One of the issues in economics is that transferring the theoretical concepts to real life often has problems. Before we even get to the conceptual issues there is the simple concept of time which means that by the time we have the full data on something it can already be too late. However today’s releases from Greece will update us on what Elton John described well.
It’s sad, so sad
It’s a sad, sad situation
And it’s getting more and more absurd
It’s sad, so sad
Why can’t we talk it over?
Oh, it seems to me
That sorry seems to be the hardest word
Looking at the last decade or so is grim reading and it starts symbolically because the Greek statistics office sends you to a page which does not exist. But once you bypass that if we look back to the pre crisis era and I mean just before the first bailout then Greek GDP at current prices was 54.1 billion Euros ( first quarter 2010) and in the last quarter of 2020 it was 42.5 billion at current prices.
As that sinks in and there is an element of shock in that size decline you may think that the Covid pandemic is just bad luck. But as I have regularly pointed out if you mess around for years and years another recession or problem was bound to come along. So the scale of this downturn is unlucky but not one occurring. We can refine our numbers in terms of scale by switching to a chain-linked index which tells us that the 104.6 of the opening of 2010 has been replaced by 77.6 at the end of last year.
An economic depression has two features of which the first is the economic decline and the second is how long it lasts. For example the Covid-19 depression has been deep but we hope it will be short. Care is needed as like wars these sort of things are always supposed to be over by Christmas and I note many who suggested it would end in 2020 have simply recycled that for 2021. Greece has been a case of it being both deep and long lasting. Looking back remember when Christine Lagarde was telling us the bailout was a case of “shock and awe” and economic growth of 2.1% for 2012 was forecast followed by 2% per annum ad infinitum?
There is another way of looking at such a thing and it is to compare yourself with your peers. Sadly things just get worse as whilst the composition of the Euro area has changed it grew by 8% over the same period.
What about now?
Inflation
Regular readers will know that in general I am a fan of lower prices but there can be special cases and Greece is certainly one of those.
The CPI in February 2021 compared with February 2020, decreased by 1.3%. In February 2020, the annual rate of change of the CPI was 0.2% ……The average CPI for the twelve – month period from March 2020 to February 2021, compared with the corresponding index for the period
March 2019 to February 2020 decreased by 1.6%.
As you can see there are actual deflation dangers here as opposed to the usual media panic which is anything but. What I mean by that is that we have falling prices with pretty much everything else falling.
Overall the issue is different as since 2009 Greece has had inflation of around 5% in total so it has not been something which has made things worse. Also looking at the detail health (~2%) and education (~12%) have got cheaper which is very rare so the numbers need an investigation I think.
Trade
These are important figures on several levels. In ordinary times they have importance. But in the context of Greece the austerity programme had something of a kicker because of the International Monetary Fund involvement as in the past its programmes were set to improve trade figures. In that context the numbers below are really poor.
The deficit of the trade balance, in January 2021 amounted to 1,442.9 million euros (1,733.7 million dollars) in comparison with 1,893.0 million euros (2,075.9 million dollars) in January 2020, recording a drop, in euros, of 23.8%..
There are several levels to this so let us start from the fact that Greece had a deficit in spite of all the austerity pre pandemic. If we now go to the Bank of Greece and add in services mostly because of the importance of services we see that there was an issue allowing for that.
In 2020, the current account showed a deficit of €11.2 billion, up by €8.4 billion year-on-year. This development is almost exclusively due to a decline in the services surplus, which was partly offset mainly by a €4.3 billion drop in the balance of goods deficit
The point here is that Greece still had a deficit pre pandemic. As to the pandemic it wreaked havoc on the tourism numbers.
A significant decrease in the services surplus is attributable to a deterioration in, primarily, the travel services balance and, secondarily, the transport balance, while the other services balance improved. Both travel receipts and non-residents’ arrivals fell by 76.5% year-on-year. Sea transport receipts dropped by 15.3%.
If we now switch back to January of this year it is worrying that imports fell faster than exports as we have seen this be a signal for an economic decline before.
The total value of imports-arrivals, in January 2021 amounted to 3,953.2 million euros (4,799.9 million dollars) in comparison with 4,747.7 million euros (5,254.2 million dollars) in January 2020, recording a drop, in euros, of 16.7%………The total value of exports-dispatches, in January 2021 amounted to 2,510.3 million euros (3,066.2 million dollars) in
comparison with 2,854.7 million euros (3,178.3 million dollars) in January 2020, recording a drop, in euros, of 12.1%
The decline in trade has mostly been outside the EU. Also as people often ask what does Greece export? Well in January it was manufactured goods across a range of categories. Followed by mineral fuels and lubricants and the vast majority goes outside the EU. Then chemicals and food exports are similar.
Production
We find a little more cheer here as we see Greece is seeing the bounce we have seen elsewhere.
he Overall Industrial Production Index in January 2021 recorded an increase of 3.4% compared with January 2020. The Overall IPI in January 2020 decreased by 0.6% compared with the corresponding index in January 2019.
However the 2019 decline is troubling as after all Greece was supposed to be surging forwards then. Also if we look back and use 2015 as our base then manufacturing output was at 101.3.
Comment
At the moment Greece is mired in two particular problems.
The third wave of the coronavirus pandemic ramped the number of daily cases up to 3,215 on Tuesday, in what was a record figure for this year, approaching those seen at the peak of the previous wave.
Also we are back to riots there with both sides accusing the others of brutality. In terms of hopes well world trade coming back would be a boost.
Greece remains the world’s largest shipowning nation. Though the country accounts for only 0.16% of the world’s population, Greek shipowners own 20.67% of global tonnage and 54.28% of the European Union (EU)-controlled tonnage (Figure 1)9. Between 2007 and 2019, Greek shipowners have more than doubled the carrying capacity of their fleet ( Greek shipping and the economy)
Although we have noted in the past the problems with taxing this area.
As to the central bankers priority the housing market it seems to have missed the reforms that have so regularly been trumpeted.
The result is that the property market is in zombie mode, in that the number of transactions completed is minimal, also damaging the state that is deprived of significant tax takings. ( Kathimerini)
There is some hope that the Brits might make some sort of rescue effort although in truth it feels like a PR release dressed up as news
The islands of the Cyclades, Lefkada and Cephalonia in the Ionian Sea, as well as the capital Athens and the nearby islands (e.g. Spetses, Hydra etc) are today the most expensive areas for investing in the property market across Greece. Nevertheless investment interest in them from abroad remains particularly strong and looks set to surge as soon as the health crisis is over. ( Kathimerini )
Notayesmanseconomics's Blog 
Hi Shaun
The figures make very sad reading. It seems to me that there were some terrible and avoidable decisions taken for political, not economic, reasons. And yet, no one has been held responsible. I would include the following decisions and responsibilities:
1. Joining the Euro. No one in their right mind could have believed that Greece and Germany could share the same hard currency. I would blame the Greek government and Goldman Sachs for helping the figures along. I would also blame the EU itself, as it must have known the reality.
2. The acceptance of the convergence theory of economics. No one now talks about such rubbish now, but the theory went that the Eurozone economies would somehow converge under German discipline.I blame mainstream economists and pro-EU federalists for those ideas
3. The disastrous “bail out” by the Troika. The comical idea that Greece would swiftly recover from a good hard shock is just that. I would blame the EU, the IMF and Germany specifically for enforcing the rules.
I am sure that there are lots of other factors involved and I know that you don’t do politics, but the Greek situation does seem to me to have been exacerbated for political reasons against all economic common sense.
I really hope that the Greeks find a way out of this mess, but fear a lost generation of unemployment, pessimism and wealth generation.
The Greeks had found a way out of the mess, they were forbidden to pursue it at gunpoint for the sake of French & German banks.
it was portrayed as a rescue…….
but only for the first class passengers …..
Forbin
Greece defines the evil that is the global banking system & the EU.
Hi therrawbuzzin
It is a subject which has gone off the radar. After all the media pretty much fell hook line and sinker for the rescue claims.
“Greece remains the world’s largest shipowning nation. Though the country accounts for only 0.16% of the world’s population, Greek shipowners own 20.67% of global tonnage and 54.28% of the European Union (EU)-controlled tonnage (Figure 1)9. Between 2007 and 2019, Greek shipowners have more than doubled the carrying capacity of their fleet ( Greek shipping and the economy)”
Greece also has a surfeit of submarines, if memory serves.
Hi therrawbuzzin
They have plans to rearm as well although not this time with submarines. In the naval sphere 4 new frigates are planned. Curiously they seem to be striking a deal with the US for this in spite of it not having built any new frigates for ages. If it is a variant of the LCS which for those who have not followed the saga has been a shambles hence the nickname Little Crappy Ships then Greece looks to be making another mistake.
Off topic and sorry foir the diversion but what do readers think about the article below and in partricular a suggestion interest rates may only reach 0.7% in 3 years time, bear in mind I think a lot of recovery is being spread to reach those rates myself and the Brazilian varient of the virus spread to the UK would cause havoc to the economy and any outlook>
By William Schomberg
LONDON (Reuters) – The Bank of England must decide next week whether to tell investors that they are betting too heavily on future interest rate hikes as Britain races ahead with COVID-19 vaccinations and the government pumps yet more cash into the economy.
In early 2020, financial markets were weighing up whether the BoE would cut rates below zero as the country reeled from its biggest economic collapse in three centuries last year.
But that was before a turnaround in expectations for global growth and inflation, triggered by U.S. President Joe Biden’s $1.9 trillion stimulus plan.
Britain’s recovery hopes were further boosted by finance minister Rishi Sunak’s announcement on March 3 of 65 billion pounds ($90 billion) in extra stimulus.
Investors now expect the BoE’s Bank Rate to rise to about 0.7% in three years’ time, up from its current all-time low of 0.1% although still way below its historic average.
Sterling has risen about 2% since the central bank’s last meeting on Feb. 4, and British government bonds recorded one of their biggest monthly sell-offs in over a decade in February.
“This constitutes a material tightening in financial conditions,” HSBC economists Elizabeth Martins and Simon Wells said in a note to clients. “The question for the BoE in March is whether this is warranted by growth and inflation expectations – and if not, then how and when it should act.”
Words of warning alone might not be enough from the BoE next Thursday, the HSBC economists said.
On March 4, Federal Reserve Chair Jerome Powell said a rise in market interest rates was “notable and caught my attention”, only for yields on U.S. Treasuries to rise further.
BOND-BUYING
The BoE’s main policy tool, for now at least, is its 895 billion-pound bond-buying scheme which is due to be fully used up later this year, unless there is a further increase in its size or its pace is slowed down.
Analysts think the BoE will not change its stimulus programme on March 18 but it might send a signal that an increase to its bond-buying firepower is an option for May when it will announce new economic forecasts.
That would show that the BoE remains hesitant about counting too much on the recovery.
Governor Andrew Bailey said on Monday he was only cautiously optimistic due to the uncertainty about the pandemic’s impact on the economy and the risk of job losses when Sunak’s jobs protection measures finally end.
The BoE will also be checking that its assumption of a relatively small drag from Brexit – which fully kicked in on Jan. 1 – is borne out by the data.
Some other MPC members are more worried than Bailey about a weak recovery which could yet justify negative rates from later this year, once banks have had time to prepare.
Only BoE Chief Economist Andy Haldane has sounded the alarm about an inflation “tiger”.
Britain’s inflation rate is expected to hit the BoE’s 2% target in the coming months, but much of the rise will reflect last year’s pandemic hit and one-off changes to energy prices.
Bailey said this week that the BoE’s task was to get inflation back up to 2% and hold it there.
($1 = 0.7208 pounds)
Interest rates will become academic, we’ll have no savings.
UK’s REAL inflation rate is approx 10% as food inflation, if you count shrinkflation is approx double that.
yes buzz
inflation is everywhere except where the BoE stands ….
( if water is amazingly cheap then how can it be inflated ……. thats the mentality we’re dealing with )
Forbin
forbin
“if water is amazingly cheap then how can it be inflated ……. thats the mentality we’re dealing with”
It depends on whether you are looking at your water bill or bottled water!
Inline with Buzz’s comments on inflation….
british election cap on election funding has been increased from £19.5 million to £33 million in line with inflation …….
Good show HMG !
seems a bit low to me , but hey ho
Forbin
” The BoE’s main policy tool, for now at least, is its 895 billion-pound bond-buying scheme ”
is that all ?
there’s only a locked tool box to check …….
Forbin
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“The third wave of the coronavirus pandemic”
https://www.euromomo.eu/graphs-and-maps
Really
yes really
there are always 3rd , 4th and 5th waves ……
unless there’s a major variant then each successive wave usually is smaller because the population gains immunity *
* SARS2-CV19 bucked the trend because we locked up to lower the mortality rate. The effectivness of all measures will be causing greif for years to come, along with economic costs.
Eventually all new viruses fade into the back ground, yes I do expect we will live the virus for years but it should be of minor interest .
the web pages just confirm all along that this virus is more deadly to eldery than the normal working age and younger generations.
Forbin
PS: 91 million have recovered to date , a figure that no one in MSM cares about.
( 118 million infections)