Cinzia and Gros in in VOX have written an interesting set of posts regarding the PIIGS in the EU mess.
We start with the overall current economic data. Clearly Greece and Italy are in a Mess and Greece and Ireland saw the greatest swings in their economies. We show this below.
The debt to GDP numbers are shown below.
The total gross external debt is shown below. This just re-intensifies the issue as shown above.
Then we have total debt as a % of exports. This we show below. Greece is way out of bounds. It is fundamentally a non exporting country, with some limited agricultural goods. It does have a strong tourist trade and the Greeks for the most part have never created any internal core businesses. They are in my experience brokers in the regional markets, reselling others exports and with little if any Greek products.
The most telling slide is the following which id debt as a percent of taxes. Greece stands out as the worst offender in this category. In my experience having started and run a Greek company the situation in Greece is unstable. There are few who pay taxes and those who do are harassed to the extreme. Greece has never established a rational taxing regime. The irony is that it is worse than Italy!
Finally the authors compare prior recoveries and look at the primary balances and the changes from bottom to top, recovery, and this is presented below.
The authors contend that recovery is possible, I question that a bit. Greece has created its own mess and only a clearing of the market by default can remedy the issue.
As the authors state:
Our analysis shows, however, that these countries are quite heterogeneous. Portugal and Greece share a key feature, namely an extremely low rate of national savings, which implies that they have to rely continuously on large inflows of capital to finance consumption (see Gros 2010). By contrast, Spain and Ireland have substantially higher savings rates, but are more exposed to financial markets because their construction booms went hand in hand with a huge expansion of financial activity. In short, for Greece and Portugal the problem is insolvency; for Spain and Ireland illiquidity. Italy seems different from both these subgroups in that its savings rate is higher than even in Spain and Ireland and its foreign imbalances are much smaller.
The above is the most telling and spot on observation. Ireland and Spain have a cash problem, a current problem, they have a lack of liquidity. One could feel safe lending to them. Greece and also Portugal are insolvent....and Greece is the worst of the lot.
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