Friday, April 22, 2016

21/4/16: Drama & Comedy Back: Grexit, Greesis, Whatever

Back in July last year, I wrote in the Irish Independent about the hen 'latest' Greek debt crisis: Optimistically, I predicted that a full-blown crisis will return to Greece in 2018-2020, based on simple mathematics of debt maturities. I was wrong. We are not yet into a full year of the Greek Bailout 3.0 and things are heading for yet another showdown between the Three-headed Hydra the inept Greek authorities, the delusional Germany, and the Lost in the Woods T-Rex of the IMF.

Predictably, IMF is still sticking to its Summer 2015 arithmetic: Greek debt is simply not adding up to anything close to being sustainable: an example of the rhetoric here. Meanwhile, the FT is piping in with a rather good analysis of the political dancing going on around Greece: here. The latter provides a summary of new dimensions to the crisis:

  1. Brexit
  2. Refugees crisis
But there is a kicker. Greece is now in a primary surplus: latest Eurostat figures put Greek primary balance at +0.7% GDP for 2015, well above -0.25% target. And Greek Government debt actually declined from EUR320.51 billion in 2013 to EUR319.72 billion in 2014 and EUR311.45 billion in 2015. This can and will be interpreted in Berlin as a sign of 'improved' fiscal performance, attributable to the Bailout 3.0 'reforms' and 'assistance'. The argument here will be that Greece is on the mend and there is no need for any debt relief as the result.

Still, official Government deficit shot from 3.6% of GDP in 2014 to 7.2% in 2015. Annual rate of inflation over the last 6 months has averaged just under -0.1 percent, signalling continued deterioration in economic conditions. Severe deprivation rate for Greek population rose to the crisis period high in 2015 of 22.2 percent, up on 21.5 percent in 2014. Industrial production on a monthly basis posted negative rates of growth in January and February 2016, with February rate of contraction at -4.4% signalling a disaster state, corresponding to 3% drop on the same period 2015. Volume of retail sales fell 2.2% y/y in January marking fourth annual rate of contraction in the last 5 months. Unemployment was 24% in December 2015 (the latest month for which data is available), which is down from 25.9% for December 2014, but the decline is more likely than not attributable to simple attrition of the unemployed from the register, rather than any substantial improvement in employment.

In simple terms, Greece remains a disaster zone, with few signs of any serious recovery around. And with that, the IMF will have to continue insisting on tangible debt relief from non-IMF funders of the Bailout 3.0.

It is a mess. Which probably explains why normally rather good Washington Post had to resort to a bizarre, incoherent, Trumpaesque coverage of the subject. This,, in the nutshell, sums up American's disinterested engagement with Europe. 

Enjoy. Grexit is back for a new season to the screens near you. And so is Greesis - that unique blend of fire and ice that has occupied our newsflows for 6 years now with high drama and some comedy.

Post a Comment