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Greek government spending decreasing, but debt/GDP high

There is certainly something wrong with the bailout and strict austerity program imposed by the creditors on Greece, so far. Government spending has been constantly decreasing but the debt/GDP ratio remains high. In fact it is higher than before the bailout in 2010…

“Latest Greek data show government spending -21% since 2011, nominal GDP -14%, debt/GDP 177%. Maybe austerity isn’t working?” asks Jamie Mc Geever from Reuters.

Greece gov spending

source: Jamie Mc Geever, Chief Markets Correspondent, Europe for Reuters

PS something wrong with austerity program? I don’t believe it!!!

 

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13 comments

  1. Small hint for the experts of KTG and Reuters:

    A GDP that is that tightly correlating to Government spending is not worth much as it is too dependent on constantly being refueled by new debt.

    The Greek GDP will shrink until it has reached the economy’s real productivitly level – without being artifically blown up with civil servants, subsidies, debt and useless infrastructure.

    Growing out of debt with new debt is not a sustainable model and there is no such thing as eternal free lunch. – Not even in the EU.

    In short: GDP needs to shrink until it is produced mainly without new debt and the Government spending will need to decrease in lockstep.
    KTG likely would call this “neoliberal reforms”. Only when the Greek economy is able to stand on its own feet again, it will be able to grow with substance and everything else is irrelevant.

    • keeptalkinggreece

      with such austerity and banks giving 0 liquidity loans growth is still far far away

    • GDP is probably one of the most unreliable indicators of anything other than GDP itself. GDP worshipers would see the growth in GDP in the US state of Louisiana from 2005 to 2008 as a good thing. After all, it was about 30% higher growth than the total country, and GDP per capita rose at an even more impressive rate. Of course, the cause of those stats made no one living in Louisiana very happy.

  2. A GDP that is that tightly correlating to Government spending is not worth much as it is too dependent on constantly being refueled by new debt.

    So, everybody may just as well stick their head between their legs and kiss their ass goodbye, because the world economy is a debt drivien economy, meaning, it is constantly being refuelled by new debt. Which is indeed the neo-liberal vulture economy model. Until of course there is nobdy left to pay this ever increasing debt, and then it will finally sink in that this emperor has no clothes and should really have been gotten rid off long time ago…

    • As long as this debt is backed with assets (and it usually is when you invest) you have no issue and you keep your head right where it is supposed to be.

      But you have an issue when you did not invest, but rather consume – or even overconsume.

      By the way: ever increasing debt is countered by ever increasing wealth, so no need panik. It’s the distribution that matters. The balance is 0. Even in your beloved alternatives to capitalism.

      A final word to your alternative: a society that treats the talented equally to the less talented has a fundamental design flaw: everything is levelled down to the less talented and this leads to agony. You can observe this decline in literally every communist country and meanwhile, there have been quite a few attempts…

      • Totally agree with Chris.
        And the problems with austerity in Greece are not by definition because of austerity… but because of implementation of the austerity (which to some extent had to be done one way or the other).
        “Austerity” could also be done by fighting against corruption, by firing tens of thousands of people who really do nothing (or close to nothing) in public sector, instead of firing e.g. cleaning ladies or whole ERT or some teachers or reducing pensions etc. But ofcourse these people are hired on the party level and nobody wants to fire them. Then corporate taxes should be reduced and not increased (like they did) in order to prevent companies leaving to Bulgaria or closing. Also reduce paperwork for creating small business (so with reduced corporate taxes) some of those fired guys will think about opening their own business (they will drive taxi, or remember that they have some olive trees in village, or…) So a lot of mistakes by previous government, which are not forced by troika… but forced moves because they didn’t want to do the right things.
        And now we come to the new government, who again wants to hire even more people (ofcourse most of them will be from Syriza, and whoever think otherwise will be very surprised), to increase pensions (without saying from where it will find money, but probably by again raising taxes)… so again the same.
        For me, the only bright spot with this new government was supposed to be fight against corruption… but now after three months and seeing nothing but even the opposite like with ex ministry of economy, I am really starting to be disappointed even on that field.
        And on top of this they are playing with fire with exiting euro… I am really afraid about future of Greece.

  3. Debt is backed by debt, which is backed by other debt backed by debt, which…. As you very well know. TAHT is the problem, which started as soon as the Glass Steagall act was repealed in the US. Everybody speaks about “contagion” relating to Greece, the real, and lethal contagion came from there.

    ever increasing debt is countered by ever increasing wealth

    Another factual lie, and one you are very aware off, I’m sure. Ever increasing debt is followed by more increasing debt, because there is no such thing as increasing wealth based on debt. All there is is wealth transfer, which makes some “wealthier” at the expense of others getting “poorer”.
    Pray tell me, where did I ever mention your fantasy about the “talented”? I really would like to know why you now decided not just to get your facts wrong on top of spreading lies, but why it is you now also feel you have the right to put words in people’s mouth? How low are you prepared to go to keep up the pretence of knowing what you’re talking about?

    • Whatever is owed is owned and the balance is zero. Period.

      Missing money for interest is nothing but an urban legend.

  4. Hmmmm I love data.
    So instead of everyone trying to use this wealth of information KTG provided us with to further their own, already set, opinion lets see what questions we can answer from this.

    How much of the bailout money actually went to greece and how much went to the banks in the form of swapping out the issued debt?
    Added government deficit for the 4 listed years is ~66B which makes for about 25% of the total bailout. Of course of those ~66B only ~28B(added primary balance) actually went directly into the greek economy, the rest is interest payment on existing debt. You can argue about how much of the interest payment should or would have been payed in different scenarios but ultimatly the answer to the question is something between those 28B and 66B.

    What are the secondary effects on the interest from the bond swapping or how much further deficit reduction is necessary without another haircut?
    The difference between balance and primary balance ,i.e. interest payments, is down from -15B to about -7B ~4%of GDP. Not sure where most other countries are right now, i know that germany was between 2% and 4%. This is the number that needs to be sustainable unless the plan is to never service any debt. How to best make it so the government can afford this, thats opinion and not fact so ill leave that for now.

    Finally the primary balance shows us that greece it winning back its sovereignity. Of course this is not tied to one single date or number because there will still be negative consequences for say not servicing an IMF loan, but in general it is clear that any country, that cannot use global markets to refinance at will, with a huge primary deficit is at the mercy of its lenders because any one sided default would have worse consequences then compliance to outside demands.

    • You expect to get paid out a loan 300%?

      100% for consumption instead of investment
      100% for paying of the debt to creditors – (“unfair – all the money goes to the creditors!”)
      100% as bailout to tackle the “humanitarian crisis” after overconsumption so as to avoid reducing spening and taxes?

      Get real. The Greek government can only fool their voters, not their creditors.

      • I dont get what you mean. I never said that the part of the bailout money that went to the banks is somehow not a greek responsibility in fact I made no statement about any opinion of my own. But it makes sense to distinguish between the part of the money that stayed in greece and the part the went to banks outside of greece right away. Money staying gives a positive impuls to the economy(how positive depends on how its spent) whereas the money that goes in and back out right away has no economic impact whatsoever.

        • When everything else fails, put words in people’s mouth… It’s just another trick out of the trickbox containing made-up “facts”, twisted truths and downright lies. Nothing new there, don’t worry about it. And definitely don’t try to make sense, that really does not compute…

  5. Whatever is owed is owned and the balance is zero.Period

    So, who ownes what is owed and who owes what is owned? But when the balance is zero nothing is owed and nobody ownes. Equally so, when the balance is zero, nothing is owned and nobody owes…
    The way of debt being backed by debt is that nobody really ownes anything but hot air, and nobody owes anything because there is nothing but hot air. Get over it, all this is is a huge accountancy trick used to pass debts created by the casino politics of private companies (=the banks, hedge funds, investment bankers etc)on to the taxpayers everywhere. With of course the able assistance of the political elite who get rewarded with cushy jobs in the EU or with those private companies after “services rendered”.
    Here’s a nice little read for you on how things really are…
    http://www.theguardian.com/commentisfree/2011/jul/11/banking-bond-holders-debt