24/7 Wall St.

The Bank of Greece has some good news for the PIIGS watchers. We would caution that this good news comes at a hefty price, but that is the world of austerity for you. The Greek’s central bank reported that the December 2012 current account balance showed a deficit of only 534 million euro. That is down by 1.6 billion euro versus December 2011.

The news is just as good or better when you measure all of 2012. In 2012, the current account deficit contracted by 15.05 billion Euro, a whopping 72.9% drop, over 2011. The full year’s current account deficit came to 5.6 billion euro and that translates to about 2.9% of GDP. This is down from a peak of 9.9% of GDP in 2011.

The income account deficit fell by 6.4 billion euro compared to 2011, which was mostly due to a sharp decline in net interest payments on Greek government bonds held by non-residents as a result of the PSI and deferred interest payments on loans under the support mechanism through the ECB.

In 2012, direct investment showed a net inflow of 2.3 billion euro versus a net outflow of 453 million euro in 2011.

Greece’s numbers sound good in a vacuum. The inflows are in part from bailout and the other side of the equation was driven by expense cutting under severe austerity measures. The good news has a price which probably matters to the unhappy Greek citizens who have taken the brunt of the austerity cuts much more than it does to those who are evaluating Greece and other Euro-area nations what are in trouble.

Here is the full data showing how the figures came to this level.