Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
I just wanted to weigh in quickly while reading more in depth later.

The lost competitiveness story for Greece has always rung hollow for me as well since Greece's two biggest sectors, accounting for half of GDP, are shipping and tourism. Third is banking, though it is smaller.

Nonetheless, all 3 sectors have improved since Greece joined the EU.

I have read numerous times since the crisis started that the euro has caused a loss of competitiveness in Greek tourism, as Greece is losing to cheaper destinations such as Turkey.

But until the recession, Greece was showing a marked increase in tourists over the previous decade. In other words, the euro brought more visitors. So, higher prices AND more tourists? How can this be a bad thing? Only if those increased number of tourists are somehow spending only on hotel, and spending much less on food, drink, trinkets, etc. Highly improbable, I should think.

Take it from me, who travels to Greece often enough, the numbers are not down and the prices are indeed much more expensive than before. I once made the mistake of grousing about 10 euro umbrella rentals on the beach, and the all-inclusive luxury resorts that seem to take customers away from the small family establishments, only to be ridiculed for preferring the dirty hippy days of the 70s and 80s. I admit to it and still liked it better then, but in no uncertain terms, the Greeks in the tourist trade do not.

Until the recession, shipping in Greece experienced its best decade ever. On Wall Street, you actually had traders following something called the Baltic Dry Exchange Index which tracks shipping rates. The costs of hiring a ship skyrocketed. Lots of Greek companies were pulling in dough. Again, they became very competitive.

In banking, Greek entities diversified and brought back notable profits from Turkey.

In short, by all appearances, it would seem that the euro has been very very good for Greece.

I imagine that Greece's agricultural sector has been hit; Greece still produces a notable amount of cotton, and that can't be a good thing when you're part of the euro.

As well, Greece has never really had much foreign investment; the presence of multinationals is negligible. So, it would not seem that Greece has suffered from international corporations uprooting for cheaper territory elsewhere. The largest international corporation is Coca-Cola Hellenic and it employs about 45,000 people.

About the IMF's 75% social spending figure (it adds gov't worker pay and pensions together), I have written on ET in the past about this number, and how funky it seemed to me. I will note however that Eurostat has the same exact number. If you take the number of Greeks taking a pension, assume a very high pension (20k a year) and add the number of Greek gov't workers, assume high salaries (25k a year) you still get to only half of the figure listed by Eurostat and the IMF. So, one can assume that buried in that statistic is a host of other costs which inflate it beyond the actual amount of money that makes its way to the citizenry. The IMF's numbers do agree however with Eurostat's numbers.

by Upstate NY on Tue May 25th, 2010 at 09:25:54 AM EST
Wages have risen, THEREFORE competitiveness has suffered and wages must drop again. It's self evident. No data to back it up is required. Any data that suggests otherwise must be wrong.
by Colman (colman at eurotrib.com) on Tue May 25th, 2010 at 09:27:58 AM EST
[ Parent ]
LOL, yes, well this comparison is only with the Eurozone. if you compare Greece to Indonesia, Greece might indeed be losing a bit, but we are still only 100 years removed from the horse and buggy. Somehow I think that Indonesia is not yet crowding Greece out of its traditional markets.

One more thing about the Eurointelligence article. The author takes his economics colleagues to task for claiming that Greece needs deflation in wages to make it more competitive. But he himself does not address part of his own article: "If we set the year 2000 equal to 100, then by 2009 Greece was at 122 while Germany was at 102."

He says that wage deflation won't solve competitiveness in Greece, and I buy that. But by his own argument, it seems that wage deflation is his remedy for Greece's fiscal crisis.

by Upstate NY on Tue May 25th, 2010 at 09:35:28 AM EST
[ Parent ]
I actually think they have no clue, so they're just making up shit as they go along. Alternatively, the proper solutions are simply outside their universe of discourse, so they fixate on things they can talk about.
by Colman (colman at eurotrib.com) on Tue May 25th, 2010 at 09:43:03 AM EST
[ Parent ]
I keep adding responses and yet I have to get going: if you read the IMF's site on Greece, it is plain as day that the Greek debt problem is not triggered by a restatement of false statistics.

The IMF page has dozens of reports all through the decade on the actual numbers and their impact on the Greek gov't budget, the high interest servicing, etc. And the numbers are not at all different from those reported in the restatement in 2009.

by Upstate NY on Tue May 25th, 2010 at 09:40:54 AM EST
[ Parent ]
As far as I can see, the only way to do this is to add up all social benefit costs to the wage and pension bill. This would include stuff like hospital equipment and new schools, along with disability pensions, unemployment benefits etc. If one includes government funding for the Social Security Funds (which theoretically, one shouldn't conflate with the pensions - these are management costs, past debts and constitutional guarantees mostly), one can reach 40% of non-interest public expenditure. I would be really interested in seeing some plausible explanation for the 70% number.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue May 25th, 2010 at 09:45:04 AM EST
[ Parent ]
Include all the costs for things like supporting the scattered islands, subsidies for ferrys (?) and public transport, everything other than the two proper functions of government, property protection and military spending.
by Colman (colman at eurotrib.com) on Tue May 25th, 2010 at 09:49:16 AM EST
[ Parent ]
Colman:
everything other than the two proper functions of government, property protection and military spending.

Colman you are getting too good at this lol

good thing there's a snark macro, it'd be brutal without.

oh dear...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue May 25th, 2010 at 02:08:59 PM EST
[ Parent ]

Display:

Occasional Series