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The problem has of course been currency swaps that racked up prices and forced normally non-indebted Greeks to go into debt. And still, the rate of private debt in Greece is at 50% which is much lower than the rate in the UK and Spain.
I don't understand the above sentences and what the 50% is a percentage of (annual income? gross? net? assets?. notes from no w here
When drachmas were traded for euros, you could not buy a souvlaki for the same relative price you used to buy it for. Whatever the conversion rate (and I'm given to understand that the conversion rate was beneficial for countries moving into the zone, a soft landing if you will) the end result was hyperinflation of goods (masked, of course, by the lack of statistics to account for the inflationary impact of conversion. If a souvlaki cost 100 drachmas on Monday, and I traded 100 drachmas for 1 euro on Tuesday, I'd return to the stand on Wednesday to see that the souvlaki now cost 2 euros.
(Or maybe I just need more sleep and then more caffeine before I re-read them...)
Maybe Central/Eastern Europe outside the Euro? En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Please don't take this as wishing Greece left the eurozone (I hope beyond hope that it doesn't happen) but Greece with a devalued drachma would do very well because of currency conversion from shipping income and rise in tourism as a cheaper destination.
Greeks in the country would experience less of a ruckus in their lives, but they would once again have a lower standard of living relative to their European peers. But sometimes a lower standard of living isn't so bad when you're eating well, have a stable job, etc. Greece would not be backsliding either since tourism and shipping aren't going anywhere for the near future. This would only mean that Greece is giving up the dream of becoming the next Hong Kong. With EU help, is that in the cards?
On the ground, I can tell you that the change was certainly felt. Overnight. It really was stunning.
In tourism too. No inflationary measure or market oriented growth analysis can account for 400% increases in room rates over 5 years.
Haven't spent so much time there, I have favorite haunts and favorite hotels, and I know for certain that the cost increases were far beyond anything that economic analysis can account for.
Unless of course, there's a way to measure Greek greed, but I really don't think it's that. The smallest item changed price.
Unfortunately, I can't be convinced it didn't happen. I was shelling out money out of my own pocket and just shaking my head in amazement.
Perhaps because my point of view tends to see a strong social component in most of my useful insights (if any) I smell--a strong social component here. The oft-repeated euroskeptic fear that the adoption of the euro could create massive conversion costs---created massive conversion costs. Partly, larger businesses- hotel chains, etc. seized on the perceived opportunity to raise prices, knowing that they had a convenient scapegoat, and smaller businesses did the same, or felt obligated to raise prices to cover their own added costs. Or both. Sometimes the most powerful economic forces stem from a social perception- a story, true or false, internalized on a micro level. Then we get lost in looking for some macro force at work-- Capitalism searches out the darkest corners of human potential, and mainlines them.
For that matter the fact that 1 drachma was so much smaller then 1 euro might have created an impression of cheapness. When exchanging money, you used to get lots of drachmas. Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
But overall this led to a small temprary blib in inflation stats which was amplified in popular media with "price gouging" stories of a few high visibility incidents or items.
What really caused inflation over the longer term was a boom caused by very low interest rates, irresponsible fiscal and banking policies, and a shortage of supply to meet the very rapid spike in demand for key items like, development land, commercial buildings, and prestige private housing. For a while everyone - including foreign tourists - went along, because it took a while for popular relaisation that prices had gotten way out of line with the rest of the Eurozone to sink in and lead to concrete action. And then we had an almighty bust amplified by world economic factors over which we had no control - and now a very painful readjustment.
But there is no rocket science about all this. Smaller peripheral economies can buck overall eurozone inflation stats only for a while and then prices - and businesses made possible by them - have to revert to something closer to what the economy can bear. Sheltered (often public) or highly innovative or advanced sectors of the economy can busk this trend for far longer if their productivity or first mover advantage or political position allows. notes from no w here
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