At something like 175% of annual GDP it is easy to think that Greek public debt is out of control. But, let’s look at it another way. If Greek GDP had stayed the same as 2008 levels instead of falling by 30%, and also assuming current levels of debt, the ratio of debt to GDP would now be 175 x 0.7 = 122.5% Which might still be a little on the high side, for a non sovereign currency issuing country, but it would be looking a lot more manageable.
If Greece had instead grown its economy by the same amount, the ratio would be 122.5/1.3 or 94%. OK still a little high, maybe, but not the catastrophe the Eurozone has on its hands at the moment.
The key to managing Greek debts is help enable Greece to service them. There’s no real need to pay them off with interest rates as low as they are. That can be best achieved by growing the Greek economy. So what’s the problem? Why isn’t the Troika (the IMF, ECB and EU commission) encouraging the kind of economic policies in the Eurozone peripheral countries which would encourage growth rather than economic austerity which, in both theory and practice, can only produce economic contraction?
The Troika shouldn’t be in any sort of conflict with the Greek government. Both should be wanting exactly the same thing. Unless Greece comes out of the crisis ahead, no-one gets paid and so no-one else comes out ahead either!
PS If you agree with this post, please re-blog it, tweet the link, wp.me/p42SCg-Q7 , post up on your Facebook page, or whatever else you can think of to spread the message. No attribution is needed. We need to show solidarity with Greece right now. It may well be us next!