Greece fact of the day

The combination of mass joblessness, wage cuts, and higher taxes means disposable household incomes have fallen even further. To make up the difference, Greeks have been eating into their savings. In 2006-2009, the personal savings rate averaged about 6 per cent. In 2015, the rate was -6 per cent.

The total amount of dis-saving since mid-2011 implies Greek households have eaten into €19bn worth of savings even as their living standards have cratered. For comparison, the financial accounts published by the Bank of Greece indicate €36bn in household bank deposits and cash, including deposits in non-Greek banks and foreign currency, disappeared over the same period…

Greek households have cut their investment spending even further, from about a fifth of disposable income in 2007 to just 2 per cent in 2015.

…Greece’s capital stock has been shrinking by about 6 to 7 per cent of output since 2012…

In other words, the collapse of Greece is worse than we had thought.  That is from Matthew C. Klein.


Thank goodness Ms. Merkel is crushing the Greeks while while rewarding the Turks. After all, a leader who shells his own Kurdish villages with artillery is expressing European Values.

Trading Britain for Turkey is the highest expression of European Values.

Many people give serious consideration to your comments, despite often disagreeing with you. That's because you often refer to facts to (at least partially) support your opinions. These two comments, however, are disingenuous.

How so? Merkel spent the first half of 2015 making sure that the results of Greek elections made no difference in Greek government policy, especially in terms of diverting resources to German banks that were stupid enough to lend money to Greece.

She spent the next half inviting a bunch of people (mostly non-refugees and/or not from Syria) to Germany and when more people were showing up than she planned she started appeasing crazy dictator Erdogan in a bid to try to slow the flow of people with almost no realistic chance of intergrating into the German labor force (how much kebab can one country eat?).

This included talks of the EU making it easier for Turks to move to the EU. Watching Merkel's uncompromising toughness with old enemy Greece and very compromised weakness vis a vis strong Turkish leader must have made Erdogan more appealing to some voters than a rational analysis of his policies would suggest.

What's your interpretation of the facts?

I did not follow the refugee situation closely enough to comment on the Turkey issue.

However, I continue to be shocked by how many people are willing to portray Germany as the villain in the Greek situation.

The EU, led by Germany, has provided hundreds of billions in loans to Greece, and renegotiated for some of their debt to be forgiven and some to be on better terms. Yet they are the mean ones because in return they expect Greece to slow the rate at which it runs up new debt. This just doesn't make sense.

Germany may not be the villain of Greece's story, but they're hardly a hero, either.

Heh. I love how parochial people can be. If you vaguely remember from those boring history classes it seems that there was a European country that was indebted, for good reasons, and the onerous demands of it's neighbors created a situation where arose a political movement built on the resentment and very clearly identifiable aggression and humiliation.

We are profoundly lucky that Europeans decided to stop having children.

@derek, a non-trivial point. But the main difference I see is how actions incentivize future behavior.

In Germany's case, the debt was payment for an exceptional event that was now over. Forgiving the debt wouldn't meaningfully incentivize another world war, because "Hey, they are making us pay for all the damage!" was not the main thing stopping Germany from going back to war; their military defeat was. Plus, forgiving the debt would improve international relations, also helping avert war.

In Greek's case, the behavior was ongoing. As long as the Greek government had the ability to fund itself, it was going to spend too much. Forgiving the debt would simply encourage more unsustainable spending in the future. I think this is pretty clear, given that even in the middle of the debt crisis it was very, very difficult to get any reductions in spending implemented, and a government which promised to throw that all out the window and spend more was elected.

If a one-off forgiveness of debt could fix the Greek situation, there would be a compelling argument for that. But it wouldn't be a one-time thing. I don't see any way of encouraging Greece to move in a sustainable direction, other than insisting on cuts to spending.

We could offer Greece the deal that Germany had at the end of WWII:

"we forgive your debts and rebuilt your country, but we are running it now."

We'll even skip the part about dividing it into four pieces.


Steve hasn't provided a proper explanation of the logic behind his comments. However, that doesn't make them wrong. Sadly, he is entirely correct. Merkel is deeply committed to the cosmopolitan elite worldview and has shown a willingness to do, and say, anything to impose her value system on Germany and Europe. The cosmopolitan elite worldview calls for rigid adherence to neoliberal economics and Open Borders. Anything else is "racism", "xenophobia", and "nationalism". Of course, these aren't just allied worldviews, they are deeply complementary. The gated community set (the people boasting about their "bubble"), regard cheap nannies and plumbers as a fundamental human right. Of course, Merkel "knows" that this is "true".

Neoliberalism menas that Greece must be crushed, and crushed, and crushed some more. Of course, Germany could simply bail Greece out and embrace a permanent transfer union to keep Greece afloat. However, this would cost hundreds of billions of Euros at the outset. (and tens of billions of Euros annually). It should be obvious that neoliberalism isn't about sharing. Neoliberalism is basically an ideology of selfishness and greed (and the glorification thereof), as a consequence a transfer union isn't going to happen.

Merkel is also deeply committed to Open Borders (at least the ideology of Open Borders). However, she knows that a continued mass invasion of Germany could trigger an actual Civil War sooner rather than later. She has to stop the invasion or be consumed by it. The obvious thing to do would be to put German soldiers and sailors (the German navy) on the front-lines to stop the invasion. However, this would be ideologically abhorrent. So she has tried to outsource the task to the Turks. That means making deals with Erdoğan.

I don't doubt that Merkel personally despises Erdoğan. He has never been much of a liberal and has become less liberal over time. If she could get away with it, Merkel would (probably) shun Erdoğan. However, she can't get away with and Erdoğan knows it. He seems delighted to be able to twist Merkel's tail.

Many Europeans (including Germans) regard the Merkel-Erdoğan alliance as unseemly, revolting, disgusting, etc. However, she has no choice. She must support Open Borders and must stop the invasion. As a consequence, she has no choice to crawl into bed with Erdoğan. No doubt her choice of bedroom partners cost "Remain" more than a few votes (which Merkel certainly knows). It is not about to change.

"For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken even that which he hath."
If only they could trade the Greeks for Britain... people have tried to do this since the dawn of time. Do you have a plan?

Any day now, Merkel will announce her conversion to Islam.

When there's mutual respect, people of different faiths can coexist in peace. After all, W. got chummy ( ) with the Saudi dictators while being a born-again Christian (or maybe there is something like a born-again Muslim). Compare and contrast with Saudi complaints about Reverend Jeremiah Wright 's most famous parishioner.

"When there’s mutual respect, people of different faiths can coexist in peace."

This is a good point. Is Islam capable of respecting Judaism and the loose Christianity of the west?

Here is Ayaan Hirsi Ali ( Muslim Apostate) on Muslims and women in the West

Yeah, isn't the rest of the Islamic world trying to kill Ayaan hirsi Ali?

Maybe we should stop pretending that greaseball deadbeats, whatever their religion, are European and more accurately apply the term Europe to north and west of Vienna.

Turkey is home to over 2.7 million Syrian refugees. Isn't it rather obvious why Germany would want to provide incentives for Turkey to keep these 2.7 million people from crossing into the Schengen area?

Paying off Turkey to stop millions of Syrians from flooding into Europe is a win/win.

I thought you nativists wanted to keep the Muslims out of Europe. What's the problem here?

Paying was fine but she gave too much. With the deal, Turkish nationals have access to the Schengen passport-free zone and Turkey is promised promotion of their effort to join the EU.

It was said Grexit would be a disaster for Greece. It looks like staying in is not much better.

If they had bitten the bullet in 2009 and got off the pseudo currency union that is the Euro, then how do you think things would be now?

Woud the UK still be an ongoing member of the EU?

The UK is still an ongoing member of the EU!

Sir Humphrey Appleby could keep them in the EU indefinitely. "Ever since 1832 the Civil Service has been gradually excluding the voters from government. Now we have got to the point where they vote just once every five years purely on which bunch of buffoons will try to interfere with our policies."

"The Civil Service does not want power for its own sake. It wants it because if the right people don't get power, the wrong people get it."

Grexit made a lot more sense than Brexit.

I could see Brexit being either more or less likely if Grexit had happened a few years ago. Almost all of it comes down to how the EU reacted to their ex-member.

People will not save if the disposable household income is high

It was joining the Euro that trashed the Greek economy. Had they kept their own currency and let it float, they would have been in a position to expand their money supply to prevent economic disaster.

So Greek economic problems are because there was too little money?

Wasn't it about debt burden and lack of competitiveness? To what extent has the Euro dictated poor government policies and underinvestment in improving economic efficiency?

No that is not accurate. Because of the debt burden and general Mediterranean inefficiency, Greek is relatively poor. But these attributes don't keep a country from growing and categorically will not make it shrink. They will just keep it 40% lower than more efficient places over time.

The shrinkage is due to the inability of the economy to adjust which is due in large measure to the Procrustean bed of the EU in general and the Euro in particular.

An alternative reading is the joining the Euro fueled a Greek economic bubble: it made their economy artificially appear stronger than it was, in particular allowing them to borrow more money than they otherwise could have. And the shrinkage is due to this collapsing.

Not only the alternative reading - it is the correct one, as many people seemed to believe that Greece had magically acquired not only Finland's or Germany's credit rating, but a guarantee that euro government debt was backed by something more than the government that issued it.

As it turns out, that was, at best, only somewhat true - 'In 2012, Greece launched the largest sovereign debt default in history. On June 30, 2015, it became the first developed country to fail to make an IMF loan repayment.[10] At that time, debt levels had reached €323bn or some €30,000 per capita.' But there were also bailouts, so there was some backstop provided by other eurozone governments.

This is the correct one indeed but how can you blame the currency because it made your access to funds easier?

You cannot blame the means of finance when the project financed is flawed. Greeks had money, they chose to waste it in non-productive "investments", stop treating Greeks as naïve victims of a German scam.

Asher and dan111,

You are both correct. Asher's comments are an accurate description of Greece from when it joined the EEC (1981, with an Association agreement as early as 1961) until 2003. After 2003, Greece was part of the Euro and yes, the Euro did fuel a bubble. The bubble was mostly in public finances (higher deficits), not housing. However, a bubble it was.

Of course, the Euro has proven to be a merciless "Procrustean Bed" for all of its victims, including Greece. Being locked into a currency union with Germany is a tough row to hoe. Certainly some North/South issues exist. However, even Finland (yes, Finland) is failing in the Euro.

"Don't blame me. It was dead when I got here. It's too late for prayers. For even if the prayers were answered, and a miracle occurred, and the yen did this, and the dollar did that, and the infrastructure did the other thing, we would still be dead. You know why? Fiber optics. New technologies. Obsolescence. We're dead alright. We're just not broke. And you know the surest way to go broke? Keep getting an increasing share of a shrinking market. Down the tubes. Slow but sure. You know, at one time there must've been dozens of companies making buggy whips. And I'll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company?"
Truth is, Greeks will be be Greeks.

Yes, indeedy, printing more money prevents economic disaster. Worked out great for Zimbabwe, among others.

Ah, a mention of Zimbabwe. Is there a Godwin's style law for this?

Its amazing to me that any mention of states that had inflation disasters is verbotten in a discussion about inflation. Yea, we shouldnt assume that any inflation will lead to Zimbabwe, but likewise, we shouldnt assume that the case of Zimbabwe is meaningless and send it down the memory hole.

The context is that of a country going through an economic contraction accompanied by deflation. In that context, talking about Zimbabwe is like bringing up the health risks of obesity when someone else is proposing food aid for malnourished sub-Saharan Africans.

It's more like arguing that the nutritional starvation of a fat man is not best solved with more candy.

Unfortunately Hitler and Zimbabwe were (are) realities.

And Pre-Real Brazil, Venezuela...

Like Venezuela.

It just adds to the mystery of Brexit. Why would anyone hold a low opinion of the EU?

And compared to the buggers in Brussels, mad Mrs Merkel is sane.

I blame austerity, neoliberalism and white nationalist male christian republicans, in that order.

But not the Muslim Communist president and his Mexican-Syrian dreaded death panels that will pry the Bibles and guns from the dead, cold hands of each and every FOX News watcher in name of Our Lord Satan (may death come quickly to his enemies!)?

L O L (You have made my day)

Well. we serve well to always serve.

Although I have heard this sort of logic from lefty friends and acquaintances, you have provided a nice example for inspection by the curious. Mirable visu!

You lie, boy! You have no friends.

Austerity is working!!

From the Post: "In other words, the collapse of Greece is worse than we had thought."

The austerity policies made it worse. This is not a "recent" collapse where one "discovers" the collapse is worse than one had thought.

The collapse began awhile ago and austerity made it worse.

Pay no attention to the Tsipras government behind the curtain.

Ok, so correct me if I'm wrong, but Austerity = Living Within Your Means. Austerity always works. I think what we're seeing the failure of is spending more than you make, and Keynesian/stimulus thinking. Here's where I believe "Austerity has failed" - and in particular the glorious EU.

1) Too little, too late. If you're paying your credit cards with other credit cards and payday loans, you've spiralled out of control. If I, Sam the Sham, owe the bank $2 trillion dollars, it's just not happening even if I stop taking hot showers and drinking a daily Starbucks. Too little, too late, therefore bankruptcy (or if they had their own currency, inflation).

2) Austerity would require some combination of raising revenue and lowering spending. Neither is as straightforward as the EU thought, particularly in Greece's example. Tax collection is an issue - simply improving tax collection without raising taxes would raise revenue. They could LOWER tax rates and improve tax collection and raise revenue. If you're a crazy right-winger kook and believe that the Laffer curve makes some sense, it's possible that just straight up lowering taxes would improve revenue, depending on where Greece was on that curve. As far as spending, some spending has a positive return on investment and just makes sense - and should be increased. Infrastructure spending in particular, social safety nets being lowest priority. It's a gamble that you can grow faster than your debt, but some bets are better than others.

2b) Tax collection!! Some professions in Greece cannot avoid taxation at all, others can. Raising taxes punishes those who must follow the law, and does not affect the free riders at all. I'm sure such unfairness is undercutting Greek stability and government trust. Lowering taxes, combined with a national effort at collecting, would probably raise revenue significantly. I don't know Greece's exact situation.

There is an austerity case for lowering taxes and continued spending. Just not the idiotic way that the EU imposed. As usual, it's going to be the citizens of Greece that pay the cost for wasteful budgets, and bankruptcy is going to be a lot more... austere... and painful than things that they could have done a few years back. You think things are bad now, you ain't seen nothing yet.

"Austerity = Living Within Your Means. Austerity always works."


I will have to amend my previous statement. As I understand it Greece is/was running a primary surplus, ie they are making more than they are spending BEFORE counting interest payments. If that is the case, then the standard of living now vs bankruptcy may not change. In any case, what Greece looks like now is a Best Case Scenario. It may not get worse. That would largely depend on the Greeks.

If you do not like austerity you have to consider the alternative. What is the alternative? Greece was running a deficit of about 10%. It is now running one of about 5%. They claim otherwise, but it is probably even worse.

So if they did not choose austerity they could do what? Default? What will be the effect of no longer being able to borrow and spend 5% of your GDP every year?

The alternative, in the anti-austerity view, seems to be that Germany should have continued to bail Greece out without insisting on conditions like reducing spending.

I find this bizarre.

"I find this bizarre."

It's standard progressive thinking. Tax the rich, give to the poor. Of course it's not their money to give, but that's often the case.

Lots of people like to pay attention to the one exact argument that helps their case and ignore everything else.

I remember Bush 43 lowering taxes in the middle of a war. Conservative friends said "but a country always has deficits during a war!" True, but it wasn't because of tax cuts.

Similarly, I believe deficit spending can stop a recession. True, but it's when a country has full responsibility for getting itself out of the debts it creates. Germany is supposed to finance Greece's recovery. Why would Germany believe they will get paid back by people calling them Nazis?

That seems an odd point.

"I remember Bush 43 lowering taxes in the middle of a war. Conservative friends said “but a country always has deficits during a war!” True, but it wasn’t because of tax cuts."

That's a rationalization, but it's clear that tax cuts were a logically rational outcome. They may have increased the deficit, but they were still quite politically feasible.

"Germany is supposed to finance Greece’s recovery. Why would Germany believe they will get paid back by people calling them Nazis?"

On the other hand the Leftist point of view is just a denial of reality. There was no reasonable likelihood that anyone would expect Germany to keep giving their money to Greece without any conditions.


"Why would Germany believe they will get paid back by people calling them Nazis?"

If Merkel and Schäuble admitted the truth (the money is gone for good) they would both out of office immediately. The Merkel/Schäuble fiction(s) is (are) about preserving the status quo until the end.

See Der Untergang for some insights.

I am pretty sure many, including Tyler, thought the collapse of Greece would actually be much worse than Greeks spending down some of their savings.

I don't know that the personal savings rate, standing alone, tells us much of anything. Collapse seems like a bizzarely overstated word though. I've seen countries "collapse," and this ain't it.

What does this savings rate change mean? To listen to Ray Lopez, Greeks are hiding their money in mattresses or smuggling it out of the country, not placing it in a repository for convenient taxation and/or seizure.

"the collapse of Greece is worse than we had thought"

Worse than you and the austarians thought. People like me told you so years ago. You morons won't even apologize for being wrong. Won't even aknowledge being wrong. But I told you so.

A post on Greece and no comment by Ray ?
He was pointing out that there are fees for Bank deposits now ; so may be some of the savings may have moved to under the mattresses.

Mass unemployment solved overnight with compensation deregulation.

This is the saddest bloody thing. They did it to themselves (with help from the hag-chancellor and the ECB)

The drop in investment is mainly in housing, but industry also not recovering. I don't think the issue is the wrong choice between staying in the euro and accepting austerity or leaving the euro and sharply devaluing. I think the issue is being in denial about having to make and own one of those choices, and instead depending on while fighting with creditors, which leaves everyone perpetually wondering when the next breakdown in talks and euro liquidity crisis will hit.

The Greek decline is *not* worse than we thought. Such data have been published for years in, for instance, the overviews of the ECB of sectoral income in Euro countries.

It's worth remembering that Greece is entering a demographic death spiral the likes of which haven't been seen since the Black Death.

The fertility rate is 1.4 and falling. The last time it was above replacement was 1980.

Greece's population has been falling since 2009 and the pace of decline is accelerating.

The working age population has fallen by 300,000 (4%) since its peak and will continue to drop.

The share of the population over 65 is already 21% (versus 19% in Florida, America's favorite retirement destination).

Over the next 35 years, that number is going to jump to 33%.

Long story short, there is no plausible path forward for Greece. They just won't have enough workers to pay off their debts or even to cover their existing pension burden.

"The share of the population over 65 is already 21% (versus 19% in Florida, America’s favorite retirement destination)."

That's a striking statistics.

Florida's seniors get to collect Social Security checks, paid for by taxpayers in younger states.

Imagine if Florida had to pay all of its Social Security recipients with only the payroll tax revenue generated in Florida.

Yes, that occurred to me.

Thank goodness the very serious people like Tyler are the ones in charge.

Permanent income hypothesis, anyone?

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