What the debt crisis is ultimately about is the fact that in certain Southern European countries people are spending too much compared to what they earn. With regard to this we are seeing significant progress in Portugal and Italy-but not in Greece.
In Portugal, the current account deficit in December fell from €17.2 billion in 2010 to €11.0 billion in 2011. That is still above 6% of GDP and thus still far too high, but as it is more than a third less than in the previous year (and nearly 50% lower than in 2008) that certainly represents significant progress. The December change was particularly impressive with the deficit dropping from €2.1 billion to €750 million.
Italy saw its December 2010 deficit of €4.9 billion turn into a €400 million surplus. Though some of that reflected a likely temporary increase in current transfer receipts, most of it reflected a genuine reduction in overspending.
By contrast, there is almost no sign of progress in Greece, where the monthly current account deficit rose from €1.85 billion in December 2010 to €2.2 billion in December 2011. Perhaps some erratic one-time items distorted this number, but if you look at the figure for the year as a whole, it’s only somewhat better, with the deficit only falling 8.3%, from €23 billion to €21.1 billion. With nominal GDP falling 6%, that’s hardly any improvement at all.
The Greeks may be spending less, but they’re earning less as well, keeping the relative overspending intact, as all too many of them (but not everyone, to be fair) are too busy striking, rioting and torching buildings instead of trying to do something useful as the people of the Baltic states did and as too a lesser extent the Portugese and Italians are doing now.