Serious people like Munchau of the FT have been willing to use Greece as an illustration of another ‘problem’ like the CDS market. So too has Michael Barnier. While Munchau’s foray produced plenty of argument in the FT Letters page (see my summary), and quite a lot in the blogosphere (I won’t bother linking), the argument that Greece is being brought down by speculators seems to have faded a little since the EU bailout (which you can read about on Stephanomics).
For example, this long piece in the FT, while having some market data, is all about the real budget figures, in essence. Yes, their debt costs contribute to a spiral – if they could borrow at German rates, life would be easier – but a great chunk of the rise in debt to 150pc of GDP is surely from a fundamental budget mismatch, and a low expected GDP growth.
So, here are the latest facts (hat tip the Economist) from Bloomberg.
- The EU’s statistics office said Greece’s deficit was 13.6 percent of GDP last year, topping the government’s two-week-old forecast of 12.9 percent and the EU’s November prediction of 12.7 percent. “Uncertainties” about the quality of the Greek data may lead to a further revision of as much of 0.5 percentage point, Luxembourg-based Eurostat said.
- In the latest IMF World Economic Outlook Greece is expected to shrink in 2010 and 2011 – th e only country in Europe expected to shrink in 2011
- It has a current account deficit of about 10% (comparison: UK = 1.6%)
- Influential trades unions attack the IMF’s crazy idea that wage cuts might be needed to make Greece more competitive
- They do not have a large manufacturing sector that is structurally able to export very much
Now you’ve read all that, a simple hypothetical question. Suppose you had 1000 pounds to lend. You can choose to lend it to Greece, Germany or Vodafone. What interest rate would you require for each? If you have a good think, and come up with a higher number for Greece than the other two, do you know what you’re doing? You’re speculating
And if you come up with the same number for some reason of ‘fairness’, you’re mad.