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Monday, November 19, 2012

'Awesome' is the word to describe the development of Greece's current account!

'Awesome' is the word to describe the development of Greece's current account during 2012. Below are the numbers:

(in BEUR)



January - September
September









2011 2012
2011 2012
Revenue from abroad





Exports 15,1 16,1
1,9 1,9

Services (e. g. tourism) 22,7 22,0
3,2 2,9

Other income 2,5 2,3
0,3 0,3

Current transfers 3,7 4,5
0,1 0,2


---- ----
---- ----

Total revenue from abroad 44,0 44,9
5,5 5,3







Expenses abroad





Imports 36,0 31,7
3,9 3,2

Services (e. g. tourism) 10,7 9,4
1,1 0,9

Other expense (e. g. interest) 8,9 4,4
1,2 0,1

Current transfers 3,0 2,9
0,3 0,3


---- ----
---- ----

Total expenses abroad 58,6 48,4
6,5 4,5














Net foreign deficit (current account) -14,7 -3,5
-1,0 0,8

Of particular note is that, while the revenue side has performed quite strongly, it is really the expense side which contributed to the very significant improvement. And on the expense side it is imports and interest which make the difference.

The reduction in interest is probably due in a large part to the debt restructuring of early 2012. This just goes to prove how important it is for the Greek economy to limit the level of debt service. I have argued in a previous post that if interest expense were capped at 6% of primary government expenditures (presently around 12%), the private sector debt could be comfortably serviced. All one would have to ask the official creditors would be to defer the collection of interest for, say, 10 years.

At the end of those 10 years, one would see if the Greek economy was restructured succcessfully or not. If not, the issue of debt becomes academic, anyway. If yes, one could sit down and negotiate a 'comprehensive final solution' for the Greek debt. That would have to consist of 2 elements: (a) restructure (or rather: structure anew) that part of the debt which is considered 'sustainable' by a well-functioning Greek economy (say, for example, the 60% Maastricht level) and (b) forgive the rest.

Anyway, if someone had asked me a year ago whether Greece would have, a year later, the kind of current account figures which it shows now, my answer would have been 'not the chance of an icicle in hell'. Amazing how wrong one can be!

PS: bear in mind, though, that industry analyses project that sales (imports) of mobile handsets will increase to 3,4 million units in 2013. To import machinery & equipment with at least part of that money would appear more sensible.

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