Internal devaluation was supposed to make Greece cheaper (sorry: more competitive) so that exports would increase. Now a Grexit is no longer being ruled out which would really make Greek exports explode. Is there substance to these claims?
Despite significant interenal devaluation, Greek exports have only increased moderately since the record year 2008. Part of the explanation may be that the reduction in wages was offset by increases in other costs, but that can only be part of it. Exports can only increase significantly when there is an export-oriented infrastructure which is underutilized due to high wages and other costs and which explodes as soon as the costs/prices have become competitive: I would suspect that Italy, with its huge industrial sector, would quickly become a fierce competitor for Germany if Italy could devalue by 20-30%. A country which does not have a car industry cannot increase car production by subsidizing wages.
Jens Berger runs the German blog Spiegelfechter and is a major contributor to the blog NachDenkSeiten. Both blogs focus on 'progressive economic thinking'. Critics would call both of them leftist blogs. In this Videopodcast (in German), Berger explains the export perspectives of Greece. The podcast was made in June 2013, so the data presented may no longer be actual.
Berger's major point is that the Greek economy has a very low productive capacity. The largest productive sectors are foodstuffs, metals and mineral products (cement, etc.) which Berger says are not the classic export sectors for a developed economy (personally, I cannot quite follow this argument because certainly foodsstuffs should be a major export sector for an agricultural country). Even though large by Greek standards, these sectors are quite small by international standards.
Greece's major exports are in raw materials and refined raw materials, again not typical examples of a developed economy. The classic export sectors of a developed economy (refined metals, beverages, chemicals, plastics, pharma, electronics, machinery, optics, semiconductors, clothing, etc.) are extremely small in Greece. A case in point: among the largest Greek companies, one does not find classic production companies.
In shipping and tourism, Greece is an international giant. But still, Berger claims that these two sector are not very sensitive to domestic wages.
In essence, Berger's presentation supports what I have been arguing in this blog all along: Greece urgently needs to build up more of a productive capacity, a greater capacity to generate economic value, in order to make its economy (and above all its exports!) grow. And if Greece cannot accomplish that alone, then this is the area where the EU should help Greece.
Despite significant interenal devaluation, Greek exports have only increased moderately since the record year 2008. Part of the explanation may be that the reduction in wages was offset by increases in other costs, but that can only be part of it. Exports can only increase significantly when there is an export-oriented infrastructure which is underutilized due to high wages and other costs and which explodes as soon as the costs/prices have become competitive: I would suspect that Italy, with its huge industrial sector, would quickly become a fierce competitor for Germany if Italy could devalue by 20-30%. A country which does not have a car industry cannot increase car production by subsidizing wages.
Jens Berger runs the German blog Spiegelfechter and is a major contributor to the blog NachDenkSeiten. Both blogs focus on 'progressive economic thinking'. Critics would call both of them leftist blogs. In this Videopodcast (in German), Berger explains the export perspectives of Greece. The podcast was made in June 2013, so the data presented may no longer be actual.
Berger's major point is that the Greek economy has a very low productive capacity. The largest productive sectors are foodstuffs, metals and mineral products (cement, etc.) which Berger says are not the classic export sectors for a developed economy (personally, I cannot quite follow this argument because certainly foodsstuffs should be a major export sector for an agricultural country). Even though large by Greek standards, these sectors are quite small by international standards.
Greece's major exports are in raw materials and refined raw materials, again not typical examples of a developed economy. The classic export sectors of a developed economy (refined metals, beverages, chemicals, plastics, pharma, electronics, machinery, optics, semiconductors, clothing, etc.) are extremely small in Greece. A case in point: among the largest Greek companies, one does not find classic production companies.
In shipping and tourism, Greece is an international giant. But still, Berger claims that these two sector are not very sensitive to domestic wages.
In essence, Berger's presentation supports what I have been arguing in this blog all along: Greece urgently needs to build up more of a productive capacity, a greater capacity to generate economic value, in order to make its economy (and above all its exports!) grow. And if Greece cannot accomplish that alone, then this is the area where the EU should help Greece.
"Berger claims that these two sector are not very sensitive to domestic wages. "
ReplyDeleteThe association of greek tourist operators begs to differ.The lower wages is what allowed to give cheaper packages to foreign tour operators, despite the higher income taxes and VAT.
I would be surprised if what you said wasn't true. Don't forget that those bloggers/economic thinkers etc. have their own agendas. Often they speak to their (German/US/International) audience and they don't care about what happens in/to Greece.
DeleteYou are partially right that there are foreigners that do not care about Greece but it is the same people that do not care about anything other than their pocket. These people are everywhere.
DeleteI beg to differ there many FiloHellenics of non greek origin who are deply concerned about Greece and express views as to help give options to the Greek problem.
V
Indeed. In international mass tourism, packet prices, showing the consumer what "bang for the buck" he would get, certainly is an issue. There had been many complaints about high prices n Greece before the crisis hit, and neighboring competitors Bulgaria and Turkey enjoyed stronger growth in tourism. It's very unlike demand should really be so independent from the costs of the product!
DeleteAnyway, there is much literature about the economic effects of tourism, and there's even a dedicated publication, "tourism economics". Is Berger's claim compatible with the findings of other economists, is there a consensus, I'd like to know.
Agreed. But here's the thing.
ReplyDeleteThe advantages of a national currency isn't just the ability to devalue. It's also the ability to provide funds in targeted sectors of the economy.
Monetary policy will determine whether this will be done through the banks alone (i.e. the private sector), or the government via the banks (i.e. what was happening in Greece before the mid-90's).
Based on Greece's characteristics, I consider the second as the best option. It's also the one that endangers the exchange-rate the least. Let's admit it, the Greek private-sector would make a shambles of it, like it did with the credit boom of the 00's.
On the other hand, it's impossible for Greece to develop a productive economy inside the euro. Here's why. Currently, liquidity is scarce (I'm talking about Greece here), as are credit-worthy borrowers, thus Greece won't experience a credit-boom any time soon (a prerequisite for investments). Also, within current European structures and frameworks, it's impossible for countries to engage in government capitalism, which is basically what I advocate here.
Would Greece have developed a productive economy had it not joined the euro? No. But it would have been a far more balanced economy, and one with a much smaller output gap (i.e. no 25% unemployment).
You are completely wrong. euro was the best thing that happened to greece. Likewise it brought some modern or civil mannerism to the coutry which helps the future youth think differently.
Delete2nd for increased capacity and production force in the respective sectors Greece will move up in time. Patience and you will see.
See my post below...
V
Mr. Kastner,
ReplyDeleteShipping will now have a boom like never seen before. SYRIZA's responsible for maritime matters, Mr. Dritsas, anounced that SYRIZA will make state owned ship lines for passenger ships. It will be also a good solution for hiring greek sailors and lower their unemployment.
According to Mr. Dritsas, private companies don't offer much and are not willing to invest.
http://www.protothema.gr/politics/article/442487/kratikopoiisi-tis-aktoploias-anakoinose-o-dritsas/
Together with a state owned air company, it will be an unxpected sector of growth for Greece. SYRIZA Lines vs SupeFast Ferries vs Minoan Lines.
Who will win!
This is another retarded proposal by Communistic minded idiot....
DeleteThe public or government companies can not be sustainted in a modern competitive market without public funds flowing in. with the petrol at 50usd per barrel it would be suicide to try to compete with a private shipping company.
He is talking air. he is ridicules.
V
Mr. V,
DeleteYes, he is ridiculous, but he is also the likely new minister of maritime affairs. Here in this blog, one may easily discard this as "he simply won't do it". It's understandable. Because Dritsas lacks the money, not because he wouldn't like to do it. Just like Tsipras doesn't have the money for Olympic airlines, which though, as he said, it is an important thing to have.
However, the time of "there is money" has passed. People are sick of being lied at. A relative of mine is an unemployed sailor and he decided to vote SYRIZA after what Dritsas said.
When they will have to tell the people the truth, they will suffer the backlash. SYRIZA is doing the campaing of Andreas Papandreou 1981. But there is one big difference. Andreas had received the debt from the evil right, at 25% of GDP. Tsipras has no similar luxury. He wants moratorium exactly so that he can give money and in 4 years, have again the evil right to come un and become unpleasant fixing state finances, and then come again and give some more.
Well, i think it won't work this time.
After all those horrible examples of inefficient, uncompetitive state owned enterprises in Greece, and after Venezuela managing to ruin even a nationalized oil company, imho every confidence in the competitiveness of a socialized shipping line are totally misguided. The difficult market conditions in this sector are well known. There won't be any boom there in the foreseeable furure.
DeleteBut I guess you already know that and your comment was pure irony, exposing the nonsensical ideas of Syriza? This can't really be taken for serious.
Well, exporting is hard work and it has been destroyed in Greece. The public sector does not export and the private sector is just a parasite of the public sector. I always thought that there is a whole pipeline that needs to be created for a country to export a certain product -say oil-. Since Greeks don't know how to do it, bring on the German managers to teach us. But this cannot be instilled from top to bottom. The potential exporters have to reach out and ask for help.
ReplyDeleteThe only help the government can give is to reduce the regulatory burden, the bureaucracy and of course the taxes.
Mr. Kastner,
ReplyDeleteI did not see the above blog and i am sure his information is correct more or less. You are even more correct that we need to do more. And more so in capacity output. Things are indeed being done and investments in infasture light and medium industries are being made but such investments as you know take time. Even on the personal level people are seeking efficiency which in the gernal mindscope contributes to an efficient economy and good economical figures.
In more detail, exports since the crisis have reduced and increased only gradually for the following reasons:
1. After the 1st shock of the economical collapse all debt strictened companies that did export went into bankruptcy. Those exports were lost as foreigns did not want to purchase fom greece initially. It was good as the "bad blood" was killed off immediately.
2. The companies that were on the Public tit, that saw that it would not last, invested hard, downscaled wages and personel as to allow for exports. Costs did come down but not significantly as the petrol and energy prices skyrocketed. (Not to mention the payment terms for good acquire from our brotheren EU companies reduced to "pay at order" from 120 -150 day credit line.) More specifically petrol because aside from the actual cost per barrel the government added extra gas taxes for 3 consecutives years every 3-4 months. Meanwhile DEH skyrocketed as well to meet troika requirement of a public company having profit. It was a detriment but companies survived and grew slowly.
3. Inovvation and infastructure is coming because all the odds and economical factors have been against us from the start. But we are still growing. I have personal knowldge of companies that produced goods and products investing in new factories warehousing and warehousing systems, and the suppliers (local) of these companies. Even new healthy and energetic companies are being created. Ofcourse not on a large scale as, as Mr. Slip states, there is a lack of liquidity from banks. That is perfectly fine. Slow growth is better by far, than any credit release. This because Slow growth allows true investors who study a market or an opporutnity to find wealth. In a credit boom even retards make businesses.
4. Personal knowledge of farmers and food stuff companies in investment of machinery for both field managment and production of final food stuffs.
5. Check the respresentatives in greece of machine and production tooling of foreign companies. Their business is booming as there is investment.
This all needs time. Money is scarce so business men are careful prior to an investment. The time necessary though is the allowance of a descent government and attitude from EU to allow us to grow. We can not grow as we have a shit politicians in general. We do not need EU against us well clamping down on us for even red mark in our damn balnce sheet.
see below....
V
Mr. Kastner,
ReplyDeleteI would like to ask you to think of basis of an article of WHOM to vote for...maybe a debate her can help me as well....
Truly I do not know. I do not care about idealogcal views as they are only for fantasy worlds. Nor do i care to hear about the propoganda of each party. My concerns are that a goverment if elected would indeed renegotiate the finance of our debt, renegotiate a growth plan and help the country as a whole move foward even if it would mean even some more priveleaged take a bigger hit. I consider myself middle class but i am sure the government sees me as upper bracket for taxation. This is not my concern. I would pay even 50% of taxes like Sweden, if it meant funds where going for a greater good of society and the growth of my country. As a healthy country means happy people. And happiness bring health and the two combined is the wealthiest commodity anybody can obtain.
1. New Democracy: Some good done. Alot bad done. A nasty Propaganda machine starting for elections. Has many fascists in its ranks. Some new ideas good some bad extreme right. If i vote for these people i feel like i am voting for some fascists whom simple will continue them same program of some good and alot bad. I am unsure their result will be better or worse than syriza.
2. Syriza: Alot of nice thoughts and many bad ideas. I like the way they are playing their political game but i believe they will be blown up. Not to mention their are some extreme leftitsts or anti-fascist as i call them. How can i vote for a party though that will block the sale of elliniko, a multi million investment and stability and jobs to the region. the Aek stadium is also being blocked. 80 million investment in shit area of the city. Just the vision of this stadium will be a sight for sore eyes. If i vote for them they most probably will win but will not be able to form a governement. whom will they pair up with? I do not believe they will risk being in the eu. But i am unsure what they will be able to dofor greec in general. new is always better but even as new i feel like there is no change.
3. Potami: I feel like i will be voting for Warren Buffet himself. His views are not his and he is clearly a puppet.
4. Golden Dawn: I feel like i am voting for Hilter himself. I can not understand that thoughts of greeks idolising Hilter, a man that mantality brought a reduction of 10% of the greek population in ww2. These people need to be closed in the mental hospital. You don't like communism. Ok. fine you don't need to kill them.
5. KKE: I just laugh. I like their views occasionally. It is a good opinion to have in the government. Just to have the other opinion. But the 90% of their views, they vote no to everything just to vote no. Pathetic. And they still believe soviet union is the pinical of society even though it came crashing down.
6. Kamenos Party: The scandal with the under table money pay offs. This was an act. they were involved as well but i believe they are purposely being torpedoed as to get New Democracy votes. I could vote here but it will be a wasted vote as he will not get 3%.
7. Kouvelos: Same as Kamenos.
8. Pasok: No i will not vote for fatty. he has been sucking on the governemnt tit for so long that he will do whatever it takes to stay, plain and simple. He doe snot care abou the country.
9. Papaidiot Party: He is just arogant and stupid. One of the biggest traitors of our modern history. His grandfather and father must be doing summersaults in their graves. It is not for the troika i call him a traitor but the way he handled the whole greek crisis. Incompetent puppet monkey. I do not consider myself a violent man, but he needs to be taken out completely.
So who to vote for? Maybe Mickey Mouse?
V
A simple answer to your question: the best choice is the least bad option. Depending on your analysis of the situation, that is likely to be either Syriza or (if you are scared of uncertainties) ND, which will guarantee to continue doing exactly the same with the same results.
DeleteHowever, I dispute your claim that membership of the eurozone was the best thing that happened to Greece. The substantial theoretical literature on monetary unions makes it very clear the conditions under which such unions can function well. The first is that the economies are so similar, that a common exchange rate and monetary policy is simply not an issue (at least, economically speaking). The second case is actually what happened in Europe: where very different economies make up the union, there will be big impacts. The stronger producers will be able to export more successfully to the weaker countries, and the weaker countries will have access to cheaper credit thus enabling their citizens to consume more (on credit) and if they wish, to increase their imports from the stronger economies. The result will be in the short run a deteriorating trade balance for the poorer countries; in the medium run, ceteris paribus, we would see reduced competitiveness leading to declining exports and reduced employment in the productive parts of the economy. Although the retail sector might offset some of the employment loss, this would be partial. Moreover, the state would probably by now be in a budgetary crisis owing to lower income tax revenues alongside the cost of increased unemployment.
At this point, the models concur, for the monetary union to survive, the richer economies need to transfer wealth to the poorer regions for the population to maintain its income levels. That could be done as explicit transfers for social reasons, as infrastructural improvements that create employment, or as subsidies for the maintenance of production that has become uncompetitive within the monetary union (and also externally).
All of the theoretical predictions have proven correct. Germany has good enough economists to know the literature and to have advised the polticians some time ago of the likely outcome of including economies like Greece in the eurozone. They are now lying through their teeth.
You may have noticed that I said "ceteris paribus" for the scenario. This is the only thing, the only reason that Greece could logically have entered the eurozone -- that it would not maintain all conditions. To do this, several things need to happen.
(1) economic efficiency (competitiveness) in production needs to increase rapidly, within a few years.
(2) access to cheaper credit is not used for household consumption, but is primarily taken up by the productive sectors. This would mean, for example, being able to purchase (on credit) new machinery with better technology; engage in mergers and takeovers of rival small businesses to attempt economies of scale (Greek businesses are all far too small); set up systematic staff training schemes and encourage lifetime learning and retraining in new technology, so that your employees can help your business compete in the global economy.
(3) in the longer run, if conditions 1 and 2 are satisfied, and another major issue (opening up the country to new business ventures without the bureaucratic nonsense and corruption that currently exists) is dealt with, then inward investment can be encouraged and facilitated. This is important, even with the enhanced access to capital implicit in (2).
Of course, all of these things will not happen naturally. They require government planning, commitments, taxation and incentive schemes, and a determination to make the thing work. Pasok did NOTHING, and ND did NOTHING. End of story.
To Xenos,
DeleteThanks for your reply. Forget the voting for now (They all suck anyway) I think we should legalize the ancient system of Exostrakismos, vote for which politicians must be banned from the politcal scheme.
I would prefer to talk about your reply on the EU. I liked your whole essay. Nicely put and good analysis.
Starting from your conclusions of the 3 bullets points I personally believe all points are coming. Especially point 1. economic efficiancy has been made and achieved and is maintained. I would be more concerned with the increased capacity which Mr. Kastner has stated. If we have the efficiency we must provide the output to meet real and large demand. I am an optimist in this manner and i see it in my work and mine and other sectors. IT IS COMING
2. Is coming slowly but mainly for businesses and under the magnifying glass and with just cause.
There are pluses and minuses for the monetary union. Your description, no offense is "textbookish." Economies are alive and are constantly changing. In retrospect for sure it help more dedicated countries succeed and maybe even entrap lackidasical countries like Greece to be in the current position we are in. But we can not say that from the mid 90's till the hit of the crisis Greece did not receieve trenches of EU cash as to build up and invest as to become competive. And not only to Greece but all eu. Some countries like Poland made due on investing every single penny that came their way and Poland who entered after us will soon be the 2nd power house of eu. What we did, is find sneaky ways to take the money and blow it away.
I don't like to generalize as there where many smart greeks that took the subsidies and invested and are successful today because of smart investments, but the majority blew the money away.
Setting that aside we had another globalization phenomena that affected the EU in general and the so called smaller lighter industries such as Greece. With China starting to roll hard at the turn of the century while the FED printing money as if it was printing toilet paper caused the dollar to drop. having the dollar drop and the RMB pegged to the dollar the EURO became the powerhouse currency. With a strong euro while credit was being dished out and a low RMB, it was insane not to buy goods from China. Unfortunately, where you produce is of no concern to shareholders but the bottom line. 5-6 years of pure profit out of cheap china. This resulted in many factory closing in Europe. Greece included. So you can not blame the EU countries that did well to maintain their industries for the long run versus selling cheap for the short term profits. For smaller economies like greece it was also harder to maintain an industry as exports were never our priority.
When the bubble burst globally and the credit line stopped, the deck of cards was gathered and is currently being thrown in the air again. Where the cards fall remains to be seen.
continued.....
I see the period of 2000- 2005 and the return of goods being bought in the EU of the last years a positive learning for all the industries of eu. Especially Greece. I believe the businessmen have learned this. It also brought sustainability and efficiency to the industries of eu. Something that China has fallen behind.
DeleteIn my travels i have had the luxury to visit many places in the world and many factories. What i see is a rturn to the eu. Meanwhile the factories and investments being made in greece however few may be are state of the art in their own holdings.
Overall, Greece must maintain its position in the monetray union. We do not have the economy, population, or government that can stand on its own feet outside of a eu. If we do we will collapse. And not due tour foes, but due to ourselves. You know in some aspects greeks need to be policed. As so we are our good selves. One starring example is the Euro basketball final betwen Olympiakos and PAO. In greece would these two sets of fans be able to be in the same stadium without chaos? In the final IN GERMANY, not even a cup dropped on the floor!
V
Thank you for your reply. My comments were entirely theoretical in that post, because I think it is crucial for people to understand that nothing that has happened in the eurozone is unexpected. The global banking crisis was not predicted by theory, but is not the cause of the eurozone problems -- merely the trigger for events that were as inevitable as night follows day.
DeleteAt an empirical level, my specialisation is in labour markets. My prognosis for the Greek economy based on these empirical data is not very good. Take, for example, the large EU transfers to Greece for training and skills development. Reliable data are not available, nor are there proper survey data on actual implementation of the many schemes. We are therefore obliged to use limited personal and anecdotal data to understand reality. What I know is that I was asked to register as a trainee, for the company to collect money, when I had been a junior professor in a UK university and was currently an advisor to the European Commission. The employer thought it quite reasonable to "train" an expert, but not actually to train an inexperienced person (who needed training). This seems to have been commonplace: that training moneys were used by employers merely to subsidise the cost of employment and not to train anyone.
Another typical case is that of technology (computer skills) training. I met many Greeks who had recieved certificates from such schemes, and used these to get jobs in companies that needed employees with computer skills. I asked them (confidnetially) what the training was like. 100% of them told me that there was no training: they were asked to turn up very day in the morning, sign a form, and then leave. This over a 5-day period. Those who complained were told "what are you complaining about? You will get the certificate without doing any work!"
In fact, I saw the outcome of this approach in my own professional work. I had a research contract with a Pasok research centre (I will not name it, as they hate my guts anyway). After I had given a public presentation of my work, using powerpoint, they asked me for a file of the presentation. So, I sent the ppt file and a pdf file. When I was in Vienna, they phoned me in desperation, asking for jpeg files of the graphs. I explained that I was abroad, but they could extract them from the pdf files. Apparently, a team of computer technicians were unable to do the most basic things with these files -- things that I do every day -- and were therefore unable to publish the presentation. When I returned to Athens, I asked why: the answer? Well, you know how people get jobs in Greece... but they all have diplomas in computing skills.
Similarly, when teaching Masters students in Greece, I found that they were very deficient in computer skills. I was surprised, since I thought that a crucial component of modern labour market requirements is that of computer skills.
So, I am not confident that Greece can compete in global markets with its current labour force. On paper, many are more qualified than me: in reality, there is a serious skills shortage. The same is highly visible in the UK, too. University graduates, other than from a few top unis such as Cambridge or LSE, are very short on basic skills. A Greek friend here in London told me that he has to train uni graduates in their company in such basic things as formal presentations, use of English, computer presentation techniques, etc etc. All of Europe has got itself into a terrible mess with formalistic bureaucratic requirements and very little evaluation of actual skills in job appointments. This extends from the most junior posts to the highest levels of management. Neoliberal ideology has failed completely, and those in positions of power refuse to admit it. Our future is bleak.
Dear Xenos,
DeleteDialogueing with you is a refreshment and quite amuzing. Please continue to contribute. You formal data is essential for good discussions. I laughed with your interesting involvements with the government.
Overall don't fret my friend. It is always darkest before dawn. I know your comments basedon the level of skills, but from my POV, regardless of your and my experiences there has been improvement, meanwhile the private sector of all of greece has skills improved 1000% in this crisis. On all scales. The competitiveness is alreayd in motion.
Take Care,
V
I truly think that one of Greece's most promising products as far as exports go, is Ouzo
ReplyDeleteNot Only: Here is a list of possible and alreay established products:
Delete1. All spirits and wines. Raki, Tsikoudia, many types of wines. Metaxa all time classic.
2. Feta (POP)
3. Yoguart. Fage has a huge markt share in the USA. not to mention competitors exporting Yoguart.
4. Krokos (Safran) Many state the best int he world.
5. Smoke fish eggs.
6. Fish
7. All types of produce.
8. Olive Oil
9. Many more... Just think of Fistikia Aeginis. premium nuts
10. All Aluminum based material raw and finished goods. Whether be Al sidings to Al windows, to solar panels and systems.
11. Pharmeceutical finsih goods.
12. Pharmeceutical 3rd party manufacturing sites. For global players.
13. Cosmetics/Toilerties/Household goods.
14. Designer companies.
15. Packaging materials:
Plastics. (Blow, injection, extruded, Injection Blow) Flexible technologies, seals, rubber, labels, films, shrink. Paper materials: Carton, boxes, leaflets.
If i sit down and mention all business in detail with growth in greece i will lose my whole day. everyone is so use to saying shipping and tourism they do not see the niche markets or smaller markets which bring grow. Niche markets bring the future.
Mercedes was once a luxurious item. A niche item for niche market around the world. now it is a necessity in most society's.
Baluga Cavier was a niche item up to 15 years ago, now it is everywhere. very expensive but it is everywhere. for niche expensive items to be everywhere it means there is a respective industry behind it.
It is why Mr. Kastner is correct that capacity must grow.
V
Some good points, but all above 9 are weird. Like:
Delete10 Aluminium? That's a very energy intensive good. Why do you think Greece is a good place for that? This is for countries with cheap energy like Iceland!
11/12 Pharmaceuticals? Why? Which advantages does Greece have? Why shouldn't that production go to cheaper countries, like Bulgaria or Lithuania?
13 Cosmetics? same as above.
14 Design? Are there so many exciting designers in Greece?
15 Plastics? For these, there either has to be a highly qualified environment for R&D of specialized products or very cheap labor. Afaics Greece doesn't fit either description.
16 Paper products? WHERE ARE THE TREES?
Let's be realistic: Greece has to focus on making more of her tradional strengths, mostly by adding value to aggricultural products. Plus tourism and TRADE (becoming increasingly interesting). If other opportunities show up, great, but don't bet on that.
Yes, the lower wages were partly offset by other costs. But, more important, Unit Labor Cost does not reflect hourly cost alone, but also productivity, and nothing has been done to increase it.
ReplyDeleteI tend to agree with Jens Berger on the impact of wages.
Tourism is characterized by small family units and the employees are family members or foreigners. The former not paying any taxes and the later sending as much money home as they can.
Shipping (except for domestic) is absolutely isolated from wages in Greece. The ships have Ukraine or Philippine crew and officers. A lot of the land bases offices are not even in Greece, even when they are, a lot of the staff are various foreign expats. The ships are not build, repaired or maintained in Greece. They are not financed by Greek banks. They are not insured by Greek underwriters. They are not fueled by Greek refineries or dealers. They do not trade in Greece. They are not classed by Hellenic Register of Shipping. only 25% of them are registered with Greek flag.
While being big, the Greek fleet is not as important to the Greek economy as the owners portray it. The myth created, has made it possible for the owners to keep the Greek shipping world practically tax free.
Greece is not an agricultural country (they should be), only in terms of proportion of population who work there. Greece is a net importer (in money) of 19% of the foodstuff. Even Germany , who we all consider an industry nation, do better with 11%. Part of the problem is, as you have mentioned Klaus, that Greece sell foodstuff in bulk, instead of putting it in 50 gram tins with fancy labels and charging an arm and a leg.
Lennard
For the shipping industry, more or less wherver they go they will pay 0 in taxes. It is why i consider them as simple turnover. Although they do pay more people in offices in the countries where they have more flags. All greek shipping magnets have offices in our main port regardless where their flags are.
DeleteAs for your comment on agriculture it is partially true. You should look below the numbers. greece does not import raw material food stuff. they import finished goods foodstuff. These two types are broken into two categories. Very high end food stuffs which create a high turnover of value and very low end food stuffs (like Lidyl super market imports) which people buy items due to the crisis. The imports exports of this percentage which you state should be reviewe under tonage not value. Then i am sure were will present a huge surpluss.
V
@V
ReplyDeleteI disagree with you on shipping, and so do the European Commission. It is much too complex a question to treat in this blog. Sufficient to say that Greece cannot solve it alone.
As for agricultural products you are right, tons would look better. However, last time I looked at currency accounts they were nominated in EURO, not tons.
Lennard
Hey and thanks for this insightful article. I just want to point out that, as you state in your article, "Greek exports have only increased moderately since the record year 2008". In my humble opinion this entails that, no matter the reasons behind this increase, Greece is at least doing something right! and lets not forget the power of Greece's Shipping and Maritime industry! I would be glad to hear some feedback on my comment! Thanks
ReplyDelete