Today it is time again to look at what has been in my time as a blogger a regular and indeed consistent contender for the saddest story of all. This is of course the issue proclaimed as “shock and awe” by Euro area ministers such as Christine Lagarde back in May 2010 as they sent Greece spiralling into an economic depression from which it shows little sign of returning. This was accompanied by a media operation where those who argued for a different course of action were smeared with claims that they would damage the Greek economy. How shameful that was!
Instead we got austerity and claims of an internal devaluation instead of the old IMF strategy where the austerity was ameliorated by a currency devaluation. Oh and promises of reform which remain in the main just that promises. Eventually there was a default but by then it was not enough partly because the official creditors refused to take part. Drip by drip we have had confessions of failure as the IMF first decided its sums were wrong and more recently has become a fan of fiscal stimulus rather than austerity. Just as a reminder Greece was supposed to return to growth in 2012 (1.1%) and then 2.1% for two years before growing at 2.7% until the end of time.
An economic depression
How do we measure this? Well the first signal is that Greek GDP was 19.5% lower in the second quarter of this year than it was in the second quarter of 2010 when “shock and awe” was proclaimed. So that is a severe depression or Great Depression. There is no other way of putting that.
If we move to the present position then we see this.
Available seasonally adjusted data indicate that in the 2nd quarter of 2016 the Gross Domestic Product (GDP) in volume terms increased by 0.2% compared with the 1st quarter of 2016 against the increase of 0.3% that was announced for the flash estimate.
Sadly even this brief flicker of candle light gets sucked up by the gloom when we look at the annual comparison.
In comparison with the 2nd quarter of 2015, it decreased by 0.9% against the decrease of 0.7% that was announced for the flash estimate of the 2nd quarter on August 12, 2016.
We have other signs of a depression here. Firstly the fact that so far there is no rebound. Ordinarily however bad things are economies eventually rebound in what is called a V-shaped response but here we have a much grimmer L shape as in a collapse and then no recovery. Also numbers in such a situation are mostly revised upwards but as you can see it has in fact been downwards.
An important signal of these times has been the behaviour of wages and especially real wages well we have seen nothing like this. There is an index for Greek wages for different sectors so let us start with manufacturing which at the start of 2010 was at 95.9 and at the start of 2016 was at 45.5 and had fallen by over 9% in the preceding year. It is not the worst example as the wages of the professional and scientific sector fell from 100.8 to 45.9 over the same time period.
Just so you see both sides of the coin the best number was for the information sector which only and by only I mean comparatively fell from 89.8 to 80.9.
This sadly is one of the worst examples of the economic depression. You may wish to make sure you are sitting comfortably before you read that on a scale where 2010=100 then Greek retail trade was 69.8 in June. Grimmest of all is that food is at 78.1.
Is it getting any better or Grecovery as some were proclaiming in 2013? Take a look for yourself.
The overall volume index in retail trade (i.e. turnover in retail trade at constant prices) in June 2016, recorded a decrease of 3.6% compared with the corresponding index of June 2015, while compared with the corresponding index of May 2016, recorded an increase of 3.7%.
May must have been dreadful mustn’t it?
The Monetary System
We see regular proclamations of recovery but regular readers will recall the situation last year when Greece saw capital flight on a large-scale. Capital Greece sums it up like this.
Greece΄s banking sector saw a 42 billion euro deposit outflow from December to July last year.
They try to put a positive spin on the data but it tells a rather different story.
Greek bank deposits dropped slightly in July after a rise in the previous two months………Business and household deposits fell by 160 million euros, or 0.13 percent month-on-month to 122.58 billion euros ($138.3 billion), their lowest level since November 2003.
That means the credit crunch is ongoing.
Export Led Growth
One of the ways that the “internal devaluation” was supposed to benefit Greece was via foreign trade. This should impact in two ways. Firstly exports would be more price competitive and rise and secondly imports would fall in sectors where Greek producers can replace them. How is that going? From Kathimerini.
exports of Greek products dropped to their lowest point in the last four years in the first half of 2016, posting an annual decline of 8.1 percent to 11.8 billion euros, against 12.8 billion in January-June 2015. Excluding exports of oil products, the annual decline came to 1.4 percent.
So the oil price fall has had an impact except care is needed here if it was counted when we were being told this was getting better. Especially troubling considering the efforts of the ECB to reduce the value of the Euro came from this.
There was a notable decrease in exports, including oil products, to non-EU countries, where they fell by 14.6 percent compared to June last year.
An area which had shown signs of hope was tourism where I recall better numbers and hope for the future but sadly the Bank of Greece has another tale.
In January-June 2016, the balance of travel services showed a surplus of €2,991 million, down 6.7% from a surplus of €3,205 million in the same period of 2015…….The decrease in travel receipts resulted from a 1.6% decline in arrivals and a 4.9% fall in average expenditure per trip.
Just in case someone wants to deploy the scapegoat of 2016 which is of course Brexit that has so kindly given the poor much abused weather a rest. well see for yourself…
Receipts from the United Kingdom increased by 24.8% to €388 million.
Actually it is people from outside the European Union who have stopped going to Greece for a holiday it would appear.
while receipts from outside the EU28 dropped by 21.9% (June 2016: €469 million, June 2015: €601 million).
Any thoughts as to why?
As we review the scene there is a familiar austerity drumbeat.From Kathimerini.
Tens of thousands of pensioners will see their auxiliary pensions slashed by between 10 and 12 percent on Friday morning, while in some cases the cuts will even exceed 40 percent…..This second wave of cuts will affect 144,000 pensioners, after a first one hit just under 67,000 retirees in August.
Odd that because we have been told so many times that reform has been completed. Oh and we have been told so many times that the banks are fixed as well.
Greece’s four systemic banks increased their provisions for nonperforming loans by a total of 1 billion euros during the second quarter of the year
By systemic they mean toxic under the Britney definition.
I’m addicted to you
Don’t you know that you’re toxic
And I love what you do
Don’t you know that you’re toxic
Meanwhile the Greek depression continues to the Sound of Silence.
Hello darkness, my old friend
I’ve come to talk with you again
Because a vision softly creeping
Left its seeds while I was sleeping
And the vision that was planted in my brain
Still remains within the sound of silence