For this Greece update, some past and current information…
Soon after the euro was launched on January 1, 2002, a €76,000 bank heist near Athens became the first major euro robbery. Near Athens also, with the new currency launch, it took 3 staff members to figure out how a customer could pay for a cheese pie. And everywhere in Greece, the transition was slow because the Greek Economic Ministry had supplied only one sixth of all Greek businesses–50,000 out of 300,000–with euros.
Looking back further, since its independence in 1829 to 2006, Greece has had 5 defaults or debt re-schedulings that occupied a total of 50.6 years. In This Time It’s Different, economists Kenneth Rogoff and Carmen Reinhart say that few nations break out of a serial default pattern.
Fast forward to 2012.
Greek yogurt maker Fage is moving its headquarters from Greece to Luxembourg. Coke’s second largest bottler, Hellenic Coca-Cola (EEEK on the Greek Stock Exchange) is relocating its Greek headquarters to Switzerland and switching its primary stock listing to London. Both wanted a lower and more stable tax environment, greater access to financing, and less exposure to a Greek financial calamity. Predictably, other firms located in Greece have responded to the ongoing crisis with modified business behavior and contingency planning.
Meanwhile, overall Greek unemployment remains near 25%, close to 50% for youth aged 15-24, its debt is still more than 150% of GDP, and unless Greece gets its next bailout transfusion, its government will soon run out of money. Still the WSJ reports the odds of Greece leaving the euro zone are down.
A final economic thought: In the euro zone, countries with different economic conditions lack the flexibility to respond to their own special needs. They share monetary policy and cannot target their fiscal policy (government spending, taxing and borrowing) to high or low unemployment and inflation.
Sources and Resources: Illustrating the extent of Greece’s dysfunction, this 2002 BBC article that specifically describes the introduction of the euro in every country was fascinating and if you do not have the Rogoff/Reinhart book, This Time It’s Different, this paper provides an excellent summary. For current information on Greece and the corporate exits, here and here are Greek newspaper articles, here is a European perspective, and here, the WSJ talks about how Citi analysts have lowered the chance of a “Grexit” from 90% to 60%.