Wednesday, March 29, 2017

The 120 BEUR Chuzpe

Handelsblatt writes about an internal paper at the German Finance Ministry with calculations that an interest deferral for Greece until 2040 would 'cost' Germany 120 BEUR. Well, they really don't say that it will 'cost' Germany 120 BEUR. Instead, they say that if Greece did not pay any interest until 2040, the total of such unpaid interest would amount to 120 BEUR by 2040. That 120 BEUR would simply be added to Greece's debt.

Or so they allegedly say because I haven't seen any original document.

When does Germany (or any other country) make or lose money on loans to Greece? In the absence of a haircut of principal, this can only be a function of interest rates.

A company keeps its books on an accrual basis. If the annual interest revenue is 365.000 to be paid on December 31, every single day, starting with January 1, will accrue interest revenue of 1.000. After 100 days, interest revenue of 100.000 will have been accrued. Since no cash payment has been received yet after only 100 days, the 100.000 accrued interest will be shown as a receivable. Should interest not be paid on December 31, the entire accrued interest of 365.000 (account receivable) will have to be written off, resulting in a full revenue loss of 365.000.

The state operates on a cash basis and not on an accrual basis. Whenever cash comes in, it is recorded as revenue. If no interest cash ever comes in, no revenue loss is recorded because the expected revenue was never shown as a receivable.

The German state has cash interest revenue from loans to Greece and cash interest expense on the funding of those loans. For all practical purposes, the German state currently has a funding cost of 0%. Put differently, if the German state lends to Greece at 3%, it is making a 3% true profit (revenues minus expenses). If, out of generosity and solidarity, the German state lowers its interest rate for Greece from 3% to 1%, it is not taking a loss of 2%. Instead, it reduces its profit from 3% to 1% but it still makes a profit!

If, instead of deferring interest, the German state would simply waive all interest on loans to Greece until 2040, and if the German state could indeed refinance itself at 0% for that period, that great gift to Greece would cost the German state exactly --- nothing!

A smart business deal is one where you offer something to your business partner which costs you nothing but which means a great deal for your business partner!


  1. And what would happen if Germany's borrowing cost goes up?

    1. Well, Germany would haves to lock in its financing cost until 2040. I have no idea what the rate for that would be but I doubt that it would be much over 0%.

      I recently read that one of the reasons why Germany can borrow at 0% (or much below) is that investors have in the back of their minds the possibility of a return to the Deutsche Mark. If that ever occurred, all those holding Euro-denominatd German paper subject to German law would make a bundle.

  2. It's now between the IMF and Germany.

  3. The issue is completely different.

    Troika's hope was that Greece could return to markets and begin to replace existing low interest EU debt with market debt.

    But Greece can't even attempt the conversion because it makes no sense to replace low interest debt with debt that carries interest 5-6 times higher.

    So whether you postpone, deffer or extend debt service is all about symantics because the effort to repay the debt (recycle with new debt) has already failed and will continue to fail in the future because the numbers involved are no longer manageable by a borrower with the size of Greece's GDP.

    So we are talking about a permanent memorandum condition for Greece which will lead to the total destruction of the greek political class and perhaps to a revolution by the people.

  4. So we don't lose sight of the FDI topic for Greece.

    Cosco just came out with the results of the Piraeus port operation. Net income: 31.3 Million euros which at a 5% capitalization rate translates to upwards of 600 Mil. value for the asset. Of all ports operated by Cosco Piraeus was the best performer showing an 8.6% profit increase over 2015.

    If anything the Cosco results show that Greece will probably sell the Thessaloniki port for peanuts again since it is unable to grasp the concept of NPV over the years of operation at optimum management. With the benefit of hindsight Piraeus was worth upwards of 1.5 Billion and Greece sold it at less than 50% of true value. I truly doubt that Greece would be able to get 500 Million euros for the Thessaloniki port and instead will give it away minus all the noise showing false progress.

  5. Also in order to keep up with old scores George Georgiou of ELSTAT keeps losing in Greek courts and I don't think this is political but rather factual:

  6. This is the personalized note I received from Teresa May:

    Dear Phoevos:

    Today we formally begin the process of leaving the European Union. This is a moment for our country to come together and to forge a new partnership with Europe and with the rest of the world.

    Pledge your support for our Plan for Britain today.

    When I sit around the negotiating table in the months ahead, I will represent every person in the whole United Kingdom – young and old, rich and poor, city, town, country and all the villages and hamlets in between. And yes, those EU nationals who have made this country their home.

    It is my fierce determination to get the right deal for every single person in this country.

    For, as we face the opportunities ahead of us on this momentous journey, our shared values, interests and ambitions can – and must – bring us together.

    We all want to see a Britain that is stronger than it is today. We all want a country that is fairer so that everyone has the chance to succeed. We all want a nation that is safe and secure for our children and grandchildren. We all want to live in a truly Global Britain that gets out and builds relationships with old friends and new allies around the world.

    These are the ambitions of this Government’s Plan for Britain. Ambitions that unite us, so that we are no longer defined by the vote we cast, but by our determination to make a success of the result.

    We are one great union of people and nations with a proud history and a bright future.

    And, now that the decision has been made to leave the EU, it is time to come together.

    So please show your support for our Plan for Britain today.

    Thank you.

    Theresa May
    Prime Minister and Leader of the Conservative Party

  7. "If, out of generosity and solidarity, the German state lowers its interest rate for Greece from 3% to 1%, it is not taking a loss of 2%. Instead, it reduces its profit from 3% to 1% but it still makes a profit!"

    But a successful loan shark always aims at maximum profit and only loosens the noose when he is afraid that either the victim is so desperate that he risks to lose everything or that the victim is so desperate as to go the police.

  8. Not about this blog post, but relevant for Greece:


    1. I can't understand why Greece is discussing Sorras at all. Why even write about him?

      His whole thesis is that he has a few shares from the Bank of Anatolia worth $600 Bil.+. Problem is that such shares are not cashable because no one recognizes these defunct shares.

      So why even write about this guy?

  9. "We are at the mercy of a currency adapted to Germany and not to our economy. The euro is mostly a knife stuck in our ribs to make us go where others want us to go," Le Pen said to loud cheers and applause.

    Perfect description for the situation in Greece. Same exact problem.

  10. "As the authors of the diaNEOsis study note "reforms should normally be implemented in a period of economic boom, when groups who have something to lose feel less insecure, and they can be compensated by an economy that is expanding".

    Unfortunately for Greece, this opportunity has been lost, and the reforms need to be implemented now, under the worst possible economic and social circumstances."

  11. Now this is FDI worth doing:

  12. It is hihgly unlikely that Germany will ever do such thing especially at it and Europe face major challenges in 2017 which include but are not limited to the following:

    1. Germany will see a drop in exports in 2017.

    2. Italy’s banking crisis will continue. It will morph into a political crisis and a confrontation with Germany and the European Union.

    3. Non-euro EU member states, especially those in Eastern Europe, will be exposed to the stagnation in the German economy.

    4. The refugee crisis will continue in 2017. Differences between European countries on how to deal with the crisis will continue and border controls, already a fact of life, are likely to be extended.

    5. The U.S. will pressure the Europeans to commit to NATO. European states will agree but will not live up to their financial commitments to the organization.

    6. Brexit will continue to have a political impact on Europe in 2017 but will have a limited effect on the U.K. and the EU member states’ economies.

    7. The U.S. and NATO enforcements on the Eastern containment line with Russia will continue in the East, while the West will focus on debating better ways for the EU to defend its borders and increase internal security.

  13. Germany willnever do such things because it goes against its geopolitical strategies. Question is why even Greece supporting the German plan?

    Germany in the past has used both diplomatic and military means to reduce the influence of non-continental powers in European affairs. One of Germany’s aims is to dominate the North European Plain, but when outside powers such as the United Kingdom or the United States choose to get involved in the balance of power on the continent, they often shift the balance in favor of one side. During the First and Second World Wars, the British alliance with the French significantly impacted Germany’s position, as the British navy blockaded German ports. A key U.S. strategic aim is to prevent the rise of a hegemon in Eurasia and, as a result, the U.S. intervened in both world wars in order to prevent Germany from dominating the continent. In addition, NATO, under American leadership, has acted as a security umbrella for Europe. Therefore, Germany is unable to fulfill the fourth element of its grand strategy since the U.K. and, more importantly, the U.S. are intimately involved in the North European Plain.

    Germany’s geopolitical challenge stems from the country’s vulnerable position on the flat North European Plain. The country’s grand strategy requires maintaining unity, competing for domination of the North European Plain, achieving internal stability, and working to prevent outside powers from gaining influence in the region. Today, Germany’s tactics for achieving these strategic goals all in part involve safeguarding the stability and unity of the European Union and the eurozone, since these two entities help Germany mitigate the threat from France. Germany’s leading role in the EU also gives the country more leverage — both politically and economically — when managing its complex relationship with Russia to the east. Moreover, the eurozone ensures that Germany has an export market, a key requirement for maintaining high domestic employment and stability in a country that is highly dependent on exports.

    The German political system revolves around negotiations and concessions, but ultimately German leaders, knowingly or not, are making decisions that are rooted in the country’s grand strategy. Tactics have changed as Germany has evolved in the post-war years and as the balance of power in Europe transformed after the fall of the Soviet Union, but Germany’s grand strategy remains rooted in centuries-old geopolitical realities.

  14. You say:

    "The state operates on a cash basis and not on an accrual basis. Whenever cash comes in, it is recorded as revenue. If no interest cash ever comes in, no revenue loss is recorded because the expected revenue was never shown as a receivable."

    According to the following document from IMF

    most countries tend to adopt full accrual basis.

    The following correspond to what you say (page 16)

    "Recognition and measurement of cash and financing operations".

    "Accounting policies should prescribe that all government’s transactions be recorded as soon as cash is received or disbursed. These transactions are usually reported at their cash value and stocks at face value..."

    and in note 15

    "The Face value of a debt instrument is the undiscounted amount of principal to be repaid at (or before) maturity. Its nominal value at any moment in time is the amount that the debtor owes to the creditor."

    But in page 15 in note 12:

    "Note that the change in the stock of debt is not explained only by cash transactions (for example, they include holding gains and losses due to currency fluctuations, and debt renegotiation and forgiveness). Therefore, including debt in the balance sheet under phase 0 implies that the balance sheet and cash flow statement will not reconcile directly: consequently, a reconciliation table needs to be disclosed in the notes to the financial statement"

    Question 1 :

    Theoretically, a government by shifting from cash basis accounting to accrual basis changes something significant how debt is reported?

    Question 2 :

    Cash, in cash basis accounting or in accrual basis has the same operation ?

    1. My guess is that most governments apply those accounting standards which best produce the numbers they like. The IMF paper is a recommendation, not a law. There is the International Public Sector Accounting Standards (IPSAS) which some countries follow.

      BTW, under IPSAS, Greece's debt would be easily sustainable (the perennial point of Paul Kazarian). Reason: what matters is less the amount of debt but, instead, the interest rate. Debt at zero interest rate has the character of equity.

      Ad 1: cash vs. accrual only affects the expense side, not the liability side. Example: if, in a cash system, all interest is deferred for 2 years, the books will show zero interest expense during those 2 years but a huge bullet at the end. The debt will always be shown at nominal value.

      Ad 2) don't understand your question.

      N.b.: under international corporate accounting standards (IRFS), if I recall correctly, debt can be shown at market value. For example, if your bonds with a nominal value of 100 trade at a discount of 50%, the books can show the debt at 50. I believe that's how the Bank of Greece calculates the country's foreign debt (to the extent that it is in bonds).

    2. Thank you for the answer.
      The IMF paper is a recommendation, not a binding one, but give in a way, a direction. Not sure.
      The point is how transparent and solid is either accounting basis, if implemented correctly.

      About 2nd question you said:

      "The state operates on a cash basis and not on an accrual basis.Whenever cash comes in, it is recorded as revenue".

      In cash basis, revenues are reported when received, in companies.

      In accrual basis,revenues are reported when they are earned, sometimes, before cash is received (for example clients are allowed to pay in 30 days).

      If for example in state,some tobacco companies which pay a significant percentage of tax revenues, defer income tax and VAT for 1 month for a technical reason and government has a surplus 1 bn € without having received some of the cash, the government might have surplus but not cash, the specific month?

      So how and when the revenues (cash) are paid changes the perception of debt sustainability?

    3. I think one of the jobs of the 'institutions' is to review the fiscal accounts and to make adjustments so that they accurately reflect incomes/expenses for a period. I know that the IMF takes Greece's interest expense and adjusts it with accruals.

    4. I m Greek, the transparency of methods give more credibility to troika and Greece, its sine qua non.

  15. Regardless of accounting methods I see the problem as:
    A nation who insist on consuming more than it produces. That can be solved by continuously injecting gifts or equity (non-voting, because of the holy sovereignty). That does not sound attractive to me. Quite a few nations, institutions and persons seem to share my sentiments.

    1. Who wants 120 Billion euro debt relief from Germany when magnanimous Austria offers the glorious amount of a rounded 1 Billion instead?

      I hope you are not serious about your comment that Greece consumes more than it produces. If that was true today then Greece would not have a primary surplus account. Having enough money to pay debt service on a gargantuan amount which by all metrics is not repayable has nothing to do with "consuming more than you produce". It has to do with the ambly demonstrated dysfunction of the eurozone plain and simple.

  16. Every self-respecting Greek needs to answer fundamental questions about what our optimum national strategy should be.

    Consider the following: Click on this link to see where Greek exports go by country of destination:


    Also look at Greek imports by country:


    So here a few questions for you to answer:

    1. Why is Greece so dominated by German imports to the tune of running a 3 Billion euro trade deficit w/ Germany( consistent year after year)?

    2. How is it possible for Greece to have a trade surplus with the largest economy in the world (the $18 Trillion US economy) and a severe trade deficit with Germny at the same time?

    3. How is it possible for Greece to export to Germany only an amount close to what it exports to Cyprus and call Germany a key partner?

    Conclusion: Greece for whatever reason has been tranformed into a German trade slave and the question is why is this undeniable fact in our national benefit? Why is Greece promoting a situation which is consistent with German strategic objectives while ignoring its own strategic goals? Who (politicians) have put us in such position and why?

  17. To get the impression that the nation insist on consuming more than it produces is easy when you read and listen. Greeks of all walks of life insist on higher wages, pensions and social benefits, you don't hear one little voice suggesting more production. The closest you get to how the consumption should be financed is "going on the markets" and "being included in the QE".
    And no, I'm not one of the evil foreigners who think Greek living standards should be reduced to Romanian or Bulgarian ones, on the contrary, I think Greeks should enjoy as many of the pleasant things in life as they can afford with their production.

    1. So why does Germany not buy more of the Greek production in order to close the 3 Billion euro trade surplus it was imposed on Greece in perpetuity?

      How come Americans buy more from Greece than they export to Greece and thus help the country balance out its books? Why does Germany insist in sapping from Greece valuable funds it does not have in order to carry a trade deficit with Germany? Why is Germany fueling consumption for its products in Greece?

    2. The trouble with trade balances is that governments can directly influence them only in a small way, i. e. to the extent that the government itself (or the public sector which it controls) engages in exports/imports. The Greek government, for example, could decide to buy military equipment only from the US in the future and that would have an impact.

      As regards the rest, the government can influence trade only with policies which incentivate/disincentivate the individual exporters/importers. Imports are much easier to influence because, as Trump promises, they can be made more expensive through tariffs, border taxes, et. al.

      The challenge is with exports because one cannot 'dictate' exports with incentives. There have to be products which other countries/markets wish to buy.

      There is no way that one could prohibit a German exporter to sell to Greece when other EU countries are allowed to do that. One could, however, incentivate Greeks not to buy German products by encouraging them to, say, buy American products. Whether that will keep wealthy Greeks from buying Mercedes' and BMWs is a different matter.

    3. Regarding the 3 questions which every self-respecting Greek should ask him/herself, my question for years has been why the Greek government doesn't talk at all about trade (neither SYRIZA nor ND nor PASOK). How should self-respecting individual Greeks ask themselves such questions when they are not even made aware that those are most important questions for the living standard and economic strength of the country. Early on in the crisis, I suggested that the Greek government should create an obsession with export promotion and import substitution (and foreign investment, for that matter). Every Greek housewife should be made aware that when she shops in supermarkets and buys foreign agricultural products, she is hurting the country. How else could one expect that housewife to know otherwise?

      The only explanation that I can come up with is my suspicion that there are vested interests involved and that those vested interests are more on the import side than on the export side. I once read somewhere that Greece has a very strong import lobby and not much of an export lobby at all.

    4. The actual data paint an entirely different picture. Click on this hyperlink below:

      Then click on the section called "Greek trade". Then click on the tab "by country" and look at the data for January 2017:

      It shows a 23.6% improvement in Greek exports compared to the same month a year earlier. Again the main reason is petroleum exports.

      However look at the billateral trade between Greece and Germany:

      Greek exports to Germany improved by 4.2% scoring 137.5 Million exports in Jan 2017 vs. Jan 2016 (131.9 Million)

      Now look at the import side to the benefit of Germany. (you can do so by clicking at the tab in the lower left corner of the same spreadsheet, a tab labeled "imports").

      So while Greek exports increase by something close to 4% from a lower base, German imports to Greece for the month of January 2017 increase by a massive 19.7% from a much higher base (406 Million euros vs. 338 Million).

      So while poor Greece increases its exports to Germany by say 6 Million more in sales then Germany's response is to increase its exports to Greece during the same period 10-fold or roughly by 66 Million.

      As you can see this is an algorithm Greece can never win and it also shows how dominating and oppressive German commerce is and for a country that is ground zero of GDP devastation.

      In my opinion this has nothing to do with a Greek import lobby and more to do with Germany's desperation to oversell in the eurozone as the US and China export markets are slowly closing down.

      Which leaves my original sin question still unaswered. What the heck is Greece doing in the eurozone by promoting German exports to her when in fact this is the last thing she could afford to do?

      Answer that question and we solved the Greek problem by 80%. The rest of 20% is the reform nonsense which pays off in decades and not in months or years as the trade junkies will tell you.

    5. If I understand correctly, the question to which you seek an answer from me is: What the heck is Greece doing in the Eurozone? My answer evolved since 2011. Until about 2013, I was adamant that Greece should remain in the Eurozone because it was the lesser of two evils and provided better future prospects. Then I started wavering. For quite some time now, I think that Greece should seriously ponder the pro's and con's of staying in the Eurozone whereby I am inclined to favor the con's. Why? To succeed in the Eurozone, Greece will have to change its ways (aka reform). Most of my Greek friends have warned me from the start that Greece and Greeks will never change, and I am beginning to believe that.

      Regarding the German trade issue, I can only repeat: Greeks can solve that problem by buying fewer German products and replacing them with products from more favored countries.

    6. o.k. your views are respected.

      As far as the consumption by Greeks of fewer German products, I can't get a reasonable explanation no matter how hard I try to find the answer. The best selling automiles in Greece are all Japanese with Toyota clearly the #1 automaker. Greece does not carry a huge deficit with Japan because Greeks like to buy Japanese cars or Korean cars for this purpose. We know that all Greek car rental agencies refresh their fleets every year about this time of the year in anticipation of a busy tourist season. But I doubt that fleet replacement favors in any significant way German cars because as we said the most popular models are all Japanese. I don't even buy the argument that the Greek elite likes to buy brand new Mercedeas, BMWs and Audis. My own observation is that those of the elite ( and I have a few relatives in said class) who drive German cars for reasons of class differentiation mostly drive older models in some cases 10 years old if not older. And I seriously doubt that there is some professional class of Greeks with good jobs willing to hoard the latest model from Stutgart or any other part of Bundesauto production.

      So how do you explain a rise in German imports by 19+% in January 2017? Is it Fraport which is importing new German toilet paper for the renovated regional airport bathrooms? German manufactured fixtures for said bathrooms? German drugs for which only the Greek government (state) could order based on the hideous supply chain arrangements that it has in place?

      Please do explain because I do not see exactly how German imports are absorbed once they enter Greece. Is it mega equipment for the lignite fired power plants in Ptotemaida? What?

      Let's abandon the stereotypes of why German products are appealing and let's get down to actual figures and analysis of said figures.

      If I were a minister of Greece I would demand on my first day at the office to have detailed figures of how imports (minus petroleum) are absorbed and used in Greece. Is Greece(or Greek importers) an intermediary of further sales of German goods to the middle East? What is going on?

      I need a convincing answer minus speculation.

      We can't solve the problems of Greece until and unless we identify and quantify them. Then I would be open to criticism regarding the shortcomings of the state and/or Greek behavior in general.

  18. Does Greece need debt relief and if so how much? Hot off the press:

  19. Imagine this!

    Tradingeconomics is now tracking German exports to Greece because everybody knows that this is the crux of the issue. I am impressed!

  20. Well, I have a slightly different take. German exports to Greece (i. e. Greek imports from Germany) are the crux of the issue if one thinks the critical issue is the bilateral German/Greece trade. The implication would be that if, instead of Germany, Greece had an identical trade deficit with, say, the US, everything would be find because the US is not as evil a country as Germany. My take is: regardless of the countries involved, the critical issue is ALL Greek exports and ALL Greek imports.

    You may recall the McKinsey report of 2011. Its focus was how to increase ALL Greek exports. Key questions: in which areas does Greek have export potential with the right kind of (foreign) investment and in which markets can that potential be realized. Off the top of my head, I wouldn't think that Germany is a prime country for Greek exports because I am not sure that Greece has a lot of products which German manufacturers heavily import. Germany imports a lot from Austria, for example, because Austria is a major supplier to the automotive industry. Greece, of course, could focus on agricultural exports to Germany. And should!!!

    Some years ago, we had a debate in this blog about olive oil exports and there were quite a few very knowledgable commentators. As it is, I understand that Greece is wasting a lot of potential by exporting oil bulk (and cheap) to Italy and Italy adds the value (and gets the margins) for making it shelf-ready and distributing it throughout Europe. Well, that added value (and added margin) should actually stay in Greece. And it would add employment, too!

    It took Austria many years to figure out that exporting cheap milk was not the real answer. Today, the focus is on refining raw products and exporting shelf-ready products. With great success. The same really applies to all of Greece's agricultural products (meat processing?).

    And on the import side, the focus should be on those products where Greece would have the potential to substitute imports with domestic production.

    It would actually seem quite easy. Someone in the government should start asking question like: What are we doing trade-wise now and what can we learn from it? Where do we have competitive advantages? In which markets would they work well? Which products could we produce ourselves just as well? Etc. etc.

    For years I have been saying that by focusing only on the debt, Greece is focusing on the wrong issue. The debt is the symptom, not the cause. Have you heard much discussion in Greece about trade? About export promotion? About import substitution?

    Take the US. Before Trump, I don't think many Americans ever thought about trade. After a few months of Trump, most Americans are aware that trade is an important issue. At Bretton Woods, John Maynard Keynes preached that the issue behind all monetary and exchange rate structures and policies was trade and that the great risk was that trade could become unbalanced. His idea was a new international currency called "Bancor" but he couldn't get much attention. Today, it looks like the world may sooner or later have to look up Keynes' notes on Bancor.

    1. I think when you look at total trade you lose the forest from the trees.

      Let's focus for a moment on the pine tree called Germany and let's forget about the rest of the forest.

      How is it possible for Greece to absorb 5 Billion worth of German imports per annum and Germany to be left with 3 Billion trade surplus year after year after year?

      Let's brake down the German exports to Greece. Where exactly do they go? and for what purpose?

    2. Let's speak te numbers language for a second. Please explain to me why Greece needs 5 billion worth of German imports each year? Based on what logic?

    3. I cannot answer your question but if you contact the German Chamber of Commerce in Athens, I am sure they can provide you with answers quickly:

      Offhand and from our shopping experiences, if you go shopping at large supermarkets in Greece, you will quickly find part of the answer!

    4. KK:

      Per the MIT study found here:

      The total car imports to Greece approximate 1 Billion euros per annum. This number includes all Japanese, Korean, French, German cars imported by Greece. Let's assume that the market share of German cars is 50% of the total Greek car market. This would be about 500 Mil. or 0.5 Billion of German car imports to Greece each year. I think the real number is lower but let's play with this hypothetical figure.

      If the flagship of German imports to Greece is cars and if German cars account for 0.5 Billion of imports then where do the next 4.5 Bil. euros of German exports to Greece come from?

      Packaged medicaments? This would mean that Germany is heavily involved into the medication supply scandal that is plaguing the Greek public health sector? So Germany is profiting from selling aging Greeks drugs for what exactly?

      The biggest import share in Greece product wise is for crude petroleum and refined petrolem products. Germany has zero contribution to such because it neither exports crude petrolem to Greece nor refined petrolem which Greece gets from neighboring countries.

      So what other category is left? Cargo and container shipping?

      And please don't tell me that because you see a few items in the supermarkets of German origin that this explains the size of Germans exports to Greece.

      Again the question stands: What the heck is Germany sending to Greece year after year and in a manner which maintains a constant 3 billion trade surplus with a country that is on its knees? What is the shameful part that Germany plays in fueling Greek consumption of what exactly?

    5. Well if you believe German propaganda (which I certainly do not under any circumstances including the fabricated numbers of the so called German Chamber of Commerce aka the Bureau of Colonial exports to Greece) then this old article kind of tells you what the cause of German excesses are (see German pharmaceutical sales to Greece skyrocketing by 22%)

      Which also points to the fact how eager is Germany to exploit for its own benefit and in a field notorius for abuses against the average Greek citizen.

      So austerity and German medicine seems to be what Schauble has truly ordered for Greece. Oh, and perhaps Germany surgery equipment and similar machinery too.

  21. Top 10 Greek Imports from Germany 2016

    Germany's exports to Greece amounted to
    $5.4 billion or 11.1% of its overall imports.

    1. Pharmaceuticals: $841.5 million
    2. Vehicles: $678.4 million
    3. Machinery: $554.9 million
    4. Electronic equipment: $387.6 million
    5. Plastics: $268.9 million
    6. Dairy, eggs, honey: $240.8 million
    7. Medical, technical equipment: $210.6 million
    8. Meat: $138.3 million
    9. Other chemical goods: $125.3 million
    10. Paper: $124.7 million

    1. Well, you got the numbers, after all! Curiously, when you add them up you are far from the 5 BEUR but anyway...

      Frankly, I don't get your excitement about imports from Germany. If Greece needs to import about 2 BEUR annually in pharma, they've got to buy it somewhere. Germany is not the only country which makes pharma. If Greek companies voluntarily buy from German companies, what's the problem? Also, if I understand your numbers correctly, Greek companies import about 2/3 of their pharma from non-German companies.

      How can Schäuble 'order' independent Greek companies where to buy pharma from? He couldn't even 'order' the state to do that.

      Apart from that, I think pharma is an area where Greece might have a lot of potential, particularly with generics. I understand there are some excellent pharma companies in Greece (like Pharmaten).

    2. KK:

      These are the top 10 imports. The total list I can not find but even the top 10 list has identified that the total German exports to Greece are 5.4 Billion euros.

      I did not have the list when I first asked for it. The lack of response prompted me to dig deeper.

    3. KK:

      You give me the impression that you glossed over the MIT study about the Greek economy. Greece exports roughly 1 Billion of packaged medicaments (aka pharma) and then imports 2.2 Billion worth of packaged medicaments/pharma. So why? Who decides that Greece needs German pharma and why?

      I am very glad that the present government does not pay its suppliers and builds large arrears balances. Why would you ever as a government of Greece reward Greek importers of German pharma? Let them write it off as uncollectible and send a strong signal to the German exporters that they need to stop sending pharmaceuticals to Greece on the basis that Greek suppliers are not good credit folk. Let them(suppliers) sink and let their businesses destroyed.

    4. KK:

      Perhaps I should let you analyze the numbers provided you have an unbiased approach. So which are the other serious pharma suppliers for Greece? The Netherlands which exports roughly half of what the German pharma exports are? Italy which is half of Netherlands? France and Belgium which export pharma to Greece almost at the Netherlands level?

    5. Ok, if there is some collusion between Greek importers and German exporters of pharma, all at the expense of the Greek people, I would agree with your sharp criticism. Except: I have no idea whether or not there is. If everything is arms' length, then there is not much to worry. Greece needs pharma and it imports that pharma which it cannot produce domestically. Where Greek importers buy that pharma should be a matter of competition among suppliers. If German suppliers get the order because they are better and cheaper than others, so much the better for Greece.

      The point, though, is whether or not Greece might have the capacity to substitute some of that imported pharma with domestic production.

    6. Kleingut:

      Unfortunately I don't have access to this report so that we can have an intelligent discussion regrading the greek medicaments market:

      However since we already know that an oligarchy of suppliers is dominating the Greek import market what do you think are the chances that such oligarchy is NOT into in collusion with German exporters? The chances of German drug sales to Greece being at arms length is I think close to zero.

  22. Obviously that's the issue. But it has to be highly suspicious and worthy of the severest investigation that the #1 German export to Greece is medicaments (pharma) and in order to supply an uber sick public health system that has collapsed. One might argue that one of the main reasons that the Greek public health system has collapsed is precisely because it is supplied by expensive German pharma and by a buyer (the state) which could ill afford to pay for such luxuries to begin with. So instead of the wealthy Greeks buying expensive German cars as the myth goes (because among other things deliberate German propaganda pursues "one size fits all" themes) what we really have here is actually very poor Greeks buying the equivalent of Porche and Mercedes drugs just because so dictate the embedded interests of German industry which like a giant squid is sucking anything Greek that its tentacles could reach. And all this under the false label that Germany is truly a friend and partner of Greece as opposed to a colonial occupier via commerce that certainly all evidence points to.

  23. What is the biggest threat to the stability of the global economy right now? Britain leaving the EU? Donald Trump’s taste for bone-headed protectionism? The Federal Reserve raising interest rates too quickly, a collapse in China, or the sudden break-up of the eurozone?

    You could make a case for all of them, and they are all worrying to different degrees.

    But in fact, it is something that gets only a fraction of the attention it deserves: Germany’s trade surplus. Hitting record highs with every month that passes, it now amounts to a massive 9pc of GDP. In effect, Germany has become an economic rogue state, hollowing out the industry of its neighbours, creating vast flows of footloose capital and undermining the stability of the financial system. It is time the rest of the world stood up to it and demanded the Germans bring it under control. If they don’t, it may well be the cause of the...

  24. Hans-Werner Sinn might have discovere what the Tsipras's new strategy is. Let's see if you can figure it out because it's very obvious:

    High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our T&Cs and Copyright Policy for more detail. Email to buy additional rights.

    Brexit is a problem not only for Britain but for the EU as well. The British economy is as big as that of the 20 smallest member states put together. So it is as if 20 of 28 countries were leaving the bloc at the same time.

    Brexit destroys the European equilibrium, rendering otiose minority rights in the European Council: the Lisbon treaty specifies that a blocking minority needs 35 per cent of the EU population. Together with the UK, the so-called “Deutschmark bloc” (Germany, the Netherlands, Austria and Finland) has a population of exactly 35 per cent. These are all countries in favour of free trade.

    At the same time, the countries surrounding the Mediterranean, which have traditionally been more reliant on protectionism and state intervention, have a population of 36 per cent, which is also a blocking minority. The Lisbon balance has been destroyed because the first block shrinks after Brexit to a population share of 25 per cent, while the Mediterranean countries extend theirs to 42 per cent. They may now seek to turn Europe into a trade fortress."

    1. I think if Greece could make it on to this list, a lot of things would get better very quickly:

    2. KK:

      Why do you think that? Greece is full of enterpreneurs. Too many enterpreneurs and too few companies.

      Would this help?

    3. I, took have made the experience that Greeks are very entrepreneurial people but it's not the people who are at issue here. Rather, it's the system within which the people have trouble unfolding their entrepreneurial talents.

  25. Q: Why do Germany not buy more of the Greek production?
    A: Because Germany does not consider Greek products competitive or desirable in terms of price/quality/marketing.
    Q: Why does Greece buy so much of German production?
    A: Because Greece considers German products competitive or desirable in terms of price/quality/marketing.
    This imbalance can be solved in many ways in a global market. Greece could become more competitive, and wealthy, it is unlikely that Germany would become poorer. Germany could become less competitive, and poorer, it is unlikely that Greece would become wealthier.
    Finally there is the suggestion that Germany should buy more Greek products they don't want/need. That constitutes transfer of money (grants, gifts, donations) from a sovereign productive country to another sovereign non-productive country. It is routinely done, but not to wealthy countries like Greece, rather to third world countries in order to stimulate development. I can think of many countries that need that sort of aid more than Greece. I can also think of other countries where that sort of aid would have a much bigger impact.

    1. So the USA considers Greek products more competitive aand desirable but Germany does not? Does Germany thinks that is better than the US? Or what exactly does Germany think of itself? Because certainly the rest of the world thinks of Germany as a trade junkie with a serious problem which if left untreated will destabilize the entire world system.

    2. Let me try to get you away - if that is at all possible - from your one-track anti-German thinking, and I will take Austria as an example.

      Austria has a trade deficit with Germany of about 10 BEUR. Without Germany, Austria's trade would be almost balanced. So the Germans are really the bad guys because they turn our trade balance deeply into the red. Or not, because exports to Germany are still about 40 BEUR and without those, Austria's living standard, employment, etc. would go out the window.

      Austria's services balance is about 10 BEUR positive overall (much tourism). Of that, about 8 BEUR comes from German tourism. So the Germans are really good guys because they account for most of our services plus.

      In sum, Austria has a plus in the current account despite the fact that the trade balance with Germany is so red. And the plus is due to the fact that those bad Germans who cause our trade deficit are the same Germans who crowd-out Austria as tourists and leave a lot of money here.

      Austria's exports are over 50% of GDP. Only because Austria's products are more competitive and desirable? Not only!

      Austria is divided into about 80 political districts. In each district there is a full representation of the national chamber of commerce offering the full services of the chamber. Export advice/promotion is a major element of that offer. Any business, however small, only needs to go to that chamber to get excellent advice and support. That chamber maintains over 100 foreign representative offices for export promotion to those foreign markets.

      Through the OeKB bank, Austria subsidizes pre- and post-export financing similar to Coface in France or Hermes in Germany. It also offers guarantees for foreign economic and political risk at most favorable rates.

      In short, there is an obsession with exports throughout the Austrian economy. That hasn't always been that way. When I was in school, Austria was essentially a client of Germany: we imported products from Germany and paid for them with money which German tourists left here. The fall of the Iron Curtain triggered a huge new development: the expansion into new markets with new products and the integration into international supply structures.

      From what I have been told, Greece has essentially nothing of the above. There clearly is no obsession with exports. There is no organized effort to promote exports. When Piraeus Bank received 500 MEUR of new funding a couple of years ago, it used more than half of it to buy shares of the Marfin Group instead of financing pre- and post-export. When I hear that Greek exporters face the financing constraint, I can only wonder. Organized pre- and post-export financing is ALWAYS available, provided one organizes it.

      The Greek equivalent of the 100+ foreign offices of the chamber seems to be the Greek diaspora. Where there are many Greeks (like in parts of the US), Greek products find their way there. Where there a not (like in Austria), one can't find any Greek produce in supermarkets.

      Whatever export industry Greece once had, I think it was severely damaged once Papandreou/PASOK took over. I think they literally drove the Greek export industry into uncompetitiveness and, in many cases, they took them over before they went bankrupt, blowing up public sector employment in the process. Greece's 'industrial cemeteries' developed during that period. The Euro was only the turbo in that development, not the original cause.

      The answer to the question why Greece doesn't export more or, in your case, why Germany imports so little from Greece can only and exclusively be found in Greece. For that, one needs to create a trade awareness and, as I have said so often, an obsession with exports and import substitution.

    3. And let me redirect your one track mind that whatever Austria (a natural extension of Germany in the same way that Cyprus is an extention of Greece) does is uber gut and therefore applicable lesson for Greece by suggesting some required reading before we have an in-depth conversation on this.

      The first reading requirement is this detailed and evidenciary book by Mogens Pelt:

      and if you want to get to the root of the German-Greek trade problem then you must read ths book by the same Danish author:

      Once you understand that Greece has started from the natural position of having a trade surplus with Germany which deliberately has turned into a chronic trade deficit we could then talk about high speed train track minds and similar topics.

    4. Greek exports to the EU are stagnating. Greek exports to non-EU countries are up by 24%+

    5. Kleingut:

      I wish to state for the record that I don't have an anti-Austrian mind, in fact that I like Austrians with Greek sounding names such as my favorite Chrysostomous (golden tongued) Theofilous (friend of God) Mozart whose music I truly admire:

    6. To Anonymous April 18, 2017 at 12:16 PM
      "...Q: Why does Greece buy so much of German production? Because Greece considers German products competitive or desirable in terms of price/quality/marketing..."

      Ha, ha, ha...

      ...Competitive or ...desirable?
      Like German submarines that have never sailed?

      You're hilarious!
      It's obligations of war marketing, stupid...

    7. The Greek submarines bought from Germany are operational and in service now:

  26. I offered a solution where Greece and Germany collectively could be wealthier, you offer a solution that will make them poorer. The ultimate solidarity, when your neighbor is broke, do everything you can to go broke as well.
    For my part I will leave it to the consumers of USA and Germany to buy their products where they wish to. You, are most welcome to try and sway them with your logic.

    1. Lennard:

      I would seriously suggest that you read the following book written by a Danish fellow which shows the systematic penetration of the Greek market by German interests:

      To suggest that there is freedom of choice by consumers when there is an oligarghic group of Greek importers of German products which does not allow diversification of Greek exports is a bit naive.

      I think you need a far better education on the subject rather than offering generalisms which do not apply here.

  27. @ Phoevos.
    But I DO agree with you that Greeks are victims. We just may not agree who they are victims of.

    1. Lennard:

      I thought that Mogens Pelt in the opening paragraps of his book "Tabacco, Arms and Politics" made it very clear that Germany is to blame for its determined efforts to dominate central and south eastern Europe and the repercussions this generated within the international trade system. Perhaps you need to concentrate a bit more on the so called "problem of continuation" i.e. the identification of structures connecting the Third Reich to the Weimar Republic and Imperial Germany. And of course there is broad consensus of the same problem continuing into the aims and objectives of today's Germany.

  28. Kleingut:

    I am trying to grasp the significance of your comparison of Austria to Greece.

    According to this latest per capita GDP comparison Austria is the 29th most wealthiest country in the world ranking below notables such as Ireland and the Falkland Islands (or Islas Malvinas in your favorite Chilean language).

    Greece on the other hand is the 70th wealthiest country in the world in the same grouping as Malaysia, French Polynesia, Russia and Kazakhstan barely above the Bahamas, Antigua & Barbuda as well as Chile (how did that happen?).

    So when you hold Austria as a model for Greece which part do you want us to emulate? the 34% Austrian dependency on German exports (in other words 5 times more dependent than Greece is at 7%) or the part that your #1 export category is integrated circuits towards sales to Eastern Europe? Do you think Greece has the same geographical facility for sales towards eastern Europe that Austria has? And what of your vulnerability towards predominent German exports? What will happen to Austria when predictably Germany begins to go down the tubes ?(forgive my anti-German mind but I thought I'd better ask this obvious question).

  29. Been a while for a new article... I guess no news is good news? :-)


    1. I have been devoting all my resources to the debate about those evil Germans who have only one mission in life - to destroy Greece...

    2. Ah, you mean the evil Germans whose mission is to dominate southeastern Europe at all costs including the Ottoman provinces as well. How did the Germans get this idea in their mind to begin with? What business do they have in southern Europe and why?

    3. So I guess this is not true at all:

      "The war aims included the creation of a big Mitteleuropa under the
      full military and economic control of the German Empire and made
      unassailable by annexations in the west and east as well as the estab-
      lishment of a ring of satellite states. In the west, Belgium was to be
      made a German dependency and the iron-rich French Lorraine to
      be annexed. In the east, Lithuania and Courland were to be brought
      under German dominion, a large section of Central Poland was to be
      annexed, and the remainder of Poland, together with Austrian Gali-
      cia, was to form a Polish state that, in spite of some political ties with
      Austria-Hungary, would be economically and militarily dominated
      by Germany. Rumania, too, was to be held in economic servitude.
      It was assumed that the Netherlands and the Scandinavian countries
      would feel compelled to join the mighty trade bloc that would arise
      from the war. In addition the German government intended to ac-
      quire most of Central Africa from coast to coast. ",%20Fritz%20-%20Germany%E2%80%99s%20Aims%20in%20the%20First%20World%20War_djvu.txt

    4. I guess you want to pretend that do you don't know what the real problem is. So let me spell it out for you:

      Before 1871, when Germany was fragmented into a large number of small states, it did not pose a challenge to Europe. Rather, it served as a buffer between France on one side and Russia and Austria on the other. Napoleon and his campaign to dominate Europe first changed the status of Germany, both overcoming the barrier and provoking the rise of Prussia, a powerful German entity. Prussia became instrumental in creating a united Germany in 1871, and with that, the geopolitics of Europe changed.

      What had been a morass of states became not only a unified country but also the most economically dynamic country in Europe — and the one with the most substantial ground forces. Germany was also inherently insecure. Lacking any real strategic depth, Germany could not survive a simultaneous attack by France and Russia. Therefore, Germany's core strategy was to prevent the emergence of an alliance between France and Russia. However, in the event that there was no alliance between France and Russia, Germany was always tempted to solve the problem in a more controlled and secure way, by defeating France and ending the threat of an alliance. This is the strategy Germany has chosen for most of its existence.

      The dynamism of Germany did not create the effect that Germany wanted. Rather than split France and Russia, the threat of a united Germany drew them together. It was clear to France and Russia that without an alliance, Germany would pick them off individually. In many ways, France and Russia benefited from an economically dynamic Germany. It not only stimulated their own economies but also provided an alternative to British goods and capital. Nevertheless, the economic benefits of relations with Germany did not eliminate the fear of Germany. The idea that economics rule the decisions of nations is insufficient for explaining their behavior.

      Germany was confronted with a strategic problem. By the early 20th century the Triple Entente, signed in 1907, had allied Russia, France and the United Kingdom. If they attacked simultaneously at a time of their choosing, these countries could destroy Germany. Therefore, Germany's only defense was to launch a war at a time of its choosing, defeat one of these countries and deal with the others at its leisure. During both World War I and World War II, Germany first struck at France and then turned to deal with Russia while keeping the United Kingdom at bay. In both wars, the strategy failed. In World War I, Germany failed to defeat France and found itself in an extended war on two fronts. In World War II, it defeated France but failed to defeat Russia, allowing time for an Anglo-American counterattack in the west.

      (continued in Part II).

    5. Part II.

      The situation became more complex after 2008. Germany's formal relationship with NATO remained intact, but without the common threat of the Soviet Union, the alliance was fracturing over the divergent national interests of its members. The European Union had become Germany's focus, and the bloc had come under intense pressure that made the prior alignment of all European countries more dubious. Germany needed the European Union. It needed it for the reasons that have existed since World War II: as a foundation of its relationship with France and as a means to ensure that national interest would not generate the kinds of conflicts that had existed in the past.

      It needed the European Union for another reason as well. Germany is the second-largest exporter in the world. It exports to many countries, but Europe is a critical customer. The free-trade zone that was the foundation of the European Union was also one of the foundations of the German economy. Protectionism in general, but certainly protectionism in Europe, threatened Germany, whose industrial plant substantially outstripped its domestic consumption. The pricing of the euro aided German exports, and regulations in Brussels gave Germany other advantages. The European Union, as it existed between 1991 and 2008, was critical to Germany.

      However, the European Union no longer functions as it once did. The economic dynamics of Europe have placed many countries at a substantial disadvantage, and the economic crisis of 2008 triggered a sovereign debt crisis and banking crisis in Europe.

      (part III)

    6. Part III.

      There were two possible solutions in the broadest sense. One was that the countries in crisis impose austerity in order to find the resources to solve their problem. The other was that the prosperous part of Europe underwrites the debts, sparing these countries the burden of austerity. The solution that has been chosen is obviously a combination of the two, but the precise makeup of that combination was and remains a complex matter for negotiation.

      Germany needs the European Union to survive for both political and economic reasons. The problem is that it is not clear that a stable economic solution can emerge that will be supported by the political systems in Europe.

      Germany is prepared to bail out other European countries if they impose austerity and then take steps to make sure that the austerity is actually implemented to the degree necessary and that the crisis is not repeated. From Germany's point of view, the roots of the crisis lie in the fiscal policies of the troubled countries. Therefore, the German price for underwriting part of the debt is that European bureaucrats, heavily oriented toward German policies, be effectively put in charge of the finances of countries receiving aid against default.

      This would mean that these countries would not control either taxes or budgets through their political system. It would be an assault on democracy and national sovereignty. Obviously, there has been a great deal of opposition from potential recipients of aid, but it is also opposed by some countries that see it as something that would vastly increase the power of Germany. If you accept the German view, which is that the debt crisis was the result of reckless spending, then Germany's proposal is reasonable. If you accept the view of southern Europe, which is that the crisis was the result of the European Union's design, then what Germany is proposing is the imposition of German power via economics.

      It is difficult to imagine a vast surrender of sovereignty to a German-dominated EU bureaucracy, whatever the economic cost. It is also difficult to imagine Germany underwriting the debt without some controls beyond promises; even if the European Union is vitally important to the Germans, German public opinion will not permit it. Finally, it is difficult to see how, in the long term, the Europeans can reconcile their differences on this issue. The issue must come to a head, if not in this financial crisis then in the next — and there is always a next crisis.

      So if you are Greece why would you ever accept German domination of your economy? What's the benefit for Greece?

    7. *Yawn*

      Although there is misery in my country, this card is becoming so boring. So tired of the endless complaining, without affirmative action by the everyday people. Self Zombification credited to foreigners and by our own selves.

      Misery, finger pointing, infinitely endless discussions which have no substantial conclusions.

      Everyday people have lost their way and can't even comprehend that small "baby steps" will bring us back on our righteous path, regardless of the shit thrown at us everyday. It stems from basics of giving. Filotimo to one an other, being courteous, hard work, whatever work it may be and regardless of the compensation. Diligence to this will clear our brain. But this is the harder road. So much easier to simply *bitch* about your misery and express anger to politicians, local and foreign. Our misery, is like our country's debt trap cycle. A misery trap cycle. Blackening our souls by our own hand.

      I tend to generalize because it is pointless to go into details and open huge threads of discussion, which lead lot of hot air and no action.

      bla bla bla....

      Personally, i have detached myself from the mainstream news, politics and the "revolutionists", regardless of the political color. Its healthier.

      PS: Interested in seeing a new thread from you though. Good article would be Fraport, their investment plan and the 800 new jobs the will create. Maybe a thread on how tourism YoY is increased. Some positive healthy discussions.


    8. V:

      That's a nice script for a complaining wife who wants to engage in pillow talk (krevatomourmoura).

      And since you want to engage in action what action precisely you want to engage in? You want Greece do go down the dead end roads because its blackmailers want her to do so?

      As for Fraport....pleaaaaaaaase. Spare me the nonsense that a few regional and highly seasonal jobs in some remote airports with poor connectivity to begin with has anything to do with the economy of Greece. Cosco yes, FRaport no. Fraport is just a management company and that's it. In fact FRaport Hellas is a so heavily indepted company from day one that to expect them to hire Greeks towards a better economy is more like Moses hoping to find a air conditioned establishment in the desert. Stop with this ND nonsense about FRaport and other Germanic fairy tales. That's for children who understand nothing about how real economies work.

    9. Dearest Phoevos,

      Hahahaha... nice correlation on pillow talk. But really in reply.

      If you haven't noticed, we the people have no real choices. The only choices we have, is the manner that we live between each other and try to improve each other lives, regardless of what is force fed to us. I won't bore you with details and secondly, I can not enlighten you anyway.

      For Fraport. Your response in itself proves how short sited you are. Again, there is no point as to enlighten you.

      I have no affiliations anymore with any political spectrum. If i vote in the next election it will be for someone who will f*ck things up the least possible or simply abstain. I see things from a business and investment point of view. If you are to blind sided by your ideologies or simply mule stubbornness, then good luck to you on finding happiness.

      You have a hard time to see the big picture of Fraport, Ellinikos, Cosco, Trainose, Road Networks, God willing the ports and marinas and finally DEH. I use to be against the sell of DEH, now no. Needs to go. The only Public work that has proven themselves is EYDAP, in these trying times. They can stay.