Simply put - the Greek economy still consumes more than it earns. Despite a 25% contraction in its economy, a plunge in domestic consumption and a sharp decline in imports, as WSJ reports [9], Greece is still exporting less than it imports, i.e. its current account is still negative. The reason... Shipping.
Greece has enough problems, from food shortages and cash shortages to unemployment and suicides, but, as The Wall Street Journal blog notes [9], without a large current-account surplus, the Greek government and Greek companies will have big problems repaying the debt owed to creditors throughout the eurozone and at the International Monetary Fund.
Why haven’t those surpluses materialized? One reason was the sheer size of Greece’s current-account deficit: It peaked at 16.5% of gross domestic product in 2008. Without the ability to devalue its currency within the eurozone, erasing that deficit through cuts in relative wages and prices was always going to be a long and grueling process.
Wages across the Greek economy have fallen sharply, but Greece’s performance in the export of goods and services has been among the weakest in the eurozone over the last seven years:
Greece’s merchandise exports have actually performed quite well:
The fault lies in Greece’s exports of services, which slumped post-crisis and never recovered:
- The Wall Street Journal
Look no further than shipping for an explanation here.
One of Greece’s main services exports is its large shipping industry. And after 2008, the economic crisis and a glut of new ships hitting the market caused global shipping rates to collapse; prices haven’t really recovered at all since. Greek exports of transport services – the vast majority of which are sea-freight exports – fell from €19 billion in 2008 to €12 billion in 2013.
And finally, to get a flavor of how 'uncompetitive' Greece was in 2008, even at record-high shipping rates, Greece's current defict was nearly 16% of GDP...
[10]
So while the world points its finger at "lazy" Greeks, it appears their biggest problem is global growth and weak demand... the same as everyone else.
Charts: Bloomberg
