Lazy Greeks at Fault?? These Two Charts Suggest Otherwise!

Well things are gonna change in Europe.  Greece just voted in a majority no bullshit government.  These guys appear to be unimpressed by titles and focused on facts, as is discussed by Yanis Varoufakis, tipped to be Greece’s next Finance Minister, during an interview with UK’s Channel 4 News.  They seem to see things as right or wrong regardless of who’s mouth it’s coming from, which is great.  Now there is no such thing as a perfect politician and these fellas are left of left with a heavy socialist slant.  I obviously see no possibility of socialist ideology rebuilding a nation from the brink of bankruptcy.  That said, if this new government is loyal to the cause rather than the ideology, their integrity will get the job done.

But what is it that needs to get done in Greece?  That’s really the $64K question.  On the surface it seems as though Greece is simply a bunch of lazy sponges.  But I caution you to look at the facts before making a final judgement.  Remember Greece was once upon a time the genesis of democracy.  These people have been doing democracy longer than any other nation on earth.  And so I have a hard time accepting all of sudden after thousands of years they simply got too lazy to carry on the pride of the people who created the concept of a self-governed and free populace.  I just don’t buy it.  Let’s look deeper.

I was studying international economics in Oxford in 1999 and so was very keen on watching the debates surrounding the implementation of the Euro.  I remember even at the time there was tremendous controversy about what covenants were going to be placed on individual nations to ensure they all carried their own weight.  The difficulty with such a system is that you have very different industry strengths among the nation states and so to force a uniform set covenants seems to be heading toward disaster.  For instance look at the balance sheets of raw materials companies vs biotech firms.  If you forced all industries to have a uniform set of financial metrics it would end in disaster for some sectors while working well for other sectors.  The same is true on a macroeconomic level.  But don’t take my word for it.

Let’s see if we can find anything to support our theory that perhaps the uniform set of covenants and the other policies surrounding the Euro benefitted some nations but were damaging to others.  If it’s true then we must not be so harsh and quick to apply blame to the citizens of Greece.  We must also then be open to solutions that will contradict the status quo given the status quo brought us to this point.

So what we need to do is look at the economic performance of various nations before and after taking on the Euro.  The following chart depicts the economic performance, using total industry production cumulative growth as our indicator, of various EU nations for the 10 years leading up to the Euro implementation.

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We can see that Spain was doing exceptionally well with Greece and Italy slightly behind and then Germany and France bringing up the rear.  However, do note that all nations had similar trends (positive) during that 10 period.

Now let’s take a look at the relative performance of these same nations in the decade subsequent to the implementation of the Euro.  Certainly the Euro is not the only variable on economic performance but remember most economic shocks have the same impact on all economies.  That is, they are either positive or negative shocks to all economies.  But our theory suggests that the Euro will be good for some countries while damaging to others.  And so we are looking for a dislocation between relative performance.  Let’s see what we find.

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Very interesting.  It appears that while Germany was actually second to the bottom of economic growth through the 10 years leading up to the Euro, subsequent to implementation of the Euro German economic growth exploded.  That’s great, except that the four other comparative nations performed very poorly upon taking on the Euro.  And so as the theory predicted we do have a significant dislocation in the performance of individual nations.  This lends credence to the theory that the Euro was a positive stimulus to some nations but a negative shock to other nations.  It means that the Euro itself and its respective policies may very well be the destructive force as opposed to a weakness of character of the southern nations.

What we need to take from this is that because some nations like Germany are doing well while others are not doesn’t mean the Germans are just better citizens or workers.  It may very well mean the Euro and its respective policies created an advantage for the Germans and a disadvantage for the Greeks. This shouldn’t surprise us as here in America we have the very same problem.

The only difference being the US has two luxuries Greece, Spain, Italy and France do not have, namely the world reserve currency and the ability to print money.  If the US had the same constraints we too would be defaulting on debt with negative economic growth.  That is an absolute and indisputable fact.  If you need to check on that proposition, read my past 4 articles and you will have no remaining doubts.

Now I’m not negating all responsibility from the Greeks themselves.  What I’m saying is let’s look further into the facts given the above charts provide support that the Euro itself or perhaps its policies are the problem.  Let’s understand what dynamics resulted in the current situation. Let’s understand all of the options that are available to Greece and not just the desired options suitable to the Lords of the ECB and the Oligarchs.

There is a new sheriff in town and he seems to have the right mindset.  Let’s give him a chance to do the right things.  My hope is his objective will be for a prosperous nation rather than proving some ideological point of socialism vs capitalism.  A prosperous working class, guaranteed individual rights and freedom, these should be the end game.

So to pull this all together, my point is to show that what you think you know about the Greek situation is likely not the real issue as shown in the charts above.  Therefore we need to be open to understanding what the issues are, what the options are and nailing down a final solution to the devastation.  Know that we will be inundated with propaganda telling us how this new government is going to ruin all of Europe and perhaps the world.  The ECB will work with banks and opposition to intentionally make things worse while blaming the new government for failing in an attempt to create unrest amongst the people.  These are the things our current Western leaders do to get their way.  We saw it in Northern Africa and we see it in Ukraine.  It is a sad fact of life that the world must currently endure.  But let’s be strong and at least give this new Greek government a chance to live up to the standards they have set for themselves.  If they fail so be it.  But let’s not kill all hope before hope has a chance to blossom into prosperity.

 

14 thoughts on “Lazy Greeks at Fault?? These Two Charts Suggest Otherwise!

  1. Is it possible to add the UK data to the two charts? It would give an interesting comparison, as the UK has not been tainted by the Euro at all.

    1. UK have these last 5 years, been in austerity to help protect the Euro, we have since 1975 gradually declined our trade, as it’s been ‘sent’ abroad since the 80’s. This is why US, UK and EU are having a problem now, the only goods we seem to trade in are Car’s? If we take DEBT from the current GDP figures, what are we left with? Zilch, Zap, Nada, Nothing. We are being forced into a slave state, especially when TTIP come in. Hidden in this power grab, are the sell-off, of all Public Services, as Services are the only ‘Trade’ we make money in, £52bn last year, which begs the question, why sell and how much?

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