Home > Uncategorized > The 10% of GDP Greek *surplus* on its services trade balance

The 10% of GDP Greek *surplus* on its services trade balance


Yesterday, as part of an attempt to raise the level of discussion about the Eurozone problems, I spent the better part of ten minutes to download a 98 page Excel-file from Eurostat containing data about the last sixteen years of European Union macro economic history. It turns out that Greece has a surplus of almost 10% of GDP on its ‘international trade in services’ account (among other things: shipping, tourism). That’s a lot by whatever standard and surely when compared with 2% of GDP German deficit. In the EU it is only topped by tiny Malta, Cyprus and Luxembourg. It is caused by the fact that Greece is not only home to one world-class economic sector (tourism) but even to two (the other being shipping), which is a lot for a country the size of Greece.

Does this mean that Greek services are hyper competitive, as opposed to a supposedly petrified German service sector? When it comes to tourism and shipping: of course. Greek beaches are more fun and have better weather than German beaches which, in combination with the British propensity to binge (and loads of vibrant companies as well as government transport and medical services) makes for a highly competitive sector! And 15% of the global fleet of merchant vessels is owned by Greek companies – at least to an extent because of a tax exemption enshrined in the Greek constitution as far back as 1967.  Beat that, Ireland! Aside – when I found out about this I was surprised that this clause in the constitution did not prevent Greek membership of the European Union… Never mind, at the moment it brings home 15 billion a year.

But the point:  There is a discussion going on about the ‘competitivety’ of countries. Often, current account data are used to prove that countries are ‘competitive’ or ‘uncompetitive’. Which is a bogus discussion. Large current account deficits (or surpluses) are not a sign of ‘competitivety’ of a country but a sign of unbalanced macro-economic spending in the country itself as well as in its trade partners. Capital flows can affect such imbalances: after the last quarter of 2004, many countries in and around the European Union saw their current account deficit increase with 5 to even 20% of GDP within two years. These are a sign of rogue capital flows which enable countries to live beyond their means (see the last link), drove up asset prices and (especially in Spain) attracted millions of immigrants. I’m not talking about benign 3 or 4% of GDP deficits of the current account here, I’m talking about deficits of 10, 15, 20 and even 25% of GDP.  But countries with large current account deficits can, like Greece, still have highly competitive economic sectors. Stating that there is some kind of macro-economic kind of competitivety misses the point. Macro economics is about total flows of money and the money value of stocks: income, lending, debt, consumption, expenditure, lending and the like. Not about competitivety.

Next time: in a country like Greece, with a very high share of self-employed, deflation is not just about low wages but also and especially about decreasing profits and ‘mixed-income’ of the self-employed. And look here for the way economists do use disaggregated current account data to estimate competitivety, using a global value/production chain approach.





  1. March 15, 2015 at 8:58 am

    So, the Euro has not been very bad for Greece… It need no devaluation. So, the Big Problem is Debt. If this is the case, who is the culpable of huge debt/GDP?

    • Ack Nice
      March 15, 2015 at 12:15 pm

      Who is culpable for foisting illegitimate debt on Greece …and the world?

      Here is a list of names you can start with – in no particular order:

      LARRY SUMMERS, Ronald Reagan, LARRY SUMMERS, Margaret Thatcher, LARRY SUMMERS, Bill Clinton, LARRY SUMMERS, Robert Rubin, LARRY SUMMERS, Tim Geithner, LARRY SUMMERS, John Corzine, David Kamansky, David Coulter, Walter Shipley, John Reed, LARRY SUMMERS, Peter Mandelson, Barack Obama, *KENNETH DART*, *PAUL SINGER*, LARRY SUMMERS, Pascal Lamy, Penny Pritzger, Jamie Dimon…

      …and did I mention Loan Shark LARRY SUMMERS, the Typhoid Mary of Economics, Despicable Daddy of the Deregulation Disaster?

      my advice: go back about 15 years and start reading what Greg Palast has been writing since then. or, just get his books “Vultures’ Picnic” and maybe “Billionaires and Ballot Bandits”

      pay special attention to how hard LARRY SUMMERS worked to get the Commodities Futures Modernization Act passed in the USA – and to the banksters re-draft of the WTO Financial Services Agreement! – and don’t miss his revelation of the END GAME memo!!

      here’s a snip from one of Palast’s emails/articles (you can sign up to get his emails at GregPalast.com):

      “The real culprits behind the suffering are well camouflaged. So let me name some: In Greece, we begin with billionaires Kenneth Dart and Paul “The Vulture” Singer.

      Dart and Singer bought up Greek government bonds for pennies on the dollar. While the holders of 97% of Greek bonds agreed to accept a loss of 75% of their value, Dart and Singer demanded several hundred percent more than they paid. Then Dart and Singer threatened the dead-broke Greek government. If Greece did not pay this ransom, Dart and Singer would declare Greek bonds in default. Every bank in Europe holding these government debts as reserve funds would face technical bankruptcy; the value of government bonds worldwide would implode in value and the entire hemisphere would face a new financial collapse.

      It was financial terrorism, and the Greek government gave in. It paid the full ransom demanded. Dart grabbed over half a billion dollars ($513 million) from the Greek treasury –– and only the gods know how much Singer has pocketed.
      [Get the full story on Singer the Vulture, read Billionaires & Ballot Bandits and Vultures’ Picnic.]

      How was this vulture food paid for? With “austerity” — tightening a belt that’s already not much bigger than its buckle. To pay Singer and Dart, the Greek government announced it would fire 15,000 workers.

      What’s sick is that the ruling coalition (or misruling coalition) does not say this is to cover the payoffs to the vultures. Rather, the government says it is the just punishment Greeks deserve for their “laziness and greed.” The victims’ punishment is called, “austerity.” ”

      lastly, I agree with Frances (below) that the Euro is terrible for Greece – and i’ll add what ought be obvious; it’s a wicked-stupid idea for any country to EVER give up its own currency and it’s also stupid-on-steroids for any nation’s elected government to relinquish the power to issue the nation’s credit to a bunch of profiteering, war mongering banker gangster usurpers.

      gee, fellow humans – is it time to remove the ONE motivation for ALL the crimes yet????

  2. March 15, 2015 at 9:21 am

    Miguel, the increase in Greece’s trade surplus in services since 1998 has unfortunately been more than matched by a large and growing deficit in goods. Overall, Greece’s balance of trade has been negative since 1995.

    The capital inflows that Merijn highlights date back to the mid-1990s, though they became much larger from 2004 onwards. They were due to Greece adopting a currency peg in anticipation of the Euro. It is this that turned the current account negative. Consequently Greece joined the Euro not only with very high legacy debt/GDP, but with large and growing current account and fiscal deficits (fiscal deficit being an inevitable consequence of current account deficit). A recipe for disaster.

    I would say the Euro has been absolutely terrible for Greece.

  3. March 16, 2015 at 8:42 am

    I agree with This history. But I think also that Greece has a terrible fiscal curriculum. Currently Greeks are not paying their taxes. They export all he money to other countries. The Grexident, as say W. Münchau, could be terrible. Better for all to manage a Grexit.

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