Wednesday, May 23, 2012

Greece's current account Jan-Mar 2012

The table below shows the development of Greece's current account in the period January-March 2012 relative to the same period the year before (in BEUR):

2011 2012
Revenue from abroad

Exports 4,3 4,9

Services (e. g. tourism) 4,6 4,7

Other income 0,8 0,8

Current transfers 2,5 2,5

---- ----

Total revenue from abroad 12,2 12,9

Expenses abroad

Imports 11,9 10,8

Services (e. g. tourism) 3,6 3,2

Other expense (e. g. interest) 2,6 2,6

Current transfers 1,3 1,2

---- ----

Total expenses abroad 19,4 17,8

Net foreign deficit (current account) -7,2 -4,9

The improvement continues: the current account deficit declined 35% (!) during this period! Imports declined 10% whereas exports increased 14%!

The discouraging fact is that - as before - after 3 or 4 years of crisis and so-called austerity measures, Greece as a country is still spending 1.379 Euros abroad for every 1.000 Euros earned abroad. That is a 38% excess of spending over income. This is much worse when only considering the trade account where Greece is importing 2.205 Euros for every 1.000 Euros which it is exporting!

Had Greece followed Mr. Tsipras' recommendation not to pay interest to foreigners, the current account deficit would have been reduced to about half of the above amount, still about 2,6 BEUR. If Mr. Tsipras intends to stop paying interest, he should first explain where he will get those 2,6 BEUR from in the next 3 months.


  1. I thought this was a good "infographic" from UK FT, whether its right or wrong I'll leave that for those who know better about these things.

    It has an audio commentary

  2. Well Sir, the Bank of Greece announced on 21-82012 that the current account deficit has shrunk by 83 % in June 2012 on a yearly basis. Default is now an option, as you know very well. What do you have to say now?

    1. You haven't read my blog. Otherwise you would know that my point is that, from day 1 of the crisis, Greece should not have gone the route of endlessly refinancing old private debt with new debt from tax payers. There was no benefit for Greece in that (only for the private creditors).

      From day 1, Greece should have negotiated a consensual debt rescheduling with its private creditors. If that had involved a default, no big problem. Defaults are only a problem when they occur in a non-consensual fashion. Defaults happen all the time. There is absolutely no reason to be scared of a default as long as it takes place in a consentual atmosphere.

      Had Greece gone to the IMF back in 2009, as it had intended to do, exactly a solution like the above would have been arranged by the IMF. That is their standard procedure. Mind you, it wouldn't have made things for Greece a lot more pleasant but the great Euro-mess could have been avoided. It was the irresponsible and prodigal sin of EU-elites that they prevented Mr. Papandreou from going to the IMF.

      Now, you seem to apply that once Greece has a primary surplus, it can easily default. That is a fallacy because it suggests that a antagonistic default is a good thing. It is not! An antagonistic default leads to a country's exclusion from international financial transactions and funding. And believe me please, Greece will need foreign funding for many, many years to come.

      It's all a matter how one plays the game with creditors during sovereign debt problems. If Greece could make a credible case (and I believe it could) that it needed a 2-year moratorium on principal and interest to get its feet on the ground again, and that the time of the moratorium would be used to do all the things that need to get done, my sense it that Greece could do that.

      What Greece cannot do is to "make a long nose" at its creditors and say "hey, we now have a primary deficit; why don't you go and fly a kite". That would be a sure way of banging Greece back into the 1950s/1960s.