Greece sees its economic depression continue with ever more debt

This morning has seen yet another outbreak of a theme which has been positively shameful so far. That is the barrage of establishment and official rhetoric proclaiming an economic recovery in Greece or Grecovery for short. In some ways it was even present back at the original bailout agreement in May 2010 when the “shock and awe” turned out to be about this.

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.

This morning’s Grecovery outbreak has been reported by The Greek Analyst.

Tsipras says is “entering growth stage,” calls on creditors 2 deliver debt relief.

The Prime Minister is also reporting that a 1.7 billion Euro tranche of debt relief will be provided today by the Euro area.

What about debt relief?

The Euro area partners are providing some of this to Greece via the way that their official vehicle the ESM or European Stability Mechanism lends to it so cheaply. Its President Klaus Regling pointed this out on the 10th of this month.

– because our loans have long maturities and very low interest rates, less than 1% for instance from the ESM. This provides savings for the Greek budget of over €8 billion every year in saved debt service payments, and that corresponds to about 4.5% of Greek GDP.

The problem for Greece is that it is piling up foreign debt albeit in the same currency as it uses in this instance. It would like to issue its own but this seems to be something which remains just around the corner. After all Greece can borrow at 1% and at what rate do you think markets would lend to it at?

One possible route where the Euro area could continue to provide help would be via the bond buying QE of the ECB. However that seems to have faded away as well probably due to what is implied by this from Mr. Regling.

but it depends if we get the missing information, the missing data, to be sure that the target on net arrears clearance has really been met by the end of September

For all the promises of reform and steps forward taken this all look rather, same as it ever was.

The debt continues to pile up

The official story was that the debt to GDP ratio would decline to 120% by 2020 but last week’s report to Eurostat told us this.

The deficit of General Government for 2015, in accordance with ESA 2010, is estimated at 13.2 billion euro (7.5% of Gross Domestic Product), while the gross consolidated General Government debt at year-end 2015 is estimated at a nominal value of 311.7 billion euro (177.4% of Gross Domestic Product).

Actually a fall in the total debt burden was reported there but sadly it has risen since to 315.3 billion Euros as of June according to Eurostat. So whilst the interest-rate paid has been slashed the overall or capital burden has continued to rise.

If we move to the fiscal deficit the numbers were affected by yet more banking bailouts to the tune of 7.71 billion Euros. That seems to be an eternally emptying pot doesn’t it? But you may also note that even after over 5 years of austerity there was still a fiscal deficit of around 6 billion Euros.


This can be summarised simply by reminding ourselves that the economy of Greece was supposed to grow from 2012 onwards and then looking at the actual numbers.

2012  GDP 191.2 Billion Euros

2013 GDP 180.7 Billion Euros

2014 GDP 177.9 Billion Euros

2015 GDP 175.7 Billion Euros

That is about as clear a definition of an economic depression as you can get. Greece was hit by the credit crunch then the Euro area crisis then the botched bailout and then of course saw the run on its banks last year.

Ordinarily a recovery out of this should be both strong and sharp or what is called a V-shaped recovery. However the latest (PMI) business survey was sadly more of the same.

The performance of Greece’s manufacturers during September followed the trend of inconsistency that has so far defined 2016. Again, the sector slipped back into contraction after declines in production and new orders were reported, with goods producers citing a combination of deteriorating demand conditions and a lack of liquidity at firms as the prominent factors behind the latest falls

The monetary position

There is a troubling issue to address and this is the amount of Emergency Liquidity Assistance still being provided by the ECB. Whilst this has fallen it is still at 51.8 billion Euros which reminds us of the E or Emergency part.

If we look at Greek bank deposits (household and business) we see that they nudged higher in August to 123. 9 billion Euros. But this compares to a past peak of above 164 billion Euros in the autumn and early winter of 2014. So a clear credit crunch which has loosened a little but not much.

House Prices

If we move to assets backing bank lending then there is little good news for the banks from this reported by Kathimerini yesterday.

The biggest drop in house prices since the outbreak of the crisis has been recorded in the northern and northeastern suburbs of Attica, and to a somewhat lesser extent in the south of the region, with rate declines exceeding 50 percent against an average drop of 40-45 percent across Athens, according to Bank of Greece figures since 2009.

The impact of the economic depression has been added to by rises in property taxation as part of the austerity measures. Looking at the new index provided by the Bank of Greece I see that the most recent numbers for the second quarter of this year show new properties falling in price by 0.6% and older ones by 0.5% making them 2.5% and 2.3% cheaper than a year before respectively.

If we move to a deeper perspective then the numbers are chilling. The older properties index was based at 100 in 2007 made 101.7 in the third quarter of 2008 and is now 58.5. That is another sign of an economic depression especially as we note that annual growth has been negative every reading since 2009 began.


This had been a bright spot for the Greek economy but these latest numbers do not help. From Kathimerini.

August saw a major decline in tourism revenues, which dropped 9.2 percent on an annual basis, according to data released on Friday by the Bank of Greece. This has brought the losses for the economy in the first eight months of 2016 to 750 million euros year-on-year.


The Greek economic depression continues to inflict suffering and pain on its people as Keep Talking Greece has pointed out this morning.

230,000 children live in households without any income and 39.9% of Greece’s population cannot afford basic goods and services, like food and heating.

According to the latest report published by the Greek Statistics Authority (ELSTAT)

Whilst the Euro area has seen growth return and maybe edge higher if today’s business survey is accurate Greece seems to have been left behind one more time. The industrial turnover figures for August did show a rise of 0.2% on a year before but the previous number had shown a decline of 18%.

Even Japonica who are the biggest investors in Greek government debt admit this.

From 2001 to 2015, Greece added only 10 cents in GDP for each additional euro of debt, compared to EZ peer average 45 cents.

Actually according to them Greece has very little debt at all.

Greece 2015 YE Balance Sheet Net Debt, correctly calculated in accordance with international accounting or statistics rules is 41% and 58% of GDP, respectively.

Meanwhile the best way out for Greece is as I have argued all along as Sheryl Crow reminds us.

A change would do you good
A change would do you good




17 thoughts on “Greece sees its economic depression continue with ever more debt

  1. 230,000 children live in households without any income and 39.9% of Greece’s population can’t afford basic goods and services like food and heating.
    A shameful situation in a pretend union.Shame on all of those responsible for this outcome especially of those involved in lying to get Greece into the EU in the first place.

  2. Great blog as always, Shaun.
    I am currently reading “Cyprus and the Financial Crisis: The Controversial Bailout and What It Mean for the Eurozone” by a pair of British writers, John and Jonathan Theodore. I would strongly recommend it to you or any of your readers who are interested in the bailouts of indebted Eurozone members. This quote is of interest in connection with Greece: “Chrstine Lagarde commented that ‘What happened at the time [2010-12], and it’s much easier with the benefit of hindsight , is that not all criteria of exceptional access [to credit lines] as defined at the time were satisfied, however she also acknowledged that the IMF’s experience ‘will probably lead us to reassessing the exceptional access criteria’, and that it was aiming to make its debt assessments more rigorous. The logic deployed here is therefore that the desperate nature of the situation justified not only the moves made, but any and all mistakes inherent to them. Such questionable reasoning could be used to justify almost any political or financial decision taken in a difficult economic period.”

    • Hi Andrew,

      I have taken careful note of this quotation from your post.
      The logic deployed here is therefore that the desperate nature of the situation justified not only the moves made, but any and all mistakes inherent to them. Such questionable reasoning could be used to justify almost any political or financial decision taken in a difficult economic period.

      I look forward to the expression on the face of the next bailiff, magistrate or County Court Judge I encounter as I plead for exemption for my own financial shortcomings on these very grounds. 🙂 🙂

      • they are part of the system , the Banks make the system , ergo they can re-write the rules and I’d posit they often have in the past

        When dealing with the Devil , he always wins in his house ( despite what you may have heard elsewhere )


    • Hi Andrew
      Just to note that the Bank of Canada left its inflation target at an annual rate of 2%. But was we have discussed before this proliferation of core measures will lead to no good in the end.

      “Bank of Canada ‏@bankofcanada
      We will stop using CPIX as preferred measure of core inflation and use these 3: CPI-trimmed mean, CPI-weighted median & CPI-common component”

      • Thank you so much, Shaun. I am ashamed to say that you noticed the Department of Finance and the Bank of Canada had signed off on a new renewal agreement before I did. They didn’t wait until December 31 as Governor Poloz told me they might. As for the change in the core measure, the DOF and the Bank of Canada have decided to fight underlying inflation by moving the goalposts. I wasn’t expecting much from Morneau and Poloz, but this is an even worse change than I thought it would be.

  3. Hello Shaun ,

    Looking back in time to WWII I see that Greece never had such a better period than the 1960s . Since then there’s been dips and rises ……

    and now the mother of all dips .

    yet reform never seems to help , do they need to be conquered ?? ( flush away all the old school and reform laws top down all the way )

    What they have now is just a slow painful death – eventually one day , somewhere in the distant future , their economy will recover a bit

    Then all the EU / Empire will chorus that , look , see , we told you our plan was working ….
    ( who or how many , need s to die before this is happens ? )


    PS How’s Iceland these days ?

    • Hi Forbin

      The trouble is that the 1960s are now “a long,long time ago” to quote Don Mclean. As to Iceland the central bank told us this in late August.

      “According to the Central Bank’s updated forecast as published
      in the most recent Monetary Bulletin, the outlook is for somewhat
      stronger output growth this year than was forecast in May, or 4.9%,
      followed by robust growth in 2017. In spite of large pay increases and
      a wider positive output gap, inflation has remained below target for
      two-and-a-half years. In July it measured 1.1%, the lowest inflation
      rate since the beginning of 2015. Improved terms of trade, low global
      inflation, tight monetary policy, and the appreciation of the króna
      have offset the effects of wage increases on the price level. The króna
      has appreciated markedly in the recent term, in spite of substantial
      foreign currency purchases by the Central Bank. “

  4. How can anyone, with a shred of humanity about him, look at the tragedy that has been visited upon Greece and call it a success?
    How can anyone look at the realistic voting options that ordinary Greeks have had, the corrupt patronage of both Pasok and Nea Dimokratika, and say they brought their troubles upon themselves?
    Since paying taxes has meant the further perpetuation of that corruption, or latterly, the repayment to foreign banks of the cost of previous corruption, how could anyone view evasion as anything other than self-preservation; the most fundamental of all rights?
    How can anyone look at those who have visited such terrible revenge, for the sins in which the overwhelming majority played no part, and say that we in Britain were wrong to vote to allow them no influence over us, regardless how many of us who voted to leave did so for less honourable reasons?

  5. Klaus Regling says that the lower bond yields granted to Greece via the ESM are worth 4.5% of Greek GDP. He fails to mention the risk (and cost thereof) to the ESM nations.

    The banks have offloaded toxic Greek debt onto EU institutions. So the taxpayers are now the creditors. And the taxpayers have no chance of voting out the guilty (Junckers, Strauss-Kahn, Trichet, Lagarde etc.) 80% of EU voters don’t get a choice of whether to eject Merkel. And here is the real tragedy of BrExit – it does not fix the EC and it does not make the EC accountable.

    In the US, they have democratic means to really shake up institutions. According to fivethirtyeight – Bernie Sanders is likely to take control of the Senate. Hello Glass-Steagall 2 & jail for banksters

    • Take consolation from the fact that they’ll no longer be financing their grotesque schemes, where farmers are paid over £50bn a year in subsidies, including half a million each, give or take, to the queen, a Saudi prince, duke of Westminster, duke of Northumberland and the MORMONS, ffs!!!!!! with UK money, whilst Greeks starve,

      • true. But the sinking sterling doesn’t help British finances and might cause a debt spiral.

        Both the Greeks and The Brits need to find politicians capable of trampling on vested interests. Greeks need to empower their tax people to make former politicians explain their assets in regards to their taxable incomes and seize the assets bought with laundered money. Greeks starve because their 1% can avoid tax with impunity.

        The British need politicians prepared to trample on the rent seeking class and act decisively to allow/enable affordable housing. Britons are economically deprived due to excessive rents.

        The EU is intended to bring peace and prosperity through cooperation and rule of law. The crooks in the EC are stealing this from Europeans, especially the younger generation. Nationalism won’t bring peace, nationalism won’t bring prosperity.

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