Hedge Fund Guru Says Greece Already Back to the Drachma

ATHENS – While many Greeks fear that if anti-austerity parties win the June 17 elections Greece could be forced out of the Eurozone, noted hedge fund manager Jason Manolopoulous, who wrote a well-received book on the crisis, said the effect of deep austerity measures demanded by international lenders in return for $325 billion in two bailouts has already returned Greece to what the value of its ancient drachma would be if it is reintroduced.
In an interview with Bloomberg news agency, Manolopoulos, who wrote Greece’s Odious Debt, said that apocalyptic-like warnings from pro-austerity parties, the New Democracy Conservatives and PASOK Socialists, who teamed up to impose pay cuts, tax hikes and slashed pensions on workers, the elderly and the poor while allowing the country’s politicians and rich elite to skate free, has crushed the standard-of-living.
New Democracy leader Antonis Samaras, whose party has hit new lows and is locked in a neck-to-neck duel with anti-austerity champion Alexis Tsipras, leader of the Coalition of the Radical Left (SYRIZA) has said his rival wants to force Greece to give up the euro and said that if the country is forced out of the Eurozone that incomes, bank deposits and property would lose at least half their value within days, food prices would soar and shortages of essentials such as medicine and fuel would cripple the country. But Manolopoulos said Greece is already at the door of disaster because of the policies instituted by New Democracy and PASOK, who want a mandate to return.
“Greece is already going back to the drachma, partially,” Manolopoulos said, noting that by his estimates for the private sector that “devaluation has happened to some extent. Wages are down approximately 35 percent and taxes are up. So disposable income is down 50 percent at least. Rents are down between 35 and 40 percent.” Manolopoulos, who specializes in emerging markets at Dromeus Capital Group, argued in his book that Greece had no business joining the euro. So what does he mean when he says the drachma is back?
“The private sector is already operating in drachma territory. The government sector is not. If you look at their total spending, it’s still going up. What kind of austerity is it when your wage and pension bill is still going up?” he questioned. And he predicted that it could get worse, even if Greece stays in the Eurozone without, as Tspiras wants, a renegotiation of the Draconian austerity measures that have worsened a deep recession, creating 21.8 percent unemployment and leading the closing of 1,000 businesses a week. “You’re also going to see petrol shortages and electricity stoppages,” he said, and in some parts of Athens this week there have already been brief blackouts as the country’s utilities say they cannot afford to keep providing power.
He put much of the blame at the feet of New Democracy and PASOK, who have taken turns putting hundreds of thousands of needless workers on public payrolls for generations in return for votes, a tactic that New Democracy is trying to use again, warning its members to vote for the party if they want to keep “being fed,” a reference to the jobs they received.
“The card New Democracy and PASOK have been playing for two years is,’Vote for us, or face catastrophe.’ But the Greeks are sick and tired of that card. They’re not buying it,” he said.
“So the unemployed are saying, ‘Why do some people have a much better standard of living and I’m here suffering and going through garbage cans?’ I’m exaggerating, but you understand my point. They’re saying, ‘I might as well vote for something different because my life is already a catastrophe.’
He said if SYRIZA wins and is able to form a government – an unlikely prospect without getting another party to join a coalition – that negotiations with the Troika will intensify. “The next two months will be a cat-and-mouse game with the Troika … the European Union will adopt a stance of, ‘Let’s see if Tsipras really will keep his pre-election pledges,’ which in my view he will not. He’s not a Che Guevara. If he plays too much hardball, the EU will push for another coalition government. If all else fails, they’ll go for a negotiated exit of Greece in the first half of 2013. That’s the base case anyway. Both sides understand that this thing is not working.”
In his book, Manolopoulos said Greece was also being destroyed by a kleptocracy, the rich who run the country and do not pay taxes but force everyone else to pay. He said in the face of protests, strike and riots, and the roundup of 500 alleged tax cheats who owe more than $1 billion – but still haven’t been prosecuted nor paid – that there are signs the atmosphere is changing and that the screws are being turned on the elite – a little.
“Lots of businessmen started being chased for not paying value-added tax. But it became a witch hunt, and people with fewer political connections or the wrong connections or celebrities were chased. Unless you instill the principle of fairness, you cannot create a proper civil society,” he said, adding that the unfairness is making otherwise ethical people become tax cheats because they are tired of the rich and politicians getting away with corruption and tax evasion with impunity and living privileged lives while some Greeks have been reduced to looking through garbage cans for food.
Is there an answer? He’s not sure. “One problem with Greece is that we have acquired some bad habits. One is not taking responsibility for our actions and blaming other people,” he said, and the finger-pointing and blame-game of the election period showed that has not changed.