Why Who's Moving The Feta Cheese Matters to Greece

Outgoing olives and incoming syringes don't make headlines in Brussels, but they are at the heart of the daily struggle of the people of Greece

On the one hand, Greece seems to have a strong case for the protection of feta cheese. On the other hand, this decision will certainly have a negative impact on other European nations like Denmark and Germany. It is unlikely that such a decision will help to further European understanding and cooperation, and it will probably increase tension. A new wrinkle comes from the future entrance of Bulgaria, with their more persuasive cultural claims to this type of cheese. Consequently, Greece and Bulgaria are currently engaged in a war of words as each accuses the other of theft and false advertising. The Bulgarians claim that the Greeks are stealing their cheese and marketing it as feta, thus using the [protected designated origin] status as an unfair advantage. The Greeks have retorted by claiming that Bulgarians have tried to market their white cheese as feta in an illegal attempt to piggyback off of this well-known name.
Mike Peluso, "The Feta Cheese Dispute: Issues of Regional Identification Involving EU Regulations and 'National' Brands of Food," Nov. 20, 2005

When I've seen Greek feta for sale in a German supermarket, it's virtually always next to a German-made competitor that is nearly half the price. The Greek version might taste better, but because Germans have less expendable income, not all that many are likely to buy it.
—Jacob Angelos, "How Germany Gamed the Euro and Worsened the Crisis," The Atlantic, Feb. 8, 2012

Who knew? Feta cheese was and is a big deal.

We are all bombarded with endless 35,000-feet macroeconomic babble when it comes to Athens and Berlin, but who is moving the cheese is a significant question that's worth your consideration. Future microeconomic foundations matter to central players of this eurozone drama—Alexis Tsipris, Angela Merkel, and even Boyko Borissov, prime minister of Bulgaria. Feta dynamics are directly linked to weighty decisions on a euro or a drachma in Greece.

Let's look at the heart of your next Greek salad as one example of the dynamics playing out beneath the headline macro debate: Feta cheese is a "protected designation of origin" (POD) product in Europe.

Germany imports a dominant 34 percent of Greece-only feta production, but it trades at a lower price than that from other dominant importers. Bulgaria imports something like 20 percent of production—near four times what the U.S. imports. All of this matters because price matters and price is a function of a given currency pair and there are multi-currency pairs (PDF) involved here.

I would respectfully suggest that Greece's past, real, and pending fiscal adjustment will throw all its microeconomics into disarray, whether the country is still in a euro world or has left to return to the drachma. Outgoing olives and incoming syringes don't make headlines in Brussels, but they are at the heart of the daily struggle of the people of Greece.

EUGNGR Index real gdp  (Greece Gross Domes 2015-06-30 10-14-24

This is easy to read from 35,000 feet. Greece's real gross domestic product has imploded. The red circle represents the end of 2009.

ECEXGRNP Index exports to gdp (Greece Exports o 2015-06-30 10-15-41

This ratio brings the 35,000 feet view lower to, say, 15,000 feet. The red circle is the same as the above chart. This is Greece's exports-to-GDP.

I cannot discern feta cheese dynamics in the above charts. What is key is the top chart tells the macro-story of Greece's imploding gross domestic product. In the lower chart, three trends characterize Greek exports, compared to its total economic output. The first is the yellow trend line, which shows the pre-euro era, when the ratio was rising. The green is a nice "pop," signalling the benefits of euro-adoption. Finally, there's the red: a deceptive boom in exports-to-GDP, which is much more about a collapsing domestic economy than rising exports. The red circles on either chart mark the turning points in those trends.

We do macroeconomics each and every moment on Bloomberg Surveillance. I would respectfully suggest that the only way to link economics to finance to investment is to be aware and respectful of the micro-trends found beneath those headlines.

In other words, who is moving the cheese matters.

Buy real feta cheese. Support Greece. Discuss.