Thursday, October 20, 2011

Improvement in the Greek economy?

First, the good news: in July 2011, Greece exported 1.879 MEUR which is the highest monthly level in her history. Congratulations!

Secondly: in July 2011, Greece had revenues from tourism of 2.252 MEUR, very close to record levels during the last10 years. Obviously, these revenues cannot be linearly extrapolated because June-September are the tourism months while the rest of the year tourism is low.

So, July 2011 can certainly be considered a near-record month for revenues from abroad with exports and tourism adding up to 4.131 MEUR.

And now to the chaos-number: in July 2011, Greece imported 4.440 MEUR!

After making adjustments for other income and current transfers, the current account deficit was 812 MEUR in July 2011. It seems certain that the current account deficit for the entire year will come out near 25 billion EUR (or more).

This is, indeed, shocking news because it means that Greece will borrow around 25 billion EUR from abroad just to finance her ordinary course of business (foreign trade and services). This does not yet include new foreign borrowings for financing the budget deficit nor does it include new borrowings for financing capital outflows (capital flight).

Any non-economist will understand that there is one conlcusion to be drawn from this: slam the brakes on imports as fast as you can! And stop capital flight!

Regarding imports: identify priority imports which the economy needs to function (energy, medicines, etc.) and leave them tax-free but slam huge taxes on all the other imports (up to 100% on luxury goods). Do that pronto!

Regarding capital flight: implement capital controls and do that immediately!

It is a shame when a country which desperately needs fincancing from abroad stands by and watches how huge sums of money flow out of the country for no good reasons!

Sorry, that is not a shame. Instead, it is absolutely irresponsible! There is no justification to lament about irresponsibilities of the past when some of those very same irresponsibilities continue in the present in unhindered fashion!


  1. Those figures say it all. Already a huge amount has left apparently...any chance they could get it back (apparently it is mostly in Switzerland)?

  2. Capital never flows by mandate; only through incentives. Today, Greek capital has all the incentives in the world to leave Greece. Only a fool would transfer his money from Switzerland to Greece these days.

    Vice versa, if Greece managed to work out incentives for those monies to return, they would return quickly (at least some of them). The incentives would have to be: (a) the same security as in Switzerland and (b) better return potential than in Switzerland.

    The real immoral thing about capital flight in the last 2-3 years is that, first of all, it was completely legal and, secondly, it was financed by the ECB: Greeks ordered their local banks to transfer money to, say, Switzerland and the local banks borrowed money from the ECB in order to finance that. Put differently: European tax payers sent money to Greece so that wealthy Greeks could transfer their money to Switzerland. And this to the tune of 50-70 billion EUR in less than 3 years. Try to explain that to the next generation of tax payers!