Greece has become the latest textbook example of Engel’s law: as income falls, proportionate spending on basic food shoots up, that is what German statistician Ernst Engel found when he studied 153 Belgian working-class homes in the mid-19th century, Bloomberg reported.
Six years of economic devastation, salary cuts and record unemployment have taken their toll on Greek families. Their wealth has shrivelled, reducing their ability to spend on overseas goods. Scarcer euros are redirected to the bare essentials. Goodbye imported cars and latest gadgets.
As Greece slid deeper into the abyss, food and fuel were the only categories that grew to a bigger stake of imports. Given how Greece doesn’t produce its own (crude) oil and shipping is a big industry, fuel is a de facto Engel-ian basic good.
Bring Germany into the equation — Greece’s economic and political nemesis — and the contrast in import patterns is stark. Between 2007 and 2014, the Greeks have cut right back on luxury goods from abroad while Germans could still indulge their appetites for foreign cars and jewellery.
The reason why imports are worthy of close attention is if the much-talked about Grexit comes to pass. Should the country leave the euro — an outcome that’s been warded off for now by a third bailout — its replacement currency would depreciate massively, making exports dirt cheap and imports prohibitive.
What will that mean for food and potentially life-saving drugs, which are the imports that Greece to this day cannot live without?