Sunday, February 24, 2013

Fighting for a share of the Direct Foreign Investment cake

The CEO of the German Allianz Group said in an interview about 2-3 years ago something to the tune of "We (Germany) will have to re-direct some of our foreign investments away from the East and the Far East to the South". That, of course, would be a very important part of the solution of the North/South imbalances.

If the numbers I researched are correct, then Germany makes foreign direct investments of about 60 BEUR annually. I don't know how much of this FDI goes to other problem Euro-countries and it wouldn't make sense to take investments away from them in favor of Greece. However, there ought to be a good portion of those 60 BEUR which might as well be re-directed to Greece. Why isn't it being re-directed to Greece?

This is only one country, Germany (albeit probably the largest foreign direct investor in the Eurozone). Other surplus countries in the Eurozone undoubtedly have their own levels of foreign direct investment, part of which could be re-directed to Greece.

I repeat what I have emphasized on innumerable occasions: the debt is only the 'derivative'; the 'underlying' is the real economy. Playing around with the derivative will not solve any problems of the underlying. To solve the problem of the underlying, the flow of products/services within the Eurozone must be re-balanced and the first step in such a re-balancing effort would be a re-directing of investments.


  1. I have heard recently comments that imply that Germany is somehow deliberately not increasing its imports from Greece. I put it this way because I didn't fully understand but maybe some of your other commentators would.

    On the other hand both Turkey and the USA have increased their greek imports phenomenally in the last 3 years..

    1. I would have no idea how 'Germany' could deliberately slow down imports from Greece. This is free trade. It is not the German government that imports; it is German companies and consumers. Even if the government (of Germany and/or any other country) gave out marching orders not to import from Greece, no one could be prevented from doing that. If Turkey and the US increased their imports from Greece, it can only be due to the fact that something happened (like a devaluation of the Euro) which made Greece exports more competitive. It could also mean that certain Greek exporters made greater efforts to sell their products abroad.

      As for myself, I have never understood why I can't buy in Austria, a mere 1.000 Km North of Thessaloniki, the same agricultural products which we buy at the laiki in Greece (instead, we get agricultural products from all over the world). It can't be the prices because the price differential between a laiki and an Austrian supermarket is so large that it would simply have to be profitable to export to Austria.

      I couldn't find the data bank but I recall vaguely that the last time I looked, German imports from Greece have been going up in recent years.

    2. Tourism is Greece's biggest export industry, I think, and historically Germans have been Greece's biggest tourism customers. Despite what the industry propagandists say; it would come as no surprise to me that, given recent ill will between Germany & Greece, more than a few Germans who might have vacationed in Greece are going elsewhere - Sardinia's nice, Croatia's closer, Morocco's interesting...

      Tourism ought be booming in Greece, given that much of North Africa has gone from being a no fly zone to being a no go zone and that Syria is a ....... disaster.

      Greek firms have historically exported bulk food to Some Other EU Country where it gets packaged (canned/bottled etc) for the consumer. But I recall reading that it often gets sold as a Made in Some Other EU Country good. Maybe the German canneries & bottlers are sourcing bulk produce from easier to do business with suppliers such as Spain, Portugal.

      The other day athensDog gave us a clue as to perhaps why you can't buy in Austria what you can buy in Thessaloniki - Greeks are as hostile to exports as they are to FDI.

      Another factor is that if you want to send fresh produce a 1000km from where its grown then you have to grow 'travel friendly' varieties, use 'best pick' harvesting regimes, and have appropriate storage and transport infrastructures.

      Maybe the Greek produce you buy in Thessaloniki is none of those things, but the Thai lychees you buy in Vienna is all of those things.