Too Greek to Fail
Greece may have understated its budget deficit when it managed to adopt the euro in 2001. It may have run chronic budget deficits since then, hitting 7.9 percent in 2004. And weeks ago, it may have just declared that it’s deficit for 2009 would hit 12.7 percent. But Greece will not go bankrupt.
Since the surprise in Dubai, Greece has been the favorite for a default, raising concern about what that would do to the euro. But European leaders have joined the new Greek government in saying default is not an option.
“The perspective, which some express, that Greece is on the edge of bankruptcy, does not match my observations,” Jean-Claude Juncker, Luxembourg’s prime minister, said this week at a two-day summit in Brussels.
And in a sign that Germany would not let Greece collapse financially, Chancellor Angela Merkel said Thursday that “What happens in a member country influences all the others, particularly when you have a common currency.”
George Papandreou, prime minister of Greece, has drawn up an austerity program, which he must convince his country to accept, and his European peers to believe. In January, his government will hammer out the details of how it will cut the deficit by 3 percent in 2010, a year in which it has already predicted no economic growth.
“We’re not asking for any gifts,” Mr. Papandreou said in Brussels on Friday. “We will live up to our obligations. There is no possibility of a default for Greece.”
But whether the reality of the Greek economy and its paper version match will no doubt linger, even after the quarterly reports. Its budget deficit numbers have proven so unreliable since it joined the euro that in Brussels, “Greek statistics” is synonymous with funny numbers.
But if Mr. Papandreou can make those painful cuts, he would in a sense be repaying a family debt. It was his father, Andreas Papandreou, who as leader in the 1980s ramped the national debt up from 30 percent to 80 percent of gross domestic product.
With that shift, interest for Greek loans shot up, and the country entered a spiral that has led it to this moment, brink or no brink, where the national debt now stands at nearly 113 percent of GDP, its credit rating is on a downgrade watch at Standard & Poor’s, and Fitch knocked it down a notch to BBB+ this week.
– Chris V. Nicholson
Greece may have understated its budget deficit when it managed to adopt the euro in 2001. It may have run chronic budget deficits since then, hitting 7.9 percent in 2004. And weeks ago, it may have just declared that it’s deficit for 2009 would hit 12.7 percent. But Greece will not go bankrupt.
Since the surprise in Dubai, Greece has been the favorite for a default, raising concern about what that would do to the euro. But European leaders have joined the new Greek government in saying default is not an option.
“The perspective, which some express, that Greece is on the edge of bankruptcy, does not match my observations,” Jean-Claude Juncker, Luxembourg’s prime minister, said this week at a two-day summit in Brussels.
And in a sign that Germany would not let Greece collapse financially, Chancellor Angela Merkel said Thursday that “What happens in a member country influences all the others, particularly when you have a common currency.”
George Papandreou, prime minister of Greece, has drawn up an austerity program, which he must convince his country to accept, and his European peers to believe. In January, his government will hammer out the details of how it will cut the deficit by 3 percent in 2010, a year in which it has already predicted no economic growth.
“We’re not asking for any gifts,” Mr. Papandreou said in Brussels on Friday. “We will live up to our obligations. There is no possibility of a default for Greece.”
But whether the reality of the Greek economy and its paper version match will no doubt linger, even after the quarterly reports. Its budget deficit numbers have proven so unreliable since it joined the euro that in Brussels, “Greek statistics” is synonymous with funny numbers.
But if Mr. Papandreou can make those painful cuts, he would in a sense be repaying a family debt. It was his father, Andreas Papandreou, who as leader in the 1980s ramped the national debt up from 30 percent to 80 percent of gross domestic product.
With that shift, interest for Greek loans shot up, and the country entered a spiral that has led it to this moment, brink or no brink, where the national debt now stands at nearly 113 percent of GDP, its credit rating is on a downgrade watch at Standard & Poor’s, and Fitch knocked it down a notch to BBB+ this week.
– Chris V. Nicholson
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