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.
#Greece 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.
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