Sunday, 26 July 2015

Worlds apart

The girl

When I joined the New Factory she was already there. I passed her by each day several times while walking past the reception desk on our floor. She looked twenty and I thought she was a weekend-mode student working as an assistant to earn money for her university tuition fee.

Normally the occupation of a receptionist is treated as temporary. Usually students take up such mundane jobs to earn a livelihood, sometimes to fill their CVs and then they move on to more ambitious positions. This is not the case here.

She is quite sociable. Easily hits it off with everyone, yet her come-and-go attitude does not help her build true friendships. With time it turns out she is 45 days younger than me, yet since I was born in December and she in January the next year, she finished her studies a year later (in 2012). As a child she was an actress, in her career she had some impressive roles in films and TV series. If you tap her name into google, you will find her more-or-less up-to-date photos and learn in 2012 she graduated from the Faculty of Law and Administration of the Warsaw University (full-time studies). Tens of fans are wonder what she’s doing.

The job with a New Factory is the first one she has held on to for more than one year and the first one in which she has a regular job contract, involving all rights, privileges and pension contributions, rather than a junk contract. Actually she only cares about the type of contract for only one reason: with a regular labour-code-governed contract she is entitled to 20 days of paid holidays a year. Until now when she felt like going somewhere, she’d quit her job and upon return looked out for a new one. None of her jobs was anyhow related to what she had studied, comparing to what her studies should have prepared her for, all her previous jobs (and the current one) seemed actually well below her competencies.

She likes the job with the New Factory. It involves meeting lots of people and chatting to them, keeping them company during lunches, making a morning coffee to a management board member. She appreciates the fact her job involves no strain and no stress. Office workers around her have hectic days, face pressures, get irate easily. She doesn’t understand their quandaries and is glad her job is so carefree, despite the fact she earns just a fraction of what her stressed-out workmates get paid. Her salary is just enough to meet her basic needs: cosmetics, clothes, weekend clubbing, holidays; a very decent pocket money. Her parents with who she lives seem to put up with her lifestyle and her grandpa whose car she uses (and once a month she leaves the vehicle, grandpa fills it up and then she picks it up with full tank of petrol) also seems to be quite tolerant.

While we lunched last week, she told me to look at her and asked what I thought she should be doing in life. After turning down several ideas she had come up with, I suggested she should search for a job in which she could make use of the knowledge accumulated during five years of law studies. She nodded her head, pulled a face, nearly burst into tears and said it would need to involve some strain.

She backs PO. She believes PiS is backward and would bring nothing good for Poland. She tells Mrs Szydło should return to the sack (Szydło wróć do worka, a pun stemming from a Polish idiom, when reversed meaning bad things should come out of light).

The neighbours

They have lived in NI since ever, their parents as well. They were on this land years before building houses on this suburb became all-the-rage in the 1990s. They sold little of the land they had had, since the family was big and a sizeable plot was needed to put up houses for all the children.

The neighbour is the local, his wife comes from eastern Poland. They met the time he was breeding foxes in late 1970s. They got married and prospered well until 1989 when exports of fox furs to the former Soviet Union came to a halt and consequently their business went bust. In the new reality they engaged in some trade with the former Soviet Republics, yet as they were shuttling between NI and the borders, four children they had at the time began to be brought up on the street. Then they switched to local trade and opened a stall on the former biggest bazaar of the CEE, where today the National Stadium is. Golden times have gone by and for more than a decade the neighbour and his wife have been jobless. They do not need to. Their properties are large enough to sublet rooms for construction workers (20 PLN per person a day, yet in black economy) and officially let a larger hall for a company (here already a registered business, generating a recurring stream of income of a few thousand per month).

Their older son (32) is a successful graduate of a technical university. While he was approaching graduation, his professors had a high opinion of him and recommended him for a few positions which could give him prospects of brilliant career. Eventually he has not taken up any of those jobs. I have no idea, whether potential employers have rejected his candidacy or whether he turned down all those jobs, because they would have interfered with his academic career, namely the doctoral studies he began eight years ago and in the meantime suspended for a year; his PhD is still pending.

Their younger son (29) according his parents’ ambition was meant to firstly finish studies and then to find a job with a town hall. Unfortunately, so far there was no job offered to him there, while the family’s ambitions are put on hold, the son takes up temporary jobs on construction sites (he indeed is a dab hand).

Two daughters (27 and 25) have finished studies and work as shop assistants in one of clothing retail chains’ shops, most probably also on junk contracts. The youngest daughter (14) keeps learning and watches her parents and older siblings staying at home or dabbing in dead-end job. What are the chances she pursues a career ambitious people want to make?

Despite the fact the family consists of seven people they easily make ends meet. They have a variety of sources of income: rent from their corporate tenant, some cash from construction crews renting rooms, the neighbour’s sickness benefits, the older son’s assistant salary, the younger son’s wages from construction sites, the daughters’ salaries from the retailer. Except for the office rent proceeds, these are most probably peanuts, yet add up to a sum which allows the family to meet their basic meets. Fair enough.

The neighbour and his family hankers after PRL, yet votes for PiS, despite not being totally fond of all points of the party’s agenda. Yet PiS passes muster, it will restore law and order in Poland, take away the wealth from the elites to give it to ordinary people and put behind bars all thieves and cons who currently run the country.

In the descriptions above I did my utmost to include only facts and avoid expressing any opinions on how other people choose to live. Yet there must be a reason why I have decided to post the two stories. Every time I read in a newspaper or in the Internet about my peers as a “lost generation” (stracone pokolenie) I wonder whether it is the system or the people (the ever-lasting question) that should be blamed for the failures of many of the youngsters…

Next weekend I’m off, next post in two weeks.

Sunday, 19 July 2015

Company cars

My job, though my position should be categorised as middle-office rather that front-office, involves more or less frequent meetings with clients and site visits at clients’ premises. Also not all clients have their offices / facilities in major cities which can boast about decent rail links with Warsaw. The less convenient to reach a client’s location is and the more numerous a group of the New Factory’s representatives is, the more reasonable and economical it is to travel by (company) car.

In my position I am not and will never be eligible to have a company car at my own disposal, but I am entitled to drive any company car while taking a business trip. I also don’t have access to corporate mailbox in my company smartphone, hence my front-office colleagues happen to ask to drive if they are busy responding to e-mails or need to be in touch with clients, or simply if the trip is so tiresome that it is wise someone else takes over the steering wheel. For this reasons over the recent weeks I had a chance to compare some vehicles against one another and to my 12-year-old, yet still holding up well, Megane.

So far I have counted five cars I had had the opportunity to try out.

1. Open Corsa D, 1.0 litre. The general impression is that what proves sufficient in city driving does not have to be up to the mark for longer trips and especially in motorway driving. The tiny engine allows the car to reach the speed of 100 kmph in 18 seconds if only the driver seat is occupied. If three of four people are on board (don’t even try squeezing five adults into this vehicle!), it takes a lot of time and revving up the engine to 5-6k to reach the target speed of let’s say 120 kmph at which you don’t feel safe anyway.

2. Volkswagen Passat B7, 1.4 litre, 150 hp. Actually a very decent car, offering respectable combination of dynamics, fuel efficiency and comfort for the driver and passengers. Turbo-charged engine is more than enough to speed up the car perkily and offers decent elasticity (from the passenger seat I observed another person pushing the accelerator pedal to the floor at the speed of 45 kmph and on fifth gear and the car obediently picked up speed without lurching or whining, yet I felt sorry for the engine being a victim of such horrific driving technique). Maybe the only drawback is not a very intuitive dashboard, but there’s no accounting for taste, as the saying goes. A nice car, but why the hell should one fork out some 100,000 PLN to get a brand-new one (currently it’s impossible, since VW has rolled out Passat B8), for a private purchase, a waste of money.

3. Opel Insignia (before 2013 face-lift), 1.6 litre, 182 hp. Since Renault Laguna is hardly ever purchased as fleet car, the notorious title of the queen of the trailers (królowa lawet) has been given over to Opel’s D segment car. Reliability of Opel cars produced over the recent decade has received a lot of bad publicity and opinions I heard from friends, parents’ friends and from Opel’s users from the Employer and the New Factory only confirm it. The one I drove did not break down on the road, but was so neglected that driving required a lot of caution. I drove it in June but the car was still on winter tyres. As it turned out, since the car was due for replacement in July (last Wednesday it indeed change hands, I feel sorry for the hapless new owner), the fleet manager decided it would have cost too much to buy a new set of summer tyres (old ones went astray). Condition of brakes also left a lot to be desired. Actually my key impression is that it’s not difficult to find a car with lower mileage than my Megane’s and much younger than my Megane, whose condition is inferior to my Megane. The new owner probably thought he had chased a bargain by buying a six-year old Insignia with mere 70,000 kilometres on the clock (odometer not rolled back). In fact the car had oil changed only twice and the first user drove mostly short distances and though the engine was not warmed up, her feet pressed the accelerator pedal heavily. I’m glad I won’t have to sit behind the wheel of that car any more, yet on the basis of it I can’t form an unbiased opinion on it.

4. Toyota Corolla, 1.6 litre, 132 hp. This car is used by a guy who drives very well and cares after the car a lot and has taken effort to run it in properly. Compared to turbocharged engines the impression should not be extraordinarily good, yet it is. The well-maintained vehicles runs smoothly, gearbox is precise, engine is nearly silent and dynamics between 2k and 3k revolutions is more than decent and better than in my Megane. Toyota, like many Japanese carmakers, holds back from embracing downsized, turbocharged petrol-fuelled engine and claims it will beat European competitors by offering superior reliability. I can say nothing of it, yet the engine has one drawback – fuel consumption is some 0.5 litre per 100 km higher than in my Megane (8.8 litres per 100 kilometres in trip consisting of 50% city, 50% motorway).

5. Mazda 6, 2.0 litre, 140 hp. Not a part of corporate fleet, yet given for a test drive for some reason by Mazda distributor in Poland. Mazda’s two-litre Skyactiv technology engine, a pride and joy of the carmaker and wonderful alternative to all-the-rage downsized engines, after a 200-kilometre trip turned out to be just a no-frill motor. The car looks well (albeit chunkily) and such limousine could make a good part of remuneration package for a senior manager in a pre-retirement age. When revolutions are low, the car runs smoothly and silently, yet to squeeze dynamics out of it, you need to rev it up above 4k and the engine is then unbearably loud. My impressions from driving can be distorted by the fact the car had tens of drivers before me and has not been run in properly. Key drawbacks I would list are: gear lever whose precision leaves a lot to be desired, low elasticity of the engine (if at the speed of 20 kmph you downshift to second gear, the engine chokes) and high fuel consumption, typical for old-times 2.0 litres engines (nearly 10 litres per 100 kilometres in motorway driving at steady speed of 140 – 150 kmph).

And recently I also took my father’s Megane III 1.4 litre, 130 hp for a longer run. The car is well-maintained, after 4 years of sparing usage has only 23,000 kilometres mileage (including five several-hundred-kilometre trips) and is well run-in and must say is no worse than any of the cars I reviewed above.

So what really matters?
Size? Compact car is more than enough for any purpose, yet for people travelling long distances and on motorway, B-segment cars are not the most recommendable.
Engine? Maybe you have noticed none of the cars had a diesel engine. I also prefer petrol-fuelled ones, especially those turbocharged which offer really decent dynamics and low fuel consumption. Diesels, although consume even less fuel, are more expensive to maintain (more defects possible and repairs are more costly), plus in winter they can be the pain in the arse.

But what really matters the most is how the car is driven and cared for. Most post-fleet cars are used by people who care little because it’s not their own vehicle and it will be replaced after a specified period or mileage. Buying such car, unless you know who and how used it, is a purchase of a pig in a poke. Usually buying a used car due to negative selection (why my Megane’s not for sale?) involves high risk of unpleasant surprises, therefore I keep my car going reliable and in two or three years, I will replace it with a brand-new one.

Sunday, 12 July 2015

It’s the economy, stupid

Thorough economic debate is a phenomenon so seldom witnessed in the public discourse in Poland that any reason seems justified to spark it off. Recently the widespread discussion has been triggered by Mrs Beata Szydło, candidate for the prime minister if PiS wins the autumn parliamentary election, who unfolded key points of her party’s economic agenda. As it often happens ahead of the election, politicians tend to be open-handed in their promises, but this time the generosity might have gone too far, since both politicians and economic pundits have taken the trouble to quantify the promises and check whether the figures hold water…

Politicians of PiS claim their ideas are absolutely feasible and the spending spree they propose will be matched by new sources of budget revenues. Their opponents from the Civic Platform and most experts point out the calculations of PiS are flawed and reckless inclination to throw about money would head Poland towards where Greece is now. Let’s have a look then on how much happiness the Lawful and the Just wish to give Poles if they get hold of power.

1)      Raising tax allowance to PLN 8,000 from current PLN 3,091.
- Truth be told, tax allowance in Poland is one of the lowest in Europe and well below the poverty line, plus it has not been increased along with inflation since 2009. But if are to compare ourselves against other European countries, we also need to take notice of the fact tax rates are higher there than in Poland.
- My proposal is then to simplify the tax system and bring in more effective progression by introducing an even higher tax allowance, let’s say PLN 16,000 and introduce a flat personal income tax rate of 32% (the current highest rate). Thus we would achieve effective tax progression, since the tax rate for an individual would be somewhere between 0% and 32% and increase linearly along with earnings.
- Cost of the proposal estimated by me: 24,400,000 * 18% * (PLN 8,000 – PLN 3,091) = PLN 21,560,328,000
- assumptions: 1) number of personal income tax payers: 24,400,000, 2) marginal tax rate: 18%,
- shortcomings of my assumptions: 1) multiplier effects from higher tax income and GDP growth on account of higher consumption are not taken into account, 2) other tax credits, e.g. child allowance also have been neglected.

2) Giving a child benefit for every second and next child of PLN 500 per month.
- My only question here is how to define the second and next children. Calculations are impeded by unclear definition of a child (until what age your offspring is a child and whether this depends on whether they learn or earn?, on the basis of what criteria the children would be counted – what if a woman has three children with three different men, or the other way round, i.e. a man has children with three different women?)
- I find the very concept ludicrous and see nothing else in it but pure giving away money from the public purse rather than encouraging people to have children.
- Cost of the proposal estimated by me: 10,879,729 * 40% * PLN 500 * 12 months = PLN 26,111,349,600
- assumptions: 1) a child is person aged less than 18 (if students are taken into account the cost would shoot up well above 30 billion PLN), 2) population of Poland is 38,580,600, 28.2% of which are not adults, 3) 40% of children would be eligible for the benefit – this is only an educated guess,
- shortcomings of my assumptions: 1) it is not clear, whether parents of students would also be entitled to benefits, 2) it is not clear when a child is “second and next”, 3) it is very hard to determine how many children would be “co-financed” with this benefit, 4) potential taxation of the benefit (or lack of it, of effects of tax deductions associated with it) is unknown, 5) multiplier effects have been neglected as well.

According to my estimations, only the two proposals would cost the budget around 48 billion  PLN yearly (vs. 29 billion PLN yearly according to calculations by PiS). If you look at the number of assumptions I have made and number of shortcomings I have listed, no wonder figures given by experts vary so much. To be fair, unless you reveal your (simplifying) assumptions and maths behind your calculations, you cannot hope to sound credible to me in the public discourse.

I do not dare to come up with a ballpark figure for the shortfall caused by reversing the pension age increase. The deficit in the government budget (which subsidises the social security system) by 2020 would probably not be substantial, yet thereafter (bear in mind in 2019 Poles either kick PiS out of the politics or it will be as entrenched as Mr Orban’s party in Hungary) outcomes of tampering with the pension age would be disastrous (also because tap with EU money will run dry in 2020).

On the other side of the budget, authors of PiS’ economic agenda point at three core funding sources for the merry expenditure programme.

1) The bank tax, to be levied on banks’ assets.
- My comment (disclaimer: I am a banking sector employee and my financial well-being might be jeopardised by the bank tax): such tax should penalise banks and other financial institutions for being involved in operations that do not contribute to well-being of a society, predominantly those which stray from the concept of traditional commercial banking (taking deposits and granting loans). I also wonder what the tax base would be: would those be total assets (including cash, treasury bonds, PPE, etc.), only financial assets, or maybe the tax base would be limited to the loan portfolio and whether there would be any risk weights on assets. Since the banking sector does not enjoy good publicity in Poland (banks have given ample reasons for being held in disregard), the idea of cutting back their mammoth profits with yet another tax should take fancy of many voters. On the other hands, most banks in Poland are controlled by foreign financial groups which have come to terms with the fact banking in Poland is no longer such great gold mine as it used to be. They will pass on the tax onto customers and since they will in unison have to bear the new burden, in unison they will raise fees and commissions for their customers, so in this very particular situation the arguments of PiS that free market and forces of competition will not let banks’ clients feel the impact of the new tax, are a daydream.
- Revenues from the proposal estimated by me: 1,500,000,000,000 * 0.39% = 5,850,000,000 PLN
- Assumptions: 1) total assets of the Polish banking sector: 1.5 trillion PLN (total financial sector’s assets in 2013 of PLN 2.1 trillion * 68% share of banks * 1.05 growth dynamics), 2) tax rate of 0.39% yearly, most often mentioned.
- shortcomings of my assumptions: 1) tax base and scope of entities subject to taxation have not been defined, 2) lower tax rates have been already mentioned by politicians of PiS since they slowly being to realise the bank tax proposal, compounded with relief for CHF-mortgage borrowers, could knock down some of the banks and necessitate a state-funded bail-out for depositors if their foreign owners decide to wash their hands clean of the Polish businesses.

2) Supermarket tax, being a turnover tax levied on retail chains with yearly sales above PLN 1 billion.
- My comments: the big chains of hyper-, supermarkets and discount shops, omnipresent in Poland and by dint of their economies of scale, offering less wealthy Poles an opportunity to buy stuff cheaply, also have become a scapegoat. A frequent argument in the debate on those shops is that taxes they pay are miniscule in relation to their revenues. Indeed, this is true, since most of those chains operate on very thin margins, yet their earnings are high due to scale of activity. For some of those chains, net margin is 1%, i.e. net profit of a company makes up 1% of total sales. Shareholders of such retail chains will have a choice either to increase prices of goods and pass on the tax to clients (more probable) or to wind down their businesses (impracticable). The former option is even more likely to materialise for the same reason as with banks – all big chains will be affected in the same way and therefore will react in the same way.
- Revenues from the proposal estimated by me: 150,000,000,000 * 1% = 1,500,000,000
- Shortcomings of my assumptions: 1) publicly available data I cite are outdated (and thus biased downward) and may not cover all stores, since many companies decide not to disclose how much they earn (also resulting in downward bias), 2) the tax rate is unknown, but might vary from 0.5% to 2.0% according to some proposals.

3) The third and the broadest proposal is to increase the efficiency of tax collection system, curb tax evasion, crack down on illegitimate VAT reclaims. All the ideas are commendable and I wish well anyone who would take up doing so, yet I am sceptical about the effect and also would not dare to estimate the resultant additional budget revenues, nevertheless the figure of 50 billion PLN seems over-optimistic.

Interestingly, none of the critics of the PiS-designed giving-away scheme has noticed a crucial causation, namely the more money citizens have in their pockets, the higher the money supply. Growth in money supply, if not accompanied by proportionate growth in output, results in increased inflation. This in turn, assuming the central bank is independent, leads to higher interest rates with all consequences…

And interestingly, hypocrites from PiS, who allegedly care so much about the poorest, do little to redistribute wealth from those well-off. The proposal to reinstate the third tax bracket has been declined, probably to appease Mr Gowin (who has finally fallen into place and does not bring discredit on PO), yet this decision does not matter much, since those who potentially could be affected by signing the third tax bracket into law do not pay the personal income tax at all. 32% marginal tax rate affects in Poland the upper-middle class, around 2% of all personal income tax payers, those are usually senior managers at corporations, whose positions are too low to make them eligible for a managerial contract. Most of the people who really earn a lot (above 300,000 PLN before tax per year) are not employed under regular job contracts, but are sole proprietors who perform a contract for their employer. Outcomes for the state budget – marginal tax rate is 19% rather than 32%, social security contributions they pay are miniscule (in return they will receive a tiny pension benefit, but with such earnings would who cares?), same as health service system contributions. Taxes might be low for actual entrepreneurs, but the practice of paying corporate income taxes by corporate executives who are not entrepreneurs and do not risk their own money to develop their business ought to be finally put to an end!

My grandfather’s neighbour gives him outdated issues of Fakt, the leading Polish tabloid. Yesterday, while at my grandpa’s I grabbed one such paper and found this article… Maybe what Mr Sienkiewicz (cynically) says is the key to the door:

Przeciętny Kowalski patrzy na te autostrady, estakady, na ten dworzec, na cokolwiek innego… Jego podstawowe pytanie jest: a co ja z tego kurwa mam?! Gdzie jest ten pieniądz u mnie w portfelu? A nie że ma wypierdolonego orlika przed oknami, bo on ma w dupie tego orlika, podobnie ma tę autostradę w dupie! Bo dla niego jest pytanie o efekt rozbudzonych aspiracji, jak się rozbudziło aspiracje, to są pewne konsekwencje. Najpierw są takie aspiracje, aby państwo było bardziej umyte i bardziej przypominało to, co ma na Zachodzie albo co sobie wyobraża. A potem się aspiracje przesuwają do własnego portfela. I jest pytanie, co ja z tego mam.

Yes, Poland has remarkably moved ahead in terms of infrastructure. I travel a lot around the country these days and appreciate the possibility to get to Gdansk or Krakow by train within 3 hours, enjoy driving new motorways and expressways, but the progress has little impact on the standard of living of an average Pole. I follow the “Decrepit Poland” page on facebook. Authors of the page publish several photos a day to give lie to the propaganda story Poland has been ruined and needs to be rebuilt from scratch. Photos show progress, but are selective; round the corner beautiful market square gives way to dilapidated houses and inhabitants of provincial towns now care more how much they can buy in a shop for money they earn than whether the centre of the town has been refurbished.

Recent travels make me also wonder whether I also live in an ivory tower, how much I have in common with ordinary people living in Zgierz where I was on Friday. How much do I have in common with inhabitants of Wałbrzych where I’m heading tomorrow. Origins of PiS recent surge in support and PO’s waning popularity is the former’s ability to at least pretend they are close to ordinary people.

Sunday, 5 July 2015

Greece on decline

Today citizens of Greece are about to decide in a referendum whether to agree on conditions of yet another bail-out package and fend off looming full-blown bankruptcy or reject austerity measures that on one hand keep Greeks on their knees, but on the other prevent the country from falling off the edge of chaos. In the previous sentence I have mentioned a full-blown bankruptcy, by which I mean the government would be unable of meeting its basic obligations towards the citizens. If effecting payments of pension benefits and other allowances ceases and the whole public sector would grinds to a halt, Greece will plunge into total chaos. In fact, since a few days Greece is formally insolvent, but in economic terms it has been bankrupt for more than five years, though much work has been put in to cover it up.

Looking back in time, the Greek crisis has been in overdrive since April 2010. To make a good comparison, recall how much time has elapsed since the Smolensk plane crash. For such long period of time Greece functions only thanks to drip of money from creditors.

Two questions which ought to naturally come to mind are:
1) why has the ordeal lasted for half a decade and no one bothered to put Greece out of misery, while creditors of Greece patiently pump in more and more money to the effectively bankrupt country?
2) why over five years, despite generous aid from creditors, Greece has not managed to turn itself around?

You could mention political backdrop of the whole situation, willingness of key actors of the European politics to keep the eurozone together, since letting one country go would give others a free rein to walk away from the common currency. You could mention other reasons, such as fear of knock-on effect, etc., yet the story which deserves to be brought to your attention is about how the Greek debt changed hands. In 2010 and 2011 key creditors of Greece were German and French banks, through which Greek sovereign default would spill over onto the whole financial system of the EU. In the spring of 2012 Greece's bondholders agreed to lose 53.5% of face value of what they had lent to the Greek government (look at this, had Poland been written down 53.5% of its sovereign debt, its debt-to-GDP ratio would have stood well below 30% and Poland would have been one of the least indebted countries in the world). Thus most of the Greece’s debt was relieved and in the meantime transferred from the banking sector to the EBC and to the IMF. Private banks thus had to swallow some losses, yet recovered nearly 50% of what they had recklessly invested in Greek gilts and got rid of the junky securities.

Over five years of keeping head above water only thanks to continuously rolled over lending from international institutions, Greece has not gone ahead with structural reforms that would eradicate all the roots of their misery. Instead, it whiled away. It also has to be underlined austerity measures slowed economic growth in Greece and impaired the country’s ability to service debt. The cure has nearly killed the patient and made (lazy and economically illiterate) Greeks fed up with the fact their lenders have been dictating them what to do. The disgruntlement brought populists to power and after a few months of their rule, stance of Greece in negotiations with creditors has somewhat hardened.

The result of today’s referendum is anything but predictable. Greeks are strongly divided regarding the government’s refusal to further accept conditions set by lenders. The more rational part of society fears a scenario of banking sector’s collapse, which would mean loss of savings for those who have it and downfall of public finance system, which would mean public sector employees would not get their salaries and pensioners would not receive their benefits. I have no idea, what the other half think they will achieve by showing the middle finger to creditors and whether they realise how dire the consequences of being cut off from IMF’s and EBC’s money are.

Even assuming Greece is ousted from the Eurozone and all its debts are written off, the problems will not disappear. Greece would not be perceived credible by anyone (maybe except for Russia, which could lend to Greece to extend its sphere of influences), so no one would lend them (a liar) money. Greece would have make ends meet on its own, something the country accustomed to living beyond its means is not capable of. The situation is hence tragic enough that even pressing ‘reset’ button and letting Greece begin from scratch would not help.

Nevertheless, cognisant of consequences of Greece going insolvent, I do not commend of extending the misery of the country. Moreover, I believe far too much money has been injected into Greece, money that will never be recovered, therefore checking out and putting Greece out of misery in a controlled way would be the most reasonable solution.

What is going to happen tomorrow when results of the referendum unfold? If majority of voters back continuation of austerity program, the populist government will lose credibility and should step down. If majority of voters support showing the middle fingers to creditors, we will be watching history in the making.

Any lessons to learn?

Firstly – a common currency does not prove to be a good idea if area where it functions is insufficiently economically uniform (do not confuse with integrated). The benefits of one currency do not make up for lack of flexibility offered by having a domestic currency.

Secondly – letting populists grow into power does not seem to be the way to heal the ailing country…