Thursday, December 1, 2011

The myth of Greece's being a victim of Germany!

Following Greek media reports and, above all, Greek blogs about the current situation, one could get the impression that the whole world consists of only 2 countries: Greece and Germany. And the second conclusion might be that one of the two countries is the usurper (Germany) and the other one is the victim (Greece).

Facts do not support this prejudice!

At issue are the imbalances in trade and current accounts. Greece's current account deficit with Germany is Germany's current account surplus with Greece. The balance of the current account between 2 countries reflects the transfer of wealth between the 2 countries from ordinary business transactions (exports, services, imports, financial transfers like interest).

Below are the numbers of the Greek current account balance with Germany from 2007-10, put in relation with the total current account balance of Germany:


Current account
Shares of current accounts


Germany Germany
Greece of

of Greece
Revenue from abroad

Exports 3.822.204 8.070

Services (e. g. tourism) 680.500 13.782

Other income 787.547 531

Current transfers 71.152 2.392

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

Total revenue from abroad 5.361.403 24.775

Expenses abroad

Imports 3.150.464 28.597

Services (e. g. tourism) 777.543 3.927

Other expense (e. g. interest) 614.084 9.837

Current transfers 208.484 36

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

Total expenses abroad 4.750.575 42.397

Net foreign deficit (current account) 610.828 -17.622

Sources: Bank of Greece for Greek figures; Deutsche Bundesbank for German figures.

Conclusions from the above:

1. Only 15% of Greece's current account deficit during this period are accounted for by Germany. If one focuses one's entire ire at Germany, one forgets that there are another 85% of Greece's current account deficit which go on the account of other countries. Which countries are those? What are they being blamed for by Greeks?
2. Germany's suplus with Greece accounts for 2,9% of the Germany's total current account surplus. So don't be surprised when Germans don't get the point that their well-being depends on surpluses generated from Greece.
3. Greece's imports from Germany account for 0,7% of Germany's total exports. So don't be surprised when Germans don't get heart attacks when confronted with the risk of losing Greece as an export market.

Bottom line: Greeks should allow facts to enter their considerations when they judge the importance of the Greek economy to Germany.



  2. 40 years of a banking career and you come up with this report!!!

  3. First of all, your premise is wrong. Noone thinks the Greek economy especially is important to Germany. What's clear is that by the inflationary boom brought to South Europe by the euro and ECB's rates, the South as a whole had a huge trade deficit with Germany between 2001 and 2008, compared to before.

    a) you should check the numbers from 2001 to 2007
    b) you should check the numbers for the South and the North aggregated, Greece is just a small economy, but the change in trade balance after 2001 affected all South European countries the same way, and if you add the surpluses of germany, the netherlands, Austria etc against the South (or Greece only), you will find that the Greek trade deficit against the North is a much higher ratio. Actually the South's trade deficits and Germany's trade surpluses are mirror opposites.

    Noone thinks that the Greek market especially is terribly important to Germany... but everyone thinks that Germany gained hugely from South Europe as a whole since 2001, from each country according to each economy's size. You should allow facts to enter your considerations when you judge the importance of the South European trade deficit, and especially its explosion (and Germany's surpluss explosion) when the South joined the Euro.

    the same for all other South E. countries.

    1. Sorry, my premise (i. e. that many Greeks overestimate the importance of Greece to the Germany economy) did not originate in my mind. I picked it up through reading newpapers articles (and letters to the editor), Greek blogs, etc.

      In my blog inventory (the first posting in this blog) you find a section "position on current account balances" and there are many other posts on this because that is one of my major themes. You will see that you and I are more or less saying the same thing in imbalances.

      On a world-wide basis, c/a balances are a zero-sum game. Indidivual surpluses/deficits represent the transfer of wealth from one country to the rest of the world. A very large structural surplus (Germany) is just as bad as a very large structural deficit (Greece). No one has described this better than Warren Buffett.

  4. Germany is the bad guy - everyone says so!

    Soon everyone will believe that because everyone says so, the truth whilst the complete opposite will not matter.

    Germans will take umbrage at this unfair accusation and start to look inwards, it's what happens when the mob leads the way. There might even be a war, judging on how easy people get fired up with old wounds that long should be forgotten appearing all over.

    Angela Merkel has worked hard to be inclusive but to no avail, stupid people can't see that in the good times, what chance is there now

  5. Danke für diese wichtige Information! Das Märchen von den deutschen Leistungsbilanzüberschüssen, die Griechenland ruiniert haben, erzählen ja nicht nur die Griechen. Das wird auch uns von unserer eigenen Politik und Publizistik gerne präsentiert, um uns das Geld für Griechenland aus der Tasche zu ziehen!

  6. I think you should stop anonymous folks from commenting on your site. Very interesting analysis.

    I have no idea why would Germany be blamed for "not having deficits" or for "benefiting" from the South, whatever that is, or Austria is very much South to me (very much so, a great wine growing country, what North is that?)

    Anyway, I blame Germany unconditionally for launching the First World War and destroying Europe. We live with consequences of that war - from emergence of ethno-Nazi statelets between old Germany and Austria and Russia to the American involvement in every imaginable affair. I am a bit reluctant with blaming Germany with starting World War II (at least up to the point of the invasion of the USSR, until June 22, 1941 the war Germany waged was - as seen impartially from the distance of time passed - was just). I would certainly not be blaming Germany because others (some non-European, Asian observers would call them lazy parasites) accumulating trade deficits. Come on. If you don't like German products or if you don't want to have a deficit with Germany, don't buy German stuff. How can it be Germany's fault that you are buying stuff from Germany - this logic escapes me.