07-12-2015, 06:37 AM
Unfortunately, Greece is a rare case of a small quasi-closed economy. Exports now account for about 30 per cent of gross domestic product, but a large part of this consists of oil and global maritime transportation services. Since Greece is not an oil producer, oil exports are in reality just re-exports with little domestic added value. Similarly, global maritime services do not employ Greek sailors and also have no connection with the domestic economy. This means that the part of exports that is really sensitive to domestic prices and wages is rather small. This particular composition of Greek trade explains why the two adjustment programmes failed to deliver. It was not because wages and prices did not adjust. Wages have already fallen by more than 20 per cent, but exports have barely moved. The Greek economy is thus unlikely to benefit much from a further devaluation.
The Greek economy is unlikely to benefit from further devaluation - FT.com
The differences start to emerge when we look at fiscal policy. Chart 5 shows that the fiscal correction started in a much sharper way in Greece than in the other troika countries.
What went wrong with Greece? | Money matters? Perspectives on Monetary Policy
The same phenomenon is seen in investment: In Ireland, Spain and Portugal investment decreased as a per cent of GDP, with respect to 2007, by some 40 per cent, in Cyprus by 50 per cent and in Greece by 60 per cent.
What went wrong with Greece? | Money matters? Perspectives on Monetary Policy