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Reason Foundation

The Coming Greek Default

Anthony Randazzo
February 22, 2012, 5:00pm

Over at Reason.com this afternoon, I have a new column on the Greek debt crisis. Last year we looked at the numbers on the blog and came to the conclusion that no matter what happens, Greece is going to default. With a new Greek bailout on the table, we update the numbers but come to the same conclusion:

The target is to get Greek debt down to just 120.5 percent of GDP by 2020. But a confidential 10-page report prepared for European finance ministers that was leaked on Monday suggests that the best-case scenario is closer to 130 percent of GDP by the end of the decade. Furthermore, the report suggested that if the bailout deal is not upheld on the Greek side, debt could rise to the 180 percent of debt-to-GDP range.  To put this in perspective, Greece should be at something more like 60 or 70 percent of debt to GDP to be a stable European nation. [...]

The second bailout is also based on overly rosy estimates of economic growth for Greece. Where the Greek economy has seen negative GDP growth of 7 percent recently and is projected to have no growth in 2012 or 2013, the target goal of 120.5 percent of GDP by 2020 assumes economic growth of 2.3 percent in 2014 and 2.0 percent in 2015. But growth from where?

Read the whole commentary here.

If you want to start making a list of reasons why Greece will default here is a starter:

For even more see these two interviews from earlier this week on the Greek debt crisis.

Monday on GBTV's Real News: 

Tuesday on RT's The Aloyna Show:


Anthony Randazzo is Director of Economic Research


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