Greece meets its final countdown one more time

A constant sad theme of this website has been the way that Greece got into economic trouble and then had a so-called “shock and awe” rescue which made everything worse and plunged it into what can now be called a great depression. Last week’s official national accounts detail just continued the gloom.

The available seasonally adjusted data indicate that in the 4 th quarter of 2016 the Gross Domestic Product (GDP) in volume terms decreased by 0.4% in comparison with the 3 rd quarter of 2016, while it increased by 0.3% in comparison with the 4 th quarter of 2015.

I pointed out last week that the trumpeting of European Commissioner Moscovici only a day before was in very bad taste.

After returning to growth in 2016, economic activity in is expected to expand strongly in 2017-18.

You see Monsieur Moscovici and his colleagues have a serial record of saying a recovery is just around the corner. For example the 0.3% annual increase in GDP compares with 2.9% forecast in the spring of 2015.  There is a familiar theme here because if we look at the forecasts from the spring of 2016 they forecast more or less the same ( 2.7%) for 2017. This repeated failure where an optimistic forecast bears no relationship to reality has gone on since 2012 which was when the original 2010 bailout forecasts told us Greece would return to economic growth and from 2013 onwards would grow by you’ve guessed it by 2%+ per annum. As PM Dawn told us.

Reality used to be a friend of mine
Reality used to be a friend of mine
Maybe “why?” is the question that’s on you mind
But reality used to be a friend of mine.

The truth was that Greece had to be forecast as growing as otherwise the national debt numbers would look out of control and could not be forecast to be 120% of GDP in 2020. That was a farcical benchmark which exploded as it was chosen so as not to embarrass Portugal and Italy who cruised through it anyway. Greece of course blasted through it and the major reason was the economic depression.

The Great Depression

I will keep this simple so GDP in the third quarter of 2008 was the peak for Greece at 60.8 billion Euros and at the end of 2016 it was 44.1 billion Euros. So a decline of 27.5% which certainly qualifies as a Great Depression.


Macropolis has pointed out the scale of the austerity applied to Greece and let us start with taxes.

The Greek economy has been burdened with 35.6 billion euros in all sorts of taxes on income, consumption, duties, stamps, corporate taxation and increases in social security contributions. When totting all this up, it is remarkable that the economy still manages to function.

Of course you could easily argue that in more than a few respects it does not function as we switch to the expenditure or spending ledger.

During the same period, the state has also found savings of 37.4 billion euros from cutting salaries, pensions, benefits and operational expenses.

So 5 months worth of economic output at current levels. Also like a dog chasing its tail they cry has gone up for what can be called “Moar, moar”.

The IMF’s Thomsen, now the director of its European Department, recently argued that Greece doesn’t need any more austerity but brave policy implementation. Somehow, though, the discussion has ended up being about finding another 3.5 billion euros in taxes and cuts to pension spending.

Of course dog’s have the intelligence to eventually tire of chasing their tale whereas the Euro area establishment continue with the same old song.

The official view

The ESM or European Stability Mechanism is the main supplier of finance to Greece these days and its head Klaus Regling has this on repeat.

Then, public creditors eased lending conditions significantly. This reduced the economic value of the country’s debt by around 40 per cent. As a result, Greece enjoys budgetary savings of about €8 billion annually — the equivalent of about 4.5 per cent of gross domestic product — and will continue to do so for years to come.

Sometimes what is true can be misleading. You see it is summed up in the word timing. Greece had an austerity program front loaded onto it and it was hit hard by it as I have described. Later the Euro area changed tack and made the loans much cheaper but by then it was too late as Greece was plunging into an economic depression at a rate exceeding 8% per annum in 2011 and much of 2012.

In spite of the calamitous situation Klaus told the Financial Times in late January  that the future was bright.

Greek debt levels are no longer cause for alarm

Of course Klaus has to churn out such a line in an attempt to distract attention from this.

The European Financial Stability Facility and the European Stability Mechanism, the eurozone’s rescue funds, have disbursed €174 billion to Greece.

This brings me to a point where Bloomberg are to some extent peddling what might be labelled fake news today.

The 2-year yield is now 180 basis points higher than the 10-year yield

You see Greek bond yield twitter if I may put it like that refers to something which exists but is not the source of funding for Greece any more a reflects a market which as I have pointed out many times barely trades. Even Bloomberg points this out.

volumes are low, with just 26 million euros trading during January on the inter-dealer platform.

With volumes so low it is easy for those with vested interests to manipulate such a market.

Trouble ahead

Where a crunch can come is when a bond needs redeeming. This is where all the proclamations to triumph and success met a hard reality of a lack of cash or another form of credit crunch. Eyes are already turning to July on that front.

Greece faces a few maturities in the coming months, but the heavy lifting is in July, when 6.2 billion euros of debt matures.

This is the capital issue I highlighted on the 30th of January.

We can bring in that poor battered can now because the Euro area and the IMF thought they had kicked it far enough into the future not to matter whereas the IMF is now having second thoughts.

The Euro area can talk all it likes about interest repayments but this ignores the fact that it cannot repay the capital which might make Euro area taxpayers mull another of the promises of Klaus Regling.

We would not have lent this amount if we did not think we would get our money back.

In a couple of months time another 1.4 billion Euros is due. This is owed to the ECB and we know that the first rule of it’s debt fight club is that every last cent must be repaid.


My theme about the IMF has been that it has been twisted by politicians so that it no longer is an institution dealing with trade balance problems. The Greek data for 2016 bear this out as with all the improvements Greece should be exporting more especially as many of its economic partners had a better economic year.

The total value of exports-dispatches, for the 12-month period from January to December 2016 amounted to 25,411.4 million euros (28,198.4 million dollars) in comparison with 25,879.3 million euros (28,776.8 million dollars) for the corresponding period of the year 2015, recording a drop, in euros, of 1.8%

So simply no as we mull again the lack of economic reform in Greece and note that the trade issue got worse and not better.

The deficit of the Trade Balance, for the 12-month period from January to December 2016 amounted to 18,551.2 million euros (20,310.3 million dollars) in comparison with 17,745.3 million euros (19,439.6 million dollars) for the corresponding period of the year 2015, recording an increase, in euros, of 4.5%.


Today’s Eurogroup meeting in Greece is being badged as a “last chance saloon” which of course is a phrase that long ago went into my financial lexicon for these times as it occurs so regularly. Still did the band Europe know how much free publicity the future would provide for their biggest hit?

It’s the final countdown.
The final countdown

Meanwhile as its economic prospects are kicked around like a football Greece itself is pretty much a bystander. If only it was a final countdown to a default and devaluation meaning it would leave the Euro. Meanwhile some reports are bizarre as this from the fast FT twitter feed last week proves.

Greece made a stunning exit from three years of deflation and low price growth in January

Greek workers and consumers however will be rueing any rises in prices as we wonder how higher prices in the UK can be a disaster according to the FT but higher prices in Greece are “stunning”?


I have been running a private trial of putting these updates out as podcasts as the world continues to change and move on. I thought I would ask how many of you use podcasts?

36 thoughts on “Greece meets its final countdown one more time

  1. Tsipras should be hanged for treason, along with a number of his predecessors.

    I thank my lucky stars every day that we’re leaving the evil EU.

    • Hi therrawbuzzin

      The one that most amazes me is the former Finance Minister Varoufakis. He is treated as a bit like an idol by the mainstream media but was in fact a complete failure and the memory of his tenure will be that Paris Match photo shoot with him sitting next to a piano.

  2. Hi Shaun,
    As interesting as ever!
    Two comments:
    1. I think that Klaus Regling needs to see a doctor, as he is clearly delusional. A ten-year old child could tell you that Greece is not going to pay this money back;
    2. Without getting into politics, the structure of the EU means that, in any given year, there will be elections and this year, these include France, Germany and the Netherland (others?). In each case, there are strong anti-Euro/EU parties and, in my opinion, it is therefore simply impossible for any mainstream politician to admit the truth over Greece’s debts (or to admit the possibility that the Euro may have worsened the problem). And so, the charade goes on, namely that all is well, the Greeks (and Portuguese, Italians) will all repay their debts in due course.
    I cannot see an easy way of reconciling the laws of economics with the reality of politics here and so cannot see it ending well.

  3. HI Shaun,
    Of the Greek debt, how much is owed to each individual country, whether in the Euro or without, not just to the EU as a whole. If this was common knowledge Europewide, it would have a lot of bearing on the forthcoming elections.
    What is the UK’s share and will we still be liable after Brexit?

    I do podcasts if you are planning it, always good to hear your take on the world!

    • Hi Foxy

      The Greek debt to the ESM/EFSF is divided up amongst the other Euro area members and in general it is between 2% of GDP and 2.9% in total. However this includes funds borrowed by Ireland and Portugal. It is also odd that it is not more equally divided with Slovenia at 2.9% at the wrong end of the stick.

      We did take part in the EFSM ( European Financial Stability Mechanism) but that was for Portugal and Ireland and amounts to 0.2% of GDP.

  4. Hi Shaun,
    Being married to a Greek and living here, let me tell you on the ground it’s a living nightmare.
    Paying all the taxes leave you with nothing. You pay for local services, but they are non existent. Road tax is a joke, the infrastructure of roads is worsening by the day. You can’t afford a decent car, but are expected to drive on roads that are hard on a 4×4 vehicle, let alone an ex hire car under 1000 cc because that’s all you can afford.
    No employment for 7 mths of the year, till the tourists turn up again and hopefully spend ( they didn’t last year) in the local economy. As a self employed person, no benefits to help you through, just a huge social security bill, which is now frontloaded from January 2017. Used to be payable in May, so you could hopefully pay it when you started work again. Every day brings a new unexpected tax bill, as they make them into legislation, no forewarning or planning or notice. Trying to budget is impossible, just a sick feeling of what is coming next in a demand for payment.
    They will never get these taxes, they are unachievable, the amount owed in unpaid debt to the government will just continue to climb.
    The only way out for Greece is an exit, many years of struggle, but at least the promise of the sun rising again for a great and proud people.

    • this makes me so sad, why are the Greek putting up with this ?

      so much faith in the EU and they just kick you harder back in the £$£$!

      best wishes to you and yours


      PS: Is this the fate the UK has avoided ? ( we’ll see )

      • Why are the Greeks continuing this ?

        The alternative is default, with inevitable inability to pay Greek governmental employees salaries. Those in charge will continue this farce as long as possible. Turkeys don’t vote for christmas.

        • Despite all the anti EU rhetoric in the comments section Expat and despite the slavish adherence in this blog to the maxim “democracy is best” the facts are that Greece is a democracy. Greeks voted for a Government that would leave the EZ/EU, when the EZ/EU told Greece it would have untold debts to repay with no further help from the EZ/EU in the event of of a Grexit which is only to be expected, the democratically elected Greek Government capitulated, replacing it’s most senior ministers with politicians the EZ found more acceptable.

          In failing to demand a further election or rioting, the Greek electorate also buckled once they saw that Grexit would bring with it lots of pain instead of the easy exit I suspect they thought they would achieve.

          So, the Greeks continue because they fear they will be worse off outwith the EZ/EU and I agree, up until about 3 years ago Grexit was doable and the Greeks could survive on their own, now it’s too late. I have the utmost sympathy with Elaine but fear she does not realise what the dire consequences of departure will be. Certainly, the Greek politicians whom overspent in the early 2000’s should be prosecuted and imprisoned but again, I note that in the Greek democracy there appears to be no call for this to happen! You cannot save people from themselves in a democracy.

          I would also comment that I am observing amongst the commenters here an idea that the “nasty EU” is operating a dictatorship by preventing Greece from leaving with”threats” and therefore acting in an undemocratic way, when, in fact, it is operating standard business practice that any Bank would when faced with a delinquent borrower whom wants to walk away from their debts with no further consequences, Oh that we could all do that!!

          The Greeks have already shown that they are prepared to continue and now I see amongst commenters here that, as far as they are concerned, the “wrong” kind of democracy is in operation i.e. the greeks’ have acted democratically in a way that many commenters on here, perhaps yourself included think is “wrong ” because the greeks’ failure to demand to leave does not tally with what the commenters think should happen – sound familiar? Irish EU referendum? Rearrange these words – Kettle, Pot, Black.

          PS in answer to a question you posed a few days ago I don’t know about lidl but iceberg lettuce is up everywhere- Tesco, Morrisons and Aldi. Regards people thinking this is about Brexit being unfairly blamed I would point out that the Pound has weakened significantly against the Euro (despite Mario’s best efforts) since June 2016 and I believe most iceberg lettuce originates from Spain although the scale of the price increase could have been exacerbated by the season. It will be clearer come the summer.

    • My deepest sympathies go to all the people of Greece, for whom I have the greatest respect and sincere affection, who have played no part in their unfolding disaster.
      When I am fortunate enough to be in your country, I make sure I pay for everything in cash, AS I HOPE THE PAYEE IS EVADING TAX, which is not levied for the benefit of the people of Greece, but for the benefit of wastrel, corrupt French and German banks, and the evil troika.

    • Completely tragic and a reminder that there are real lives being wrecked by an ideological straitjacket. As usual, it is not the banksters/politicians etc who suffer.
      There seems to be no pragmatism in these debt discussions – just an ideological obsession with the Euro.
      Very sad and I am sorry to hear of your hardship.

    • Great post Elaine.When you hear it from the frontline,it just underlines how much can be hidden behind the figures.

      Sorry to hear things are hard,but it does seem like you and alot of people know the way out,it’s just the politicians who want to pretend it’ll all be ok.

  5. In its most recent assessment of the Greek economy, the IMF said: “Greece cannot grow out of its debt problem. Greece requires substantial debt relief from its European partners to restore debt sustainability.”


    “…..It is a sign that the restructuring of the Greek banking sector is progressing well.”

    Oh no , not the BANKS again…….

    ” institutions in charge of Greece’s bailout have reached a “common position” ……. so we can get a result.”

    erm, umm ………….ooo- err missus!

    my poor Greek friends, would your enemies be as cruel ?


    • Forbin,
      Whilst I feel sorry for the plight of the Greeks, surely the lesson here is not to overspend in the first place!

      Something that Britain should bear in mind, before we cannot grow the economy fast enough to pay/service the debt.

      • Whilst I have nothing but contempt for most Greek politicians and the ruling elite (Tsipras apart – I talked to him once and he ruefully said that he doubted that he would ever get the chance to put in place his plans for Greece, which included stopping a great deal of the day to day corruption and making the elites pay their fair share of tax, as his government would be totally preoccupied with the bailout issues and firefighting day to day problems) nevertheless I think you can easily understand where the average Greek went wrong.

        Let’s say you worked in the public sector in 2006/7. Salaries were going up significantly (the government were bribing the electorate with borrowed funds) and the economy appeared to be doing well. The banks came along, keen to make vast profits on loans, and said to these people ‘ you are doing well, your job is safe, the economy is doing well, salaries are going up – why not move house? Buy a new car? Take a foreign holiday?’ And many people did just that. Who can honestly say that in the same position we would do otherwise? What people did not know is that their salary increases were being paid by borrowed money, the economic growth was false, pumped up by borrowed money and the Greek government and the EU were complicit in this deception.

        The average Greek is having a really torrid time under enforced austerity and I see no end to it.

  6. Shaun,

    At the risk of sounding like a broken record,I do wonder what proportion of GDP imputed rents are in Greece?

    Greece will default,it’s just a matter of when.Elaine’s eloquent post tells us all we need to know

    • Hi Dutch

      It sounded a good question as I could not recall seeing any income version of GDP. But I have found one but we are stymied for now as there is a big catch all category including business profits and “mixed income” which is just over 50% of GDP.

  7. Hi Shaun, Re: Podcasts

    So far it seems Foxy is the only reader who is into Podcasts. Count me in also.

    May I suggest that readers uptick this comment if they would like to hear your podcasts…

    And downtick if they are not interested.

    Simple – but could be helpful.

  8. Hi Shaun,

    Sorry not following your podcasts, which I usually would consume as a 40 min radio programme. Happy to read your daily blog. Paul C.

  9. Showing my ignorance but I had to ask my kids what exactly a podcast was! had the general idea but didnt know about the auto update etc. I read your blog every day and listen to your radio links but doubt I would ‘podcast’!

  10. Hi Shaun, I like podcasts but hadn’t noticed you’d done any… probably my fault as I read your blog at lunchtime and so I then skip over your retweets. Is this where you announce them?


  11. Hi Shaun
    I have read your excellent site for many years, and contribute when not geographically challenged.
    I would find it difficult to keep up with podcasts, selfishly I hope you don’t stop producing your erudite written essays.

  12. Hi Shaun, I like podcasts but at the moment my sound card is bust. When it is fixed I will certainly give it a try . I do watch some of your tv broadcasts when I have the time. On Varoufakis, I read his book “The Global Minotaur” with interest and cannot understand why with him as Finance Minister the Greeks did not drop out of the Euro and default as you repeated stated to be the only real way forward.

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