Debt crisis in Europe hits Israeli exports

Exports to Portugal, Ireland, Greece and Spain dropped an accumulated 17.3 percent in dollar terms in the third quarter of 2010.

By SHARON WROBEL
November 29, 2010 07:14
2 minute read.
European Parliament members

European Parliament meeting 311. (photo credit: AP Photo/Christian Lutz)

Israeli exporters are starting to feel the pains of the debt crisis in Europe as exports to Portugal, Ireland, Greece and Spain dropped an accumulated 17.3 percent in dollar terms in the third quarter of 2010 compared with the same quarter last year, the Israel Export Institute reported Sunday.

“As the sovereign debt crisis in Greece and Ireland is threatening to spread to Portugal and Spain, Israeli exports of goods to these countries were hit hard in the third quarter of this year,” Israel Export Institute director Avi Hefetz said. “The decline in the figures was impacted by reductions in inventories as well as cautionary measures taken in reaction to the debt crisis in Europe and the heightened risk to sales in these markets.”

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Exports of goods, not including diamonds, to Portugal, Ireland, Greece and Spain totaled $299 million in the third quarter, down 17.3% compared with $361m. in the third quarter last year. During the reported period, the dollar weakened 10% against the euro, which accelerated the decline in exports to these countries, while overall exports increased 11%, the Israel Export Institute reported.

Exports to Greece dropped 49.8% to $33m. in the third quarter, down from $66m. in the same quarter last year. Exports to Greece by the chemicals and petroleum-refining sector plunged 63% to $12.3m.

Exports to Spain totaled $222m., down 8.9% from $244m. in the third quarter last year. Exports of chemicals to Spain declined 6% to $76m., while exports of machinery and equipment dropped 40% to $33m.

Exports of goods to Portugal fell 12% to $27m., down from $23.8m. in the third quarter last year. Exports of rubber and plastics dropped 34% to $3.9m.

Exports to Ireland fell 19% to $19.8m., down from $24.4m. in the third quarter last year. Exports to Ireland by the chemicals and petroleumrefining sector dropped 48% to $3.6m. Exports of telecommunications equipment declined 46% to $1.85m., while exports of rubber and plastics dropped 48% to $1.4m.

“The Irish crisis and subsequent bailout have returned sovereign concerns to the forefront of investors’ minds,” Barclays Capital economists Simon Samuels and Mike Harrison said in a report to investors published over the weekend. “In our view, the renewed focus will now be on Spain, where spring 2011 looks tricky. The challenges facing Spain remain substantial.

The question marks over asset quality will likely last far longer.

“By contrast, we are far more sanguine on Italian prospects. The absence of an asset bubble and limited wholesale funding reliance suggests the banks pose little incremental risk to the Italian sovereign.”

Barclays Capital said any further problems for Spanish banks or the Spanish sovereign would reverberate loudest in France and Germany.

“Should the tail risk of a Spanish bailout materialize, it is likely that the [stronger] French and German economies will bear the brunt of rescuing Spain, and by extension, the euro zone,” the Barclays Capital report said.


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