What Mr. Seguro refers to by "solutions" is the complete lack of structural reforms presented by the government.  All measures presented so far, are stop gap measures, that will worsen the economy instead of improving it.  However, Mr. Seguro is probably not really in favor of the necessary structural reforms.  Him and his party prefer taxing instead of limiting the expenses.  So his arguments are curious at the very least.

Concerning "nightmares", Mr Seguro refers to the recent interview with the prime minister.  For the first time in recent time, I can record, Mr. Passos Coelho gave something that with a little flexibility could be considered a message to the Portuguese people.  About time - I say!

Back to nightmares.  The prime minister during the interview would not rule out further austerity measures in 2012 if it becomes necessary.  He would not rule out one of the measures being the loss of the subsidies (15% of the salary consisting of the 2 extra salaries every year) in the private industry.  Presumably by increased taxing.

What the politicians will do - I have no idea.  Their brains are wired differently from that of human brains.  But I can practically guarantee you, that further austerity measures will become necessary in 2012.

- - -

As an aside I present you the photograph from when Mr. Seguro made the statement:

Hat tip to "O Expresso"
Is it just me?  I consider the colors absolutely psychedelic.  They could give me nightmares.  Looks like something out of what I imagine a LSD trip looks like.   It goes with our continuous nightmare of the Portuguese collapse.  So I suppose I cannot blame the designers...   

Thursday, December 1, 2011

Fourth most corrupt

The Corruption Perceptions Index, 2011, by Transparency International is out.

Portugal is number 32 in the world, with the least corrupt at the top.  It is number 18 in Europe (out of 32), but only less corrupt than three other countries in Western Europe:  Malta, Italy and Greece.

The comparison of Western Europe does not sound that far off; however the place as number 32 in the world (out of 182) could be doubtful.

To understand the index one must understand it is based on a number of studies in the form of 17 assessments and surveys (the methodology can be downloaded under "download data" on the website).  The rating of each (not all countries are in all studies) is used for a final index.

But take a look at some of the questions of the surveys below.  My answers are in red (corruption positive) or green (corruption negative).  How can that give a rating of 32?  I wonder what people were asked.  The corrupt politicians and officials?
  • Are there clear procedures and accountability governing the allocation and use of public funds?
    No
  • Are public funds misappropriated by ministers/public officials for private or party political purposes?
    Yes
  • Are there special funds for which there is no accountability?
    Yes
  • Are there general abuses of public resources?
    Yes .
  • Is there a professional civil service or are large numbers of officials directly appointed by the government?
    There is a large professional civil service, but a large number of officials are appointed directly or by nepotism
  • Is there an independent body auditing the management of public finances?
    Yes (in theory - to my knowledge, except for one or two cases, nobody of any importance has ever been punished).  The number of large cases, that have never been solved is astounding.
  • Is there an independent judiciary with the power to try ministers/public officials for abuses?
    Yes
  • Is there a tradition of a payment of bribes to secure contracts and gain favours?
    Always.  Not always in the form of money, though.
  • Has the government implemented effective anti-corruption initiatives?
    Never
  • Is the government free from excessive bureaucratic regulations, registration requirements, and other controls that increase opportunities for corruption?
    Are you kidding? NO!
  • Are there adequate laws requiring financial disclosure and disallowing conflict of interest?
    No
  • Does the government advertise jobs and contracts?
    No to jobs, and yes to most contracts because of EU ruling.  But contracts are hardly ever awarded on mere merit.
  • Does the state enforce an effective legislative or administrative process—particularly one that is free of prejudice against one’s political opponents—to prevent, investigate, and prosecute the corruption of government officials and civil servants?
    No way
  • Do whistle-blowers, anti-corruption activists, investigators, and journalists enjoy legal protections that make them feel secure about reporting cases of bribery and corruption?
    Somewhat.  It is not risk free to be a whistle blower, though violence is probably not an issue  OTOH to be a journalist is probably quite risk free.

World moving to save the European mess

The world's largest central banks yesterday acted to avert a liquidity crisis in Europe.  It was a concerted effort.
There has been no explanation.  But before the action the European banks were hardly given any dollar credits and perhaps it was to save one or more large European banks.  Or even countries.  The international community does not want a repeat of the Lehman Brothers' collapse.  Partly in due to lack of liquidity.

To illustrate the nervousness of the financial markets before the action -  I can mention that the German one year bonds were offered at an interest rate of -0.05 percent.  The first time ever with an interest rate below zero.  In other words investors were willing to pay the German state to keep their money safe for one year.

The collapse of one, more or all of the following:  Greece, other PIIGS, The Euro in Southern Europe, the entire Euro, the entire European Union and perhaps consequent international financial collapse does not look unlikely in the eyes of investors.

Some collapse looks inevitable from where I am sitting as well.

At the moment, I can perhaps for the first time in my life say I am fortunate not to have a dozen million dollars to place somewhere.  Putting them in a bank account or buying bonds of PIIGS countries would be out of the question.  The risk of devaluation or even collapse is too high.  You could then consider buying gold.  But there has been sold more certificates of gold than the actual quantity of physical gold available.  So unless you take possession of the physical gold - you could be in trouble.  A run on gold is not entirely unlikely.

Perhaps betting on Germany not going bankrupt the coming year and paying for it - is not that crazy...

Wednesday, November 30, 2011

Policies cooked up by charlatans

Financial terrorists
Hat tip: Apodrecetuga

Adding debt to a debt problem is going to increase stability?  That is insane.

Bad boy banker threatens

The bad boy banker Fernando Ulrich, president of BPI, one of the larger Portuguese Banks, makes an interesting statement:

Public entities local or central will never ever get credit (from the banks) again - unless they can show the same credit rating and cash flow as similar entities in Germany or Schwitzerland.

The reason I call him bad boy banker, is the he has been the most vocal of the bankers against the demand banks must raise their reserves to the levels demanded by the Troika.  From him came the by now infamous question.  It goes something like this (from my memory)  "How can 5th or 7th level rank bureaucrats (of the Troika) be deciding issues of this kind of importance?"

His argumentation is that the money applied for further capital in the banks is less money available for financing companies and society in general.  Also he argues, that banks forced to augment the capital by next year may have to borrow from the state's fund created for this reason.  The state gets the money from the Troika - a by now infamous fund of 12 billion euros.  He knows the state will demand influence (stocks?!) from the banks they lend money.  And as he claims - this is a kind of nationalization.

His most weighty argument in my opinion is this:  "Let the bankers take care of banking."

He has a point.  The politicians obviously do not understand banking or much of anything.  They should stay out of the private sector.

On the other hand this whole crisis has the financial sector as one of the culprits.  But it must also be stated that the Portuguese banks have been some of the most responsible of all Europe.

Until now, BPI, Mr. Ulrich's bank, has been awarded by Fitch by receiving a junk rating together with the Portuguese state.

Perhaps the public sector not being able to borrow money in the future is positive.  Then at least they can waste less and perhaps become responsible.  Spending less than your income would be a nice rule for the next 100 years...

The public sector can foresee some horrific short term problems.  If I were I bank I would not lend a cent to any public entity.  Not even the Bank of Portugal.  Not even if they handed in the gold reserves as a collateral.  Because no matter what - you can only be sure of one thing:  The public sector is untrustworthy.

Tuesday, November 29, 2011

Empty barrels make more noise

A number of socialists, foremost among them ex-president Mr. Mario Soares , ex-minister of finance Mr. Freitas do Amaral and the entire opposition are rambling against the "dictatorship of Merkozy".  Merkozy being Mrs. Merkel of Germany and Mr. Sarkozy of France.  The dictatorship being them negotiating alone and making demands mostly on the PIIGS and other European countries.

The economy of France is in fact not very healthy, but it still has a triple AAA rating and the German economy is so far the healthier.

They are are the only two big sustainable economies left in the European Monetary Union.  I do to a degree understand the preoccupation of many concerning the apparent lack of democracy in the current process.  But:
  1. Who is paying for the PIIGS?
  2. Who will save Europe?  The PIIGS?
  3. Who has blatantly - even criminally mismanaged their economies?
  4. In Northern Europe mismanagement and corruption has consequences.  Is it that hard to understand that Northern Europe, calvinistic or not, want to see the responsible punished?  The reason is to make sure it does not happen again. With the persons and causes identified it is less likely.
  5. When you have mismanaged economically it is quite normal to loose freedoms and maneuverability.  The creditors will always impose rules to insure their capital.
  6. Northern Europe is by definition more proactive than reactive and plan long term in stead of short term.  The PIIGS have done the opposite.
It is of course not pleasant to have been called out in the open and shown that years of work has been wasted. It has been wasted because the quality of work has sub-par and even miserable.  Looking back in time the socialists share the main burden as their governance is more recent.  But the social democrats also have a large share the guilt.

The rot has to come out of the political system and the rot has to come out of the public system. 

Portugal should be happy to have the rich uncles in Europe trying to save it (and themselves and the European Union).   If the socialists here in Portugal had any results they could point at, and say "We know what we did.  See how fine it is."  Then they could join the discussion of the adults.  As it is - they deserve to be left out.

Even though I personally am no great fan of German bureaucracy and German mentality as a whole - I can see some of the qualities.  Portugal needs more discipline, more accountability, more planning, more focus etc.  In fact, Portugal should consider replacing the top 2000 public function managers with Germans.  Give them power to fire and change.  In five years there would be results. We would have less liberty in Portugal, but at least we might not be broke.

And as the socialists now have discovered.  When one is broke, one does not have much liberty anyways.  

Going broke, the odds are in, take two


The financial markets gives us again the probabilities on countries defaulting.  The top 10 current candidates are (the numbers from three weeks ago in parenthesis):
  1. Greece
    92.93 (1: 86.58%)
  2. Portugal
    60.50% (2: 58.79%)
  3. Argentina
    54.47% (6: 46.48%)
  4. Pakistan
    54.38% (4: 48.55%)
  5. Venezuela
    53.12% (3: 50.46%)
  6. Ukraine
    46.95% (7: 41.00%)
  7. Ireland
    46.79% (5: 46.79%)
  8. Italy
    37.63% (8: 38.82%)
  9. Hungary
    35.99% (9: 31.06%)
  10. Spain
    33.64% (10: 29.16%)
The PIIGS are all in the top 10.  Otherwise it would be disappointing.   To people who love to be at the top of lists.  The presence on this one is no reason for pride.  The company neither.