Saturday, February 24, 2018

EU - The Transfer Union

To all those who claim that the EU should become a transfer union, the graph below shows that a lot of transferring/redistributing is going on already. The figures represent per capita Euros (2015). Net receivers are on the left side (gray) and net payers are on the right side (red).

A Decade In The Life Of A Current Account

It was the year 2008 which will reserve Greece a spot of distinction in the world's history of absolutely shocking current accounts. In 2008, the Greek economy spent 105 BEUR outside its borders compared with only 69 BEUR which it earned outside its borders. In consequence, the external deficit of the Greek economy was 36 BEUR in that year. These numbers assume their real significance when comparing them to the 2008 GDP of 241 BEUR, as reported by ELSTAT: the external deficit was 15% of GDP (!). Perhaps not a world record but probably close to it.

Now, a decade later, Greece can reserve another spot of distinction, this time in the history of dramatic current account improvements. For 2017, the Bank of Greece reported an external deficit of 1,5 BEUR, or just about 1% of GDP. The significant figures of this development, as published by the Bank of Greece, are summarized below:

Current Account (in BEUR)
2017 2016 2008
Revenue from abroad
Exports 27,9 24,5 21,9
Services (e. g. tourism) 28,3 25,0 34,2
Other income 6,1 5,9 9,0
Current transfers 1,9 1,8 3,4
------ ------ ------
Total revenue from abroad 64,2 57,2 68,5
Expenses abroad
Imports 46,3 41,1 66,3
Services (e. g. tourism) 10,9 9,7 18,5
Other expense (e. g. interest) 6,0 5,9 16,6
Current transfers 2,5 2,4 3,7
------ ------ ------
Total expenses abroad 65,7 59,1 105,1
Net foreign deficit (current account) -1,5 -1,9 -36,6
Trade balance -18,4 -16,6 -44,4
Services balance 17,4 15,3 15,7
Other balance 0,1 0,0 -7,6
Current transfer balance -0,6 -0,6 -0,3
---- ---- ----
Net foreign deficit (current account) -1,5 -1,9 -36,6
Non-oil and non-shipping exports
2017 2016 2008
Exports "Other Goods" 19,9 18,2 17,0
Imports "Other Goods" 34,3 31,8 46,9
---- ---- ----
Balance of goods excluding oil and ships -14,4 -13,6 -29,9
Ratio: Imports vs. Exports 1,7 1,7 2,8

A truly meaningful analysis of the above development would require statistics at a level which the BoG does not publish (it might be a recommendation for the BoG to provide such a meaningful analysis!). Nevertheless, the following observations can be made with general accuracy.

1) "Exports", "Imports" and "Trade Balance" confuse in the case of Greece because these figures include large and widely fluctuating figures from oil and shipping trade. Still, overall exports went from 22 BEUR to 28 BEUR during the decade while overall imports declined from 66 BEUR to 46 BEUR. That represents a turn-around of 44 BEUR for the decade!
2) "Other Goods" are included in the overall exports/imports and they represent those categories which could be considered as regular trade. Here, exports went from 17 BEUR to 20 BEUR and imports declined from 47 BEUR to 34 BEUR, representing a turn-around of 16 BEUR for the decade!
3) Unclear is what happened to "Services" as revenues in this category declined from 34 BEUR to 28 BEUR. It certainly was not a decline in revenues from tourism (which actually increased from 10 BEUR to 15 BEUR). Instead, the main trigger was a decline in revenues form transportation from 14 BEUR to 9 BEUR.
4) The "Other" category declined on the revenue side from 9 BEUR to 6 BEUR but much more significantly on the expense side from 17 BEUR to 6 BEUR (!). The latter was primarily due to a reduced interest expense.

Last but not least: the import overhang ratio (imports vs. exports) in the category of "Other Trade" had been an incredible 2,8 in 2008, i. e. imports amounted to almost 3-times the volume of exports! It is now down to 1,7, still a high ratio in normal circumstances but certainly defendable in an economy with high services revenues (e. g. tourism), such as Greece.

One could be inclined to see only good news in the above development because the numbers do not show the methods employed in order to achieve them. The 'sledgehammer' was the most important method (i. e. strangle domestic demand so that less money is spent abroad). The risk inherent in that is that as growth returns - without other structural changes - money spent abroad will increase again in line with increased domestic demand. 2017 might already represent a negative omen: growth returned and while exports of "Other Goods" increased, too, imports of "Other Goods" increased much more significantly.

Friday, February 23, 2018

"Through Greece: A Path To European Energy Security 2.0" - Op-Ed By Dean Plassaras (cont'd)

Having brought to the attention of the readers of this blog three energy projects worthy of observation, I now wish to complete the task and bring to conclusion the Pentalogy of energy projects in Greece which are worthy of deep and somewhat quiet observation/reflection. The reflection part pertains to the fact that perhaps Greece, in addition to the tourism and merchant marine pillars of her economy, perhaps has found a new pillar called energy.

For it is my conviction that perhaps 50 years from now and at a time when we all have departed this hospitable earth, which most days resembles a warm and full of understanding "Observing Greece" blog session, there will be no longer a memory of this miserable crisis which befell Greece due to the deep shortcomings of its so-called "partners" in the European community (I am sure the word community is some form of cruel euphemism the deep irony of which we could no longer escape). Instead, our generation (and I am speaking of the Greek side now) will be remembered as the generation which adopted our Exclusive Economic Zone and freed up the forces which propelled Greece into a level of new prosperity based among other things on matters of energy. It's a modest "Eureka moment" which underscores that maybe we found a new area of energy competitiveness for the Greek economy, dependable and worthy of building upon.

So here are two more projects, in a more advanced stage of implementation than the trilogy presented last week, which I believe set up a nice observation framework for the future. And they are:

1) "Gas Interconnector Greece-Bulgaria Pipeline (IGB)" which is a pivotal infrastructure to connect the Greek and Bulgarian gas networks, enhancing South-East Europe's (SEE) security of supply and allowing imports from various sources. The IGB project is being developed by ICGB AD, a 50-50 joint venture between IGI Poseidon SA and Bulgarian Energy Holding.

The IGB will have an initial transportation capacity of 3 Bcm/y (billion cubic meters per year) from Greece to Bulgaria that could be upgraded up to 5Bcm/y at a later stage, in response to the market demand. The IGB Pipeline will also be equipped in order to offer physical and/or commercial reverse flow.

European support: In 2015, with the support of the Bulgarian and Greek Governments and as a result of the benefits that the project brings to Europe, the IGB pipeline has been confirmed as Project of Common Interest (PCI), being included by the EU Commission in the second PCI list among the Southern Gas Corridor projects. In addition, IGB has been identified as a priority project of the EU's Central and South-Eastern European Gas Connectivity (CESEC) initiative which aims to support and accelerate the development of strategic infrastructure.

The IGB project has also been included in the last Ten Years Development Plan (TYNDP), in line with the objective of the European Network Transportation System Operators of Gas (ENTSOG) to create a single European market for gas and a reliable and safe transmission network capable of meeting Europe's current and future needs.

The project has been awarded in 2010 with European grants for up to 45 million euro, through the European Economic Recovery Plan (EERP) for the performance of the FEED (Front-End-Engineering-Design) and for pipeline manufacturing and installation.

Development status: The IGB project has obtained the Installation Act in Greece, the approval of the technical design in Bulgaria and the Environmental Impact Assessment (EIA) was approved by both competent Ministries of the two countries. The final construction permits are therefore under completion.

In December 2015, the IGB's Final Investment Decision (FID) was taken by ICGB Shareholders. Construction is scheduled to start during the 1st quarter of 2018 and the Commercial Operation Date (COD) is envisaged in 2020.

More information about the IGB pipeline can be found on the ICGB website:

And, finally, last but not least:

2) "Trans Adriatic Pipeline (TAP)" which will transport Caspian natural gas to Europe. Connecting with the Trans Anatolian Pipeline (TANAP) at the Greek-Turkish border, TAP will cross Northern Greece, Albania and the Adriatic Sea before coming ashore in Southern Italy to connect to the Italian natural gas network.

The project is currently in its construction phase, which started in 2016 and about 70% complete.
Once built, TAP will offer a direct and cost-effective transportation route opening up the vital Southern Gas Corridor, a 3500-kilometer long gas value chain stretching from the Caspian Sea to Europe.

In fact, TAP has received the largest ever EU Bank loan (a rare affirmation of EU interest in this project)

Thanks again for allowing the space for this presentation and I wish you all the best. And please remember the Pentalogy of these Greek energy projects is based on conveyance systems and not "treasure hunts for new riches".

Dean Plassaras

Thursday, February 15, 2018

"Through Greece: A Path To European Energy Security" - Op-Ed By Dean Plassaras

Op-ed by a reader/contributor to this blog, Dean Plassaras, a Greek-American entrepreneur living in California.

As we are all observing Greece looking for factors that might make a difference, I wish to bring to your and blog readers' attention 3 energy projects with promising potential. They are:

EuroAsia Submarine Interconnector Cable: The EuroAsia Interconnector is a leading European Union Project of Common Interest (PCI) that will link the electricity grids of Israel, Cyprus and Greece (Crete-Attica) through a 2,000MW sub-sea cable and converter stations at each connection point. The total budget of Stage 1 of the project for the initial 1000MW interconnector is estimated at 3.5 billion euros.

EuroAfrica Submarine Interconnector Cable: EuroAfrica will link the electrical systems of Egypt, Cyprus and Greece (via Crete) through sub-marine DC cables and HVDC onshore stations in each country/location, and have a capacity of 2000 MW. The EuroAfrica creates an energy bridge between Africa and Europe with a total length of the interconnector being approx. 1648 km, and creates a reliable alternative corridor for transferring electricity to Europe.

East Med Gas Pipeline Project: The Eastern Mediterranean (EastMed) pipeline project relates to an offshore/onshore natural gas pipeline, directly connecting East Mediterranean resources to Greece via Cyprus and Crete that could: i) enhance Europe's gas security of supply via diversification of counterparts, routes and sources; ii) develop EU indigenous resources such as the offshore gas reserves around Cyprus and Greece; and iii) promote the development of a South Mediterranean Gas Hub.

Mindful of the well known "resource curse" or the "paradox of plenty", I am not so much interested in suggesting that hydrocarbon discoveries could solve the problems of Greece. Rather, I wish to focus our attention on the interconnectivity issue and energy performance improvements delivered by such systems.

Of utmost importance and leading the pack is the EuroAsia submarine electric cable with a parallel fiber-optics cable component. Cheap electricity, whether produced by gas-fired plants or solar installations, could cut current electric costs by half and end the energy isolation of the Greek islands which currently produce electricity on demand through burning of dirty and expensive mazout (heavy petroleum) which needs to be imported (we both agree that Greece needs to cut its imports and increase its exports).

The EuroAsia interconnector has now reached its implementation phase and I hope it becomes the proverbial "win-win" for better Greek economic results and greater EU energy security.

Regrettably, this topic is not sufficiently covered and on the rare occasions it is, perhaps not sufficiently explained.

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Tuesday, February 13, 2018

Kristina Tremonti - Fighting Corruption in Greece!

I came across Kristina Tremonti through this article in Der Spiegel (the article is in German but the video at the beginning is in English). Here is another video about her fight against Greek corruption. And here is an English article from The Guardian.

Tremonti was born in Vail, Colorada, as daughter of an Italian father and a Greek mother. At age 2, she moved to Greece with her mother and at age 16 she returned to the US for studies, and she later received a degree from Yale University. At age 23, she left a well-paid job in NYC to return to Greece to make a contribution to her mother's home country. She is now 27.

After having had to pay a bribe ("fakelaki") to get her grandfather a cancer operation in a Greek hospital, Tremonti chose corruption as the field of her activity. She established the platfrom www.edosafakelaki.org

I have browsed her activities in the internet a bit and everything sounds really quite impressive!

Meritocracy And Greece

This paragraph says it all:

"We need meritocratic decision-making in Greece, be it by left- or right-wing governments, and both in the public and private sectors. More than debt relief, Greece needs meritocracy. This is not something that we can translate into a specific prior action. This is not something that you can order from the Eurogroup. This is something about a political and governance culture of responsibility and a mentality that needs to continue to be developed. Many Greeks have suffered during the economic crisis. The price they paid should not be for nothing."

It comes from an article written by the Dutch Ambassador to Greece and published in the Ekathimerini. The Greek nationalists will probably consider this article as a display of arrogance by a foreigner. Particularly the following sentence from the article will trigger their ire: "The country needs to keep working on the structural challenges of its economy. Greece needs to aim for its economy to converge to a European standard." The Greek nationalists will cry out that the premise of Greece having to adjust to the European standard is totally false. On the contrary, it is the other way around: the rest of Europe should adjust to the great wisdoms which had their origin in Greece.

My reaction? This should not be viewed as an either-or proposition. Instead, it should be viewed as an as-well-as proposition. 

Monday, February 12, 2018

Does Germany Abandon Itself?

I was not aware that the coalition agreement of the (expected) new German government was so pro-European (see this article). The pro-Europeans, like the French, will like that. The Schäuble-supporters will despise it for reasons which the author explains in the article. In any event, if all of this comes through, it will take winds out of the sails of those who always blame Germany for wanting to dominate Europe on its own terms and with only its interests in mind.

"It is not only legitimate, but also the duty of French President Emmanuel Macron to pursue French interests and see to it that the French economic model prevails in Europe. What is to be deplored is that the German government is evidently abandoning the formulation and pursuit of German interests. That is not only politically stupid, but will actually also deepen the crisis of the European Union. Especially in the face of Brexit, the logical goal of German policymaking in Europe should be to counter French central planning with Germany’s well-proven, market-liberal policies in the tradition of Ludwig Erhard. To keep Europe prosperous and united, competition in the Single Market needs to be strengthened and the operations of the ECB refocused on the provision of sound money."

Friday, February 9, 2018

Greece Through Irish Eyes

In this article, a xenos describes a book which he has written about Greece. Aptly, he calls the book "Greece through Irish eyes". After reading the article, I believe I will buy this book. Here are my favorite paragraphs:

"One would have to be an imbecile or a politician to love Greece without realizing how grievously it suffers as much from self-abuse as from the cruelties of others. So we tolerate the imperfections amid which we live our lives."

"What is there to love about Greece? For me, the unchangeable keywords are: 'filotimia,' 'oikogenia,' 'estia,' 'oikonomia' and above all 'eleftheria.' These constitute 'Greekness' – 'ellenikotita.'"

And particularly this one:

"A Westerner, trained in linear thinking, will be exasperated by the difficulty in making connections between cause and effect. Quite often, what I see does not correspond to what I would call 'reality.' The West still does not understand Greece, because it insists that Greece belongs to them, when in fact it is a pivotal joint between East and West."

Wednesday, February 7, 2018

The Miraculous Greek Merchant Fleet!

This article from the Ekathimerini reports what most people assume to be a fact, anyway. Namely, that Greek shipowners are the Number One in the world's merchant fleet. Specifically:

* over 4.500 ships are valued at 100 BEUR
* Japan ranks in second place with 89 BEUR
* China ranks third with 84 BEUR

I have said this in a previous posting: The fact that entrepreneurs from a relatively small country of 11 million people, a country which really doesn't have a track record of successful economic and/or business performance, would reach such a position is quite mind-boggling to me. True, Greece - surrounded by water - has a history of seafaring but so have other countries. Spain or Portugal have similar histories and the UK used to rule the waves. And, by the way, where are the Americans?

What puzzles me about Greek shipowners is the following: they obviously know what it takes to be successful and they obviously understand why their country is not successful. They must see that every day. Why in the world do they not take a role in making their country successful???

Thursday, February 1, 2018

Manufacturing Expected On The Rise!

This is one of the most important graphs about trends in the Greek economy: the index reflecting the expectations of purchasing managers in Greece's manufacturing sector ("Manufacturing PMI"):

The light blue field in the background represents GDP. In 2010, when Greece's GDP first collapsed, the PMI exaggerated that collapse. The same phenomenon occurred during the drama times of 2015-16 but then the PMI's exaggeration was much greater than before.

The point, however, is this: for quite some time now, the PMI is rising. Rising significantly above GDP growth. There is no other way than to interpret this as a very positive sign for the near future of the Greek economy!