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Thursday, December 27, 2012

Greece's current account balance per October 2012

The overall development in the current account remains impressive (-54% month-to-month; -74% YTD-to-YTD) as follows:

in BEUR

January - October
October









2011 2012
2011 2012
Revenue from abroad





Exports 16,8 18,0
1,8 1,9

Services (e. g. tourism) 25,1 24,0
2,4 2,1

Other income 2,7 2,7
0,3 0,3

Current transfers 3,9 4,7
0,2 0,1


---- ----
---- ----

Total revenue from abroad 48,5 49,4
4,7 4,4







Expenses abroad





Imports 39,9 35,3
3,9 3,5

Services (e. g. tourism) 11,7 10,3
1,0 1,0

Other expense (e. g. interest) 9,7 4,8
0,9 0,4

Current transfers 3,4 3,1
0,4 0,2


---- ----
---- ----

Total expenses abroad 64,7 53,5
6,2 5,1














Net foreign deficit (current account) -16,2 -4,1
-1,5 -0,7

It is quite noticeable that the improvement continues to come mostly on the expense side. Revenues actually declined in October and YTD they increased only modestly. As positive as it is that exports reached an all-time high in October, and that YTD exports increased by 7%, if one excludes oil and shipping from the total and looks only at the export of 'other goods' (the 'regular' exports), the YTD increase is only 3%. The most important category of 'services' actually declined 4% YTD. Why should the increase in exports be much higher? First, the Euro still trades significantly below the levels of recent years, thus making the entire Eurozone 'cheaper' relative to third countries and, secondly, Greece itself has become quite a lot 'cheaper' due to austerity.

The bulk of the improvement is due to the expense side, particularly lower interest expense as a result of the PSI. At the same time, YTD imports are running 12% below the previous year's level.

It should be noted that the 'primary current account balance' (i. e. excluding interest) will in all likelihood turn out to be positive for the entire year of 2012!

So what do we have here? We have an economy where budget and current account balances are already in or approaching equilibrium (before interest). That's the good news. The bad news is that the structure of the Greek economy is such that when the economy achieves equilibrium, it cannot employ its people.

It is funds flow from abroad which had become the principal driver behind adequate Greek employment, at least since the Euro. Going forward, that funds flow is unlikely to restart in necessary volumes in the form of debt. Thus, I offer three solutions for the Greek problem: foreign investment, foreign investment and, again, foreign investment. Not only with a view towards bringing funds into the country but, above all, with a view towards bringing know-how in all areas, particularly in the area of corporate governance, into the country!

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