euro crisis

Brits being led to the slaughter in Greece?

August 20, 2013 by Jon

Real estate or building land for sale

You’ve got to feel sorry for the Brits don’t you?

The economy’s in the doldrums, it rains 350 days a year, and the cultural culinary high-water mark is a shepherd’s pie. Meat AND mashed-potato… IN A PIE!

Genius.

But I feel most sorry for the poor old mum and dad British investors. Ignorant, naïve and cashed-up. Everything a scammer could hope for.

And now a text-book guide to everything that can go wrong in off-shore property investing.

You’d think they’d learn. There’s been 20 years of investing horror stories, across the Mediterranean, but they keep coming back for more.

And right now, here in Greece, there are a whole bunch of specialist agencies lining up to market bargain basement Greek property directly to the Brits. Some of them are probably ok. Some of them are probably shamelessly criminal.

One of those organisations is the Greek government itself. Apparently you can now rent out the treasures of ancient Greece – places like the acropolis – for fashion shoots or music videos… for a modest fee.

Maybe if we ever go broke we could do something at the Sydney Opera House, like put on a concert. Oh wait…

But there are shysters out there playing off the British dream of a cute little holiday villa in the Mediterranean. And who’s going to help them do anything about it. MI5?

I’ve been looking around at property since I’ve been here (I can’t help myself. Some people like looking in Galleries, I like looking in real estate windows…) And there are some bargains here to be sure!

I’ve seen places, quality places, going for discounts of 50-70 percent. Premium inner city houses, stunning water-front villas. There are some incredible bargains on offer.

Because the debt crisis has had a huge impact on the Greek property market. And the truth be told, a down turn in property was underway well before the debt crisis hit. Actually it was one of the key causes.

But now property prices nationally are 30 percent lower than they were three years ago.

And in the 5 years leading up to the GFC, an average of 150,000 properties changed hands every year. Now, Greece is lucky to post 10-20,000. Volumes are down an incredible 90 percent!

A 30 percent fall in prices, a 90 percent fall in volumes? That’s a property market that’s been decimated. But it’s also a property market that’s offering up some incredible bargains.

And new taxes on property are pushing even more sellers on to the market. If it isn’t a buyers market, I don’t know what is.

And it’s a market that’s attracting buyers from all over Europe, not just the UK. Snare yourself a piece of paradise at bargain basement prices!

But I wonder if the British mums and dads really know what they’re doing – if they really understand the risks.

It highlights some issues that everyone thinking about offshore property investment should be aware of.

First of all, the Greek property market is not particularly sophisticated – definitely not relative to Australia. There’s still no one website to look at all properties available for example.

So buyers are relying on buyer’s agents to source their properties. But how much can you trust your buyer’s agents? Often, they just work on commission, so unless they think you’re going to be a repeat customer, they don’t really care what piece of crap they flog you.

You think the Brits would have learnt this lesson in Spain. A lot of folks bought there, completely sight unseen! And then it turned out that quaint little villa with water-views was actually a hovel with a garbage tip aspect. And there was nothing they could do about it.

The second issue is the difficulty of navigating a foreign legal minefield. Greece doesn’t have a reputation for being light on red tape. And there’s still a lot of uncertainty around the legality of foreign title.

Again, you’d think their experience in Turkey would have been instructive. There were a lot of cases there of transactions that lacked the proper documentation, which meant that down the track they were null and void. There were also cases of Brits rocking up to find that the title had actually been put into the name of the buyer’s agent’s cousin.

And how many do you think had the pockets or the wits to try and drag someone through the Turkish legal system? You’re a long way from home.

The other thing I wonder is how many of them are hedging, or even really understand the currency risk involved…

There’s always the Pound / Euro risk. It’s not really clear which way that might go. There’s a lot of factors to consider.

But what about the risk that Greece exits the Euro? That still remains a possibility. Those Brits could find themselves with a euro-based mortgage against an asset denominated in next-to-worthless drachmas… scary.

And then there’s sovereign risk. Foreign property owners (with no vote!) would be tasty targets for tax hikes to try and fill the budget black-holes.

It’s a minefield.

Now I’m not saying Greece is a no-go zone. I’ve been keeping an eye out myself. There are some incredible bargains. And if you could afford it, and you bought well, a piece of paradise is a piece of paradise, no matter what happens to the economy.

But you really need to know what you’re doing if you’re going to invest off-shore. Or at the very least, you really need to partner with someone who does, and who is someone you can trust!

Get that in place, and Greece could be an incredible opportunity.

But if you don’t you’re just a lamb to the slaughter. Makes me wonder how many unsophisticated Brits are being led up yet another Mediterranean garden path…

The Real Greek Crisis

August 15, 2013 by Jon

Socrates

Someone was telling me that a University here in Greece had a new policy on security guards. To save money, they’re firing all the security guards, and only keeping on those with masters degrees of PhDs.

Now, I don’t know if security is a more complex business here in Greece. But I thought it was more of your Cert IV kinda skill set – not a university degree.

And you can’t imagine someone’s invested in a PhD with the hope of cracking the security guard market. Something’s going wrong here.

And I think it goes to the heart of the crisis Greece is in – when you have an educated people, unable to find meaningful work.

And I’m not joking or trying to be punny when I say it’s a tragedy.

Take Olympia. She’s been our waitress at our favourite little café here in Mykonos. She’s mid-20s, bright and articulate, speaks perfect English, and has a masters degree in Social Work…

… and waits tables for lazy tourists like me.

If you think that’s a waste of potential, it is. It’s a waste of her talents and it’s a waste of the contribution she could have made to her country.

I’m not bagging working at a café mind you. For some people it’s great. For some it ties in with their lifestyle. Some have a passion for it.

But Olympia’s got no passion for her job. If she could be working in her field, she’d toss in her apron at the drop of the hat. No, it’s the economy that holds her here.

The youth (under 25) unemployment statistics in Greece are horrifying. At last count, 64.2 percent of people of working age under 25 didn’t have a job.

That means only 1 in 3 are working. It’s a depressing stat if you’re one of the two hoping to be one of the one. The numbers are against you.

It’s a tragedy in Greece, but it’s ugly across Europe.

Euro Unemployment

This chart shows that youth unemployment is up to 56 percent in Spain, and up over 40 percent in Italy.

Only Germany have anything looking like a full employment rate for it’s youth – which again shows just how different the euro zone economies actually are from each other – and how hard it is to keep the wriggly bag of roosters that makes up the euro together.

If this isn’t a crisis, I don’t know what is. I believe the children are the future (because that’s logically true by definition). But if the future is being lumped with an erosion of productive skills as well as massive set-backs to their self-esteem, what will the future look like?

Not pretty.

Normally, it’s the unskilled that have the hardest time finding work in a struggling economy. Again, this is almost true by definition. If you don’t have particular marketable skills, it makes you less marketable.

But it’s gone further than that in Greece and continental Europe. A full 30 percent of 20-35 year old Greeks are university educated. In Spain, it’s 40 percent. It’s the most educated generation in history, and it’s all going to waste.

Think of all that knowledge and energy embodied in those young minds – all that investment – just going to waste. Spectacular fruit left to rot on the tree.

I ask Olympia if she has any regrets about studying and studying so much.

“At first, I was happy with the choice. I enjoyed the topic, and I wanted to work in the field. Now I wonder if I should have studied something that could get me a job overseas. Like finance and commerce. Maybe medicine. If I had my time again…”

The irony is that Greek needs social workers now, perhaps more than ever. Six years into recession, on a lot of measures the crisis in Greece is topping the Great Depression in the US, and is lasting longer. With more and more people out of work, Greece is at risk of running into a humanitarian crisis as well.

“Sure, there’s lot of social work to do,” says Olympia. “But who’s going to pay for it? All the municipal governments are broke. There’s no money.”

And so how did Olympia, originally from Athens, end up waiting tables in Mykonos?

English.

Here, being able to speak English gets you a lot further than any experience you have in hospitality. Olympia spent some time in the UK when she was younger, and had a knack for languages.

Today, it’s her saving grace. “If I couldn’t speak English, I don’t know what I’d be doing. I’d been looking for work for over a year in Athens, and couldn’t find anything. So I came here. But I don’t know what I’ll do when the season ends. I don’t want to think about it.”

Maybe she’ll go back to Athens and join the rest of her disaffected generation on the streets of Athens. She doesn’t look like the rock-throwing kind, but desperate times make for desperate people.

Or maybe she’ll just throw it all in and try her luck overseas. The numbers on the leakage of skilled and educated professionals out of Greece are staggering. A recent study by the University of Thessaloniki found that more than 120,000 professionals, including doctors, engineers and scientists, have left Greece since the start of the crisis in 2010.

That’s a real Brain Drain. And just when Greece could really use that talent. But who can blame them?

For some of the young here, unemployment is all they’ve known. And when you feel you can’t make a valued contribution to your society, it eats away at you. It scars you.

For their sake, and for the sake of Greece’s future, they need to get on top of this problem fast.

When your carers forget to care, and learn how to throw stones instead, you’ve got a real problem on your hands.

A First-Hand Look at the Euro Crisis

August 13, 2013 by Jon

Mykonos

Determined to go whatever lengths necessary to discover the truth for my faithful readers, I’ve come to get a first hand look at the Euro Crisis.

Let me tell you, it’s ugly. The beaches are crowded, the harbour’s so full of 100 million dollar boats you can practically walk across it, and the clubs and the bars are so pumping, that last night I had to wait a full 45 minutes for a Mai Tai.

Ok, so perhaps coming to the Greek island of Mykonos – one of the most popular tourist destinations in Europe – wasn’t the best way to get a representative sample.

Because there’s certainly no sign of the Euro Crisis here. The place is pumping. The locals I talk to say it’s the best season they’ve seen in years. They’re even using the word ‘optomistic’!

So what’s the deal? Have our media misled us again?

You’d have to think there’s a fair chance of that. But I think the mayhem in Mykonos hides two separate phenomena.

The first is that Mykonos has always been a favourite cubby house for the rich and famous. Jacqui Onassis Kennedy made put it on the radar back in the 60s, and since then it’s been a favourite summer stop-over for every billionaire with a yacht.

Down in “Little Venice”, where the white-washed houses sit literally on the sea, with nary a care in the world for global warming and rising sea levels, apparently Madonna has a little hide away for when the pressures of being rich and awesome all the time get too much. (Tour guides will take you to the street, but they can’t tell you which house is hers…)

And last month, so my cabbie told me, the Kardashians were here, film crew in tow, just doing what they do…

…which is sod all as far as I can tell.

But this is the first rule of economics. When the crisis hits, it’s the poor who go to the wall first. The rich have their riches to protect them.

And in an economic collapse, when prices and wages are falling like they are in Greece, the wealthy actually find their wealth stretches a lot further than it used to. “Another Mai Tai, James? They’re practically giving them away.”

And if you own assets, especially property, when everything else is going to ruin – when everything is unwinding in a reverse economic miracle – then you’ve got something you can bank on. Something real.

So our small statistical sample of life in Mykonos only tells us that the rot hasn’t reached as far as the top end of Europe-town.

The other story playing out in Mykonos is the pulling power of deflating prices in post (mid?) crisis Greece. A Greek holiday doesn’t cost as many euros as it used to, and savvy Germans and French, and a growing mix of affluent Hungarians and eastern Europeans are turning it to their advantage.

Apparently foreign tourist arrivals were up 24 percent in the year to May, and as the locals keep telling me, it’s looking like one of the best summers on record.

Tourist revenue is already up a massive 38.5 percent over the year. But then you’ve got to remember that a year ago, the streets were filled with protests and Greek society looked like it was on the brink of collapse. Hardly a strong pull for a retired German couple.

“I went to Greece and all I got was this lousy t-shirt and a rubber-bullet wound.”

But with GDP still falling (output has now fallen a devastating 22 percent since 2008) prices are heading south too. In large part this is driven by falling wages. The waitress who brought me my breakfast Mai Tai said that they had taken a 50%+ pay cut at that particular café.

With unemployment up at a staggering 27 percent nationally, with youth unemployment up at an inconceivable 65 percent, a job is a precious thing to have – even on half pay.

And so with falling prices, a Greek holiday is not the extravagant luxury it used to be, and cashed up Europeans are looking to take advantage.

You might hope that this tourism boom might lead Greece out of its crisis. That soaring spending might boost the taxation revenue take, and help bring down Greece’s crippling public debt.

But Greece’s problems run deeper than that.

A recent survey here on Mykonos found that 56 percent of cafes, restaurants and hoteliers were committing some kind of tax fraud.

On some islands it was up as high as 85 percent!

Scandolous! In Australia, that kind of behaviour, in the middle of a debt crisis, would end up on Today Tonight so we could all have an good, entertaining judge. But in Greece, no one thinks much of it. It’s just what you do.

And it highlights just how difficult the Greek problem is. No one feels like they caused the crisis – and in a way that’s true. Greece’s problems emerged from generations of poor public policy and governance. And so no one feels that they should bear the brunt of the burden.

Which, again, you can understand. But everyone with a Greek passport finds themselves in a sinking ship. And so the situation requires a new sense of collective and national identity – a willingness to take the problem on together.

But when you don’t have that kind of national identity and responsibility, it’s not something you can easily engineer.

And so the buck-passing, tax-dodging, and do-what-you-can-to-get-by continues. Of course it does. Can you expect little Maria in her souvenir stall in Mykonos to go out of her way to pay full tax, when there are sports-stars and entertainers who haven’t paid tax in years?

It’s a very curly problem. Almost intractable.

But Greek history is full of challenge and tragedy, and they’re still here. I think they’ve got themselves out of worse jams than this ones.

And so for my part, I’ll be doing what I can, in my own small way, to give the economy a push.

“I think I’ll have another Mai Tai please, Olympia.”

Lessons from the European way…

August 8, 2013 by Jon

Protests in Turkey One of the things that always strikes me when I travel, is how uptight we are in Australia about some things.

We like to think of ourselves a country of laid-back, easy-going, she'll-be-right-mate shelias and blokes, but I wonder how true that actually is.

Maybe it's true if your only point of reference is the Brits and Americans. But the anglo-sphere is nervous, twitchy

… and regulated.

It really becomes obvious when you're travelling around the Mediterranean, and continental Europe.

If you want to see laid back, try buy anything in Spain around siesta time!

And right now, I'm writing this blog from the famous Cicek Pasaj (The Flower Passage) in Istanbul. It used to be a flower market around the turn of the century, but now it's a bunch of tasteful cafes and restaurants.

Outside is the bustling Istikal Avenue. And I don't mean bustling in a Lygon street kinda way. I mean bustling in an Istanbul-city-of 20-million people kinda way.

Some days in summer they can get a million people through in a weekend! The paved street, some 30 metres wide, is wall to wall with the young and old, turks and tourists.

And right through the middle of it, is a great big tram!

I'm amazed there aren't more accidents. There's no guard rails. No warning signs. No flashing lights, no high vis vests. Just a cute little bell the driver constantly rings to say, “Hey old lady, you're about to be squashed!”

And young boys run along behind, jump up and swing from the side, enjoying a free ride and the warm breeze in their hair.

And the driver doesn't get angry. He doesn't stop the whole show. He doesn't call the police.

Rather than regulate, the Turks seem like they'd rather let people take responsibility for themselves. In this case, it seems to be working.

And I think it makes for a happier, more alive people. Sure, you've got to take a bit of extra responsibility for yourself, but you don't have the state breathing down your neck all the time, having a say about everything you do.

Not that Turkey is a citizen's paradise, without a care in the world. Just down from here, at the end of Istikal Avenue, is Taksim Square.

Through June and July, Taksim square was filled with hundreds of thousands of protestors. It started with a small protest about turning some of the last remaining green space in the city (trust me, there isn't much), into another shopping mall.

There must be 2,000 shops along the 2 miles of Istikal Avenue. Seems like it probably wasn't a great planning decision.

However when the government used the heavy hand of the police to break up the protest, and when the Prime Minister hurled a few insults at the rabble (what was the PM doing getting involved in a council planning process?) the small mob ballooned into a civil uprising.

There's no tear gas here today. The worst thing I've got to worry about are the hawkers and pick-pockets

…or getting hit by tram.

No, apparently today the tear gas and the protestors are down the coast a little way at Silivri.

In a special built (and heavily defended) court house, verdicts were handed down against the people allegedly behind a James Bond evil genius style of plot to overthrow the government.

Some 275 people – including former generals, parliamentarians and journalists – were charged with forming a clandestine nationalist “terrorist” organisation called Ergenekon. Ergenekon's alleged goal was to feed social unrest through a number of high-profile assassinations and terrorists act, and ultimately bring down the government

… and defeat the Autobots once and for all.

It's a turning point in Turkish politics. But the people I've spoken to are sceptical, and divided.

On one hand, military coups are relatively common in the history of the modern Turkish state. For a long time, the military has seen itself as the ultimate defender of a secular and democratic Turkey – a precious gift handed down to them from modern Turkey's founding father, and military commander, Mustafa Kemal Ataturk.

And so some see the trials as a coming-of-age for Turkey, and the end of military domination of political life.

However, as the Taksim uprising showed, not everyone is that trustful of the government either.

There's a perception that the levers of politics are actually being pulled behind the scenes by what people call ‘the deep state'. In the mid 90s, a senior politician, a wanted criminal and a police chief ended up in car crash together, and some of the connections between business politics and the criminal underworld make people nervous.

And people are also nervous about a perception that the government is becoming more authoritarian. Add “Islamist-leaning” to that picture, and you have a dangerous recipe for a repressive religious state.

Nearby Tehran in Iran was once known as the Paris of the east before the revolution crushed those ‘infidel' freedoms. It's an example that weighs heavily on the minds of Turkey's freedom loving youth.

And that's just scratching the surface. This is just the picture I've pieced together from talking to a hotelier, a cafe-owner, a tour-guide and some guy on the train.

But it makes what goes on in Australian politics seem like a boring bed-time read.

And you know, maybe it's because political life in Australia is so vanilla, that the government feels a need to butt in on everything you do – just to make you feel like they're relevant.

But from here, it's over to Greece. And boy, if you want to talk about political dramas, Greece has a full pantheon full.

I'll drop you a line from there.