Do Greeks Have Cause For Optimisim? – Primary Surplus

Ta Nea, one of the main newspapers in Greece had an article today detailing Greece’s “primary” surplus and the budget deficit for the first quarter of 2013.

Institute for International Economics – Hopelessly optimistic in the eyes of this blogger.

In the first 3 months of 2013 the article gives a number of 508 million for the primary surplus and a figure of 1.386 billion Euro for the budget deficit.

Ignoring the fact that March’s numbers are not even in yet, what does this mean for Greeks?

Again, assuming the predictions for March are correct, over the year it would mean a total budget deficit of 5.5 billion Euros for 2013.

Using 2012’s GDP figures of 200 billion Euro the Greek government would be on course to have a deficit to GDP ratio of  only 2.8%. This is nothing short of miraculous, or to put in another way, too good to be true. Or to put it yet another way, a forecast, which if it were believed by Germany, would have the Troika packing their bags and giving themselves huge high fives all the way to the nearest Greek airport.

As I stated, the Greek government has no clue as to March’s figures as yet so let us say there is some wiggle room in these numbers.

Nevertheless the story was positive which promoted me to go looking for other sources which painted a similarly optimistic picture of the Greek economy for 2013.

It did not take long.

The FT. The summary being that the government’s debt burden is 5-6% of GDP even on a debt approaching 200% of GDP. Completely sustainable if the figures are true apparently

The Institute for International Economics has another rosy article. Again it says the budget deficit is forecast to be 6.5% in 2015 but it does give a more realistic figure when it talks about 2011, namely a budget deficit of 11% of GDP.

Nevertheless 6.5% sounds excellent especially when you take into consideration the same article predicts the government’s primary surplus will rise to 6.4% of GDP by 2014. In other words the Institute for International Economics believes the Greek government will have balanced books in 2014.

If you have been reading this blog you will know that I am a reluctant pessimist when it comes to the Greek economy.

News like this from supposed respected sources gives me a small sense of elation. I don’t mind admitting it.

But deep down I know these figures will not come out in the wash.

All of these articles are using hopelessly optimistic GDP “growth” forecasts.

Greeks have been told for the past 3 years that the economy will start to recover at the end of “this” year and yet the recession has only increased in momentum.

In reality the GDP in Greece in 2013 will contract as fast as it ever has done since 2008 and this immediately blows the optimistic figures above out of the water, as they are all measured in terms of GDP.

And having an intimate knowledge of what is going on in the Greek economy at the moment as I do, even if the figures that are being put out by the government were true re the surplus/deficit, not a single Greek believes it is a sustainable situation.

The Greek economy has still not stabilised after the last round of tax increases and now a new income tax regime is due to be applied retroactively for 2012.

The only logical forecast one can make is that GDP in Greece will shrink more in 2013 than it did in 2012.

And given the fact that the Greek government is now pressing criminal charges against the statisticians who are compiling the economic numbers, I have to go by what I see rather than what I am being told.

The business environment in Greece has not improved one iota in terms of rules and regulations since 2008. The paperwork for accountants is changing on a monthly basis and it’s volume is increasing.

So to summarise. The figures being put out by the government cannot be trusted and especially the figures in the Ta Nea article as March’s economic numbers have not even been submitted yet by Greek businesses.

As much as I want a recovery to start in Greece and as much as I want the figures being quoted in the international media to be true I have to look at what is happening on the ground and I have to look at the previous track record of forecasts coming from the Greek authorities, neither of which paint an evenly remotely pretty picture.

The fact is until the tax increases stop any forecasts are doomed to be grossly overoptimistic. 


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