"Greek recession is over" - Are we sure about it?

[Ludicus]

Not enraged but ..

Good posts, Denny, but you are wasting your time.

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And no, it's not off-topic,
I genuinely like this man. Pope Francis speaks at the European Parliament (full speech, english audio)
http://www.youtube.com/watch?v=A6dARTnMwc0

Excerpt,

....Ladies and Gentlemen, Members of the European Parliament, within this dynamic of unity and particularity, yours is the responsibility of keeping democracy alive for the peoples of Europe.
It is no secret that a conception of unity seen as uniformity strikes at the vitality of the democratic system, weakening the rich, fruitful and constructive interplay of organizations and political parties.

This leads to the risk of living in a world of ideas, of mere words, of images, of sophistry… and to end up confusing the reality of democracy with a new political nominalism. Keeping democracy alive in Europe requires avoiding the many globalizing tendencies to dilute reality: namely, angelic forms of purity, dictatorships of relativism, brands of ahistorical fundamentalism, ethical systems lacking kindness, and intellectual discourse bereft of wisdom.

Keeping democracies alive is a challenge in the present historic moment. The true strength of our democracies – understood as expressions of the political will of the people – must not be allowed to collapse under the pressure of multinational interests which are not universal, which weaken them and turn them into uniform systems of economic power at the service of unseen empires. This is one of the challenges which history sets before you today.

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Pope Francis Slams EU's 'Opulance' And 'Aloofness'

Martin Schulz, the President of the European Parliament, and UK Prime Minister David Cameron's nemesis, Jean-Claude Juncker, President of the European Commission, shifted uncomfortably in their seats throughout

[The Wandering Storyteller]

May I ask, what does the four principles of the EU have to relate to the Greek Recession?

[Kraut and Tea]

I`d rather have Greeks tell me if the recession in their country is over.

Rather than some artical or US, German, UK, Dutch, Italian or French politicians.

Is it?

[Sphere]

Spain adopted the Euro in 1999. Even including the the recession and all it entailed, close to tripling your GDP in 15 years is doing pretty damn good.


Looking at the GDP per Capita (PPP) actually shows only a doubling since the adoption of the Euro (and is a better measure of the average Jose's economic situation). But still it is hard to call Spain's adoption of the Euro anything but an economic success. Yes, there some of the growth was a bubble. But most of it wasn't.

[Denny Crane!]

If blind faith in GDP is your assumption of an economic success then yeah I guess.

http://www.tradingeconomics.com/spain/unemployment-rate

Hovering around 25% unemployment (50% youth) is not economic success I would ever thought anyone would call economic success for a country but maybe that is just me.

[Stavroforos]

I`d rather have Greeks tell me if the recession in their country is over.

Rather than some artical or US, German, UK, Dutch, Italian or French politicians.

Is it?

I'm not in the private sector and not employed (not for the lack of trying, lol), so my picture isn't the most informed, but it seems to me we've stabilized in a very poor position. Some signs of recovery appear, but mostly it just seems we've gotten used to the economic situation as it has been since 2009, so we no longer panic and protest over how shite everything is.

[alhoon]

I would mostly agree with Stav that we stabilized in a poor position and there are signs of very slow recovery. And since elections are approaching, I'm afraid our government would go vote-grabbing and lend money we can't repay, using the funds to show a temporary recovery that will again be followed by a plummeting spiral.

[Sphere]

If blind faith in GDP is your assumption of an economic success then yeah I guess.

http://www.tradingeconomics.com/spain/unemployment-rate

Hovering around 25% unemployment (50% youth) is not economic success I would ever thought anyone would call economic success for a country but maybe that is just me.

Having a look at the history of employment in the two decades before the Euro doesn't paint a really rosy picture of Spain's pre-Euro economy where 20%+ unemployment wasn't exactly unknown.



In the decade before the recession, Spain was experiencing exceptionally good levels of employment. And I'd be the last person to defend how the crisis was handled in Europe (overall the decisions taken have made things longer and worse than they had to be), but considering this recent international economic crisis was the worst since the Great Depression, Spain has a good chance to experience that sort of employment again when things return to normal.

[Akhenaton]

What Stav and alhoon said. The Storm of the crisis has passed for now, but it has left a devastated field of misery in it´s wake. The economy has stopped droping, but since the main policy of the past years has been rigouros saving and not smart investing, naturally there can be no economic growth. It doesn´t also help, that the 13th and 14th wage has been cut, as people will be far less willing to spend much money on the important days of christmas and new years eve. Many shops had to close and smalltime businessowners were hit especially hard. Only few new stores have opened so far...In Conclusion, the economy is stable, but far weaker than pre 2009, the same families who dragged this country down over the last decades are still in major positions of power, police now patrol streets in full combat gear, which is always helpful if you want to build a healthy and trusting relationship between citizens and the state and yeah...life goes on.

...Until the next big economic crisis will errupt

[Denny Crane!]

Having a look at the history of employment in the two decades before the Euro doesn't paint a really rosy picture of Spain's pre-Euro economy where 20%+ unemployment wasn't exactly unknown.



In the decade before the recession, Spain was experiencing exceptionally good levels of employment. And I'd be the last person to defend how the crisis was handled in Europe (overall the decisions taken have made things longer and worse than they had to be), but considering this recent international economic crisis was the worst since the Great Depression, Spain has a good chance to experience that sort of employment again when things return to normal.

So GDP is better.

Employment is the same level as the last global recession yes.

Everyone has an absolute ton of personal debt in comparison to before. Trade deficit is up. Public debt is at an all time high (has historically been kept under control).

Rocking GDP though.

[Sphere]

What Stav and alhoon said. The Storm of the crisis has passed for now, but it has left a devastated field of misery in it´s wake. The economy has stopped droping, but since the main policy of the past years has been rigouros saving and not smart investing, naturally there can be no economic growth. It doesn´t also help, that the 13th and 14th wage has been cut, as people will be far less willing to spend much money on the important days of christmas and new years eve. Many shops had to close and smalltime businessowners were hit especially hard. Only few new stores have opened so far...In Conclusion, the economy is stable, but far weaker than pre 2009, the same families who dragged this country down over the last decades are still in major positions of power, police now patrol streets in full combat gear, which is always helpful if you want to build a healthy and trusting relationship between citizens and the state and yeah...life goes on.

...Until the next big economic crisis will errupt

On the plus side, Greece/Spain/Portugal etc are part of the European market, European banking system and use the common Euro currency. When investors and banks get tired of having their money sitting in German bonds making little in returns, it can flow back into these places as quickly as it flowed out.

I think anyone predicting that Southern European nations are doomed to perpetual economic squalor are as shortsighted as those in the 2000's predicting perpetual economic boom.

[alhoon]

When investors and banks get tired of having their money sitting in German bonds making little in returns, it can flow back into these places as quickly as it flowed out.

Assume you earn 10 million Euros in a grand lotery, and after 30 days of blissful drink binge and partying, you wake up in your new Mercedes, slightly hung over.
Would you invest the money in Greek businesses and banks? Perhaps 10-year bonds of Greek debt?

I wouldn't.
The risk of a really ugly turn for bond holders, like 30% debt write-off of the debt is too high for the profits promised. If I am to make such a risky investment I would want an equally brave return of my investment.
Greek businesses now... We are STILL mired by bureaucracy, local petty politicking, corruption in every level. You want to open a factory near a town with 6000 people? Get ready to bribe the local mayor and the local Union leaders, whether your factory pollutes or not and be ready to deal with MOUNTAINS of red tape with public employees moving at glacial speed. By the time your factory opens doors, you would have made tons of profits if you opened it elsewhere.

[Stavroforos]

Assume you earn 10 million Euros in a grand lotery, and after 30 days of blissful drink binge and partying, you wake up in your new Mercedes, slightly hung over.
Would you invest the money in Greek businesses and banks? Perhaps 10-year bonds of Greek debt?

I wouldn't.
The risk of a really ugly turn for bond holders, like 30% debt write-off of the debt is too high for the profits promised. If I am to make such a risky investment I would want an equally brave return of my investment.
Greek businesses now... We are STILL mired by bureaucracy, local petty politicking, corruption in every level. You want to open a factory near a town with 6000 people? Get ready to bribe the local mayor and the local Union leaders, whether your factory pollutes or not and be ready to deal with MOUNTAINS of red tape with public employees moving at glacial speed. By the time your factory opens doors, you would have made tons of profits if you opened it elsewhere.

Don't forget about the left wingers showing up to protest opening up a factory, and then its workers protesting and going on strike, and then the left wingers showing up to protest once the factory shuts down.

[Sphere]

Assume you earn 10 million Euros in a grand lotery, and after 30 days of blissful drink binge and partying, you wake up in your new Mercedes, slightly hung over.
Would you invest the money in Greek businesses and banks? Perhaps 10-year bonds of Greek debt?

That's an interesting question. I did my best to analyze it given the difference between the current German 10-year bond return (.75) and the Greek 10-year bond return (8.00).

Lets say there is a chance of another 30% haircut in next ten years (and no chance of any sort of German default). At what level of risk (i.e chance of such a haircut occurring) would your expected return in Greek bonds match the rock solid German return?

The answer would be at 19% chance of a Greek haircut.

Spoiler Alert, click show to read: 

1.0075(1) = 1.08(P) + (1-P)(.70)
P = .809

To me 19% seems a bit high, but I am no expert.

Don't forget about the left wingers showing up to protest opening up a factory, and then its workers protesting and going on strike, and then the left wingers showing up to protest once the factory shuts down.

The German idea of turning the PIIGS into centers of cheap manufacturing is silly. Greece has a comparative advantage in things like shipping, tourism and agriculture. All of which would be doing much better if European growth wasn't so sluggish.

[Stavroforos]

The German idea of turning the PIIGS into centers of cheap manufacturing is silly. Greece has a comparative advantage in things like shipping, tourism and agriculture. All of which would be doing much better if European growth wasn't so sluggish.

Indeed, those three sectors are basically all we can be strong at. Industry simply won't happen in Greece. Tourism is a good milk cow and there should be some attempts to expand it beyond "come and leave your northern wasteland and see some sun and beaches" to attract more types of tourists and throughout the year. Agriculture is also a strong point, we can produce niche products, like vegetables that actually taste good.

[alhoon]

And yogurt.

Those 10 millions? I would totally drop them on hotels.

[Sphere]

Indeed, those three sectors are basically all we can be strong at. Industry simply won't happen in Greece. Tourism is a good milk cow and there should be some attempts to expand it beyond "come and leave your northern wasteland and see some sun and beaches" to attract more types of tourists and throughout the year. Agriculture is also a strong point, we can produce niche products, like vegetables that actually taste good.

A local distillery near me now makes Ouzo. And since this is America they call it ouzo, because ... that's what it is.

When I drink it, I think of you Stav. Prost my friend.

[Knight of Heaven]

A country without industry is a garden, since industry wont happen acording to you folks, competivenesss wont happen neither in the eurozone it is as simple as that.

Yes Agriculture is fine ( it wont happen in Portugal either because of terrain), tourism is great, only execption is a Country that has an economy based on this sectors its usualy not a developed country. Good thing Portugal and Greece are part of Europe then.

It is what south of Europe is good or will be good for.

For tourism. Same with Portugal, with a perk that all of retirees in Europe aim to be established in Portugal, it has or it is becoming the florida of Europe. Funny thing is naturaly these people pay their taxes at its country of origin, still obviously they are more then welcome anyway, as they usualy invest in property etc. Also Portuguese population is shrinking at a tremendous rate, in 2011 we were 10 milion, now we are expected to be 8 milion or so.

The thing is you guys can name examples of stuff Greeks and Portuguese can export , niche things, like olive oil, yogurt, Portuguese wines ( porto wine etc) and gourment stuff, canned food, and stuff that traditionaly these countries are strong, like tourism for instance, but it wont matter much in the gran scheme of things without transformation, specialized industry ( in the case of Portugal, that has GALP oil refineries, no thanks from the oil that come from venezuala, Angola, Brazil etc), but again i dont see it happening anytime soon, so we will continue to be this misery, dont expect the paradigm to change because we become better at tourism, and agriculture etc.
it just wont happen. Specialy when these two sectors are seasonal economic sectors...

One thing, where interesting things seemed to happen is on the CPLP countries, lately, but all that is still very incognito, but aparently what initialy were a cultural project of Portuguese speaking countries propeled by Portugal, with countries like Brazil, Mozambique, Angola, Timor, St Tome etc, it is now something else, and it is becoming something else, as more countries want to join, like Japan for instance. Since Equatorial Guinea joined this year, it changed things considerably. A thing wich as Portuguese im very ashamed btw. Equatorial Guinea is one of the worst dictatorships in the world, and it isnt even Portuguese speaking, yet other economic interets prevail, interests of Angola, and Brazil naturaly. Atm there is less and less interest of Portugal in this, but things might change who knows.. it is no chance that prime targets of Portuguese people to migrate to, are these countries, specialy Brazil, Angola, and Mozambique as well.

They have more luck there and are far better treated in this countries then in the usual European migration countries, like Switzerland. France, or Belgium etc.

I mean the things people tell me, friends of mine that went to work in this "civilized" countries are allmost unbelivable to be true, yet they are. From indentured servitude in Netherlands for instance and in Belgium and Switzerland where second rate primary schools for Portuguese emigrants for instance there is actual a division in this matters, just shamefull.
It isnt all gloom of course, integration isnt always easy. But as i said there is terrible problems imo. Generaly speaking Portuguese emigrants are treated much better in Angola, brazil and in Mozambique. Language also helps of course, and intimate historic connections and all that, as emigration goes both ways even today bewteen these countries..

[Stavroforos]

A country without industry is a garden, since industry wont happen acording to you folks, competivenesss wont happen neither in the eurozone it is as simple as that.

Yes Agriculture is fine ( it wont happen in Portugal either because of terrain), tourism is great, only execption is a Country that has an economy based on this sectors its usualy not a developed country. Good thing Portugal and Greece are part of Europe then.

It is what south of Europe is good or will be good for.

For tourism. Same with Portugal, with a perk that all of retirees in Europe aim to be established in Portugal, it has or it is becoming the florida of Europe. Funny thing is naturaly these people pay their taxes at its country of origin, still obviously they are more then welcome anyway, as they usualy invest in property etc. Also Portuguese population is shrinking at a tremendous rate, in 2011 we were 10 milion, now we are expected to be 8 milion or so.

The thing is you guys can name examples of stuff Greeks and Portuguese can export , niche things, like olive oil, yogurt, Portuguese wines ( porto wine etc) and gourment stuff, canned food, and stuff that traditionaly these countries are strong, like tourism for instance, but it wont matter much in the gran scheme of things without transformation, specialized industry ( in the case of Portugal, that has GALP oil refineries, no thanks from the oil that come from venezuala, Angola, Brazil etc), but again i dont see it happening anytime soon, so we will continue to be this misery, dont expect the paradigm to change because we become better at tourism, and agriculture etc.
it just wont happen. Specialy when these two sectors are seasonal economic sectors...

One thing, where interesting things seemed to happen is on the CPLP countries, lately, but all that is still very incognito, but aparently what initialy were a cultural project of Portuguese speaking countries propeled by Portugal, with countries like Brazil, Mozambique, Angola, Timor, St Tome etc, it is now something else, and it is becoming something else, as more countries want to join, like Japan for instance. Since Equatorial Guinea joined this year, it changed things considerably. A thing wich as Portuguese im very ashamed btw. Equatorial Guinea is one of the worst dictatorships in the world, and it isnt even Portuguese speaking, yet other economic interets prevail, interests of Angola, and Brazil naturaly. Atm there is less and less interest of Portugal in this, but things might ghange who knows.

Yes, that's increasingly my fear, that Greece will simply become a tourist colony like those Caribbean islands, where it's basically modern day colonialism with the natives being at the beck and call of the wealthy northern tourists. Of course, some of the northerners are fine with this, and will even talk condescendingly when we suggest that being slaves for their tourist cash is somehow not the best thing for us, but it's really a danger.

In essence though, I simply can't see any sort of industry getting off the ground in Greece, because it would be so noncompetitive.

[fkizz]

It's painfully obvious that the endgame for countries like Portugal and Greece is to downagrade them as a cheap holydays destinaton for the wealthier europeans. This isn't breaking news, signs of it have been around for years, but people liked EU funds so they overlooked this on purpose, now we pay the just desserts, after some portuguese spending decades saying that it is bigot, nationalist and intolerant and quasi fascist to want to build our own industry to protect ourselves from financial markets whims, blame can hardly go to just foreigners, as tempting as it is to say otherwise, lots of portuguese screwed up on this.

Clientelism and corruption.

I agree on that, but joining the euro offered a way to hide all that corruption under the carpet. It's still around, as you can see by Italy state of economy nowadays. It wans't solved.

As you can see from the latest table I posted, the overwheliming part of the decreasing interest rate process happened after the signing of Maastricht treaties but before the introduction of the Euro. Why? Because Maastricht introduced determined fiscal policies (debt and deficit limits) which were at the time believed by the markets, thus causing the drop.

My take on reason for lower general interest rates was that weak countries with unstable currency that demand risk premium suddenly getting on a process that would leave having the same currency as Germany gave an insurance against pereceived risk thanks to the Bundesbank reputation as having conservative behaviour. We cowardly hide under Bundesbank skirt like little bambies, and now we pay the price.

Basically we got lower general interest rates that did not match the true investment risk at stake anymore. Interest rates stopped matching the risk at hand, which made bubble creation easier. Go take a stroll at mata las cãnas in Spain outside of summer season and you will feel first hand what I mean, when you walk a long time by ghost towns, you see something was done by very wrong