Greece is not a stable country, and it does not have a thriving economy. The country’s debt problems and political paralysis have been the subject of much analysis. A new Citigroup Inc. (NYSE:C) report on the state of the world economy takes a look at the situation in Greece and finds that the country may be stabilizing.
The report, which was authored by Willem Buiter and his associates, projects that “large debt relief from official lenders would probably be the only viable (but politically painful) option to restore fiscal sustainability.” Greece is going to need a soft default on more of its debt if its government is going to continue to function. That debt relief will not come until the middle of next year at the earliest, leaving Greece in a poor situation indeed.
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Devastation in Greece
Over at The Telegraph, Ambrose Evans-Pritchard takes a look at the same report. He finds something different in the figures, however. Greece, or Club Med as Evans-Pritchard calls it, “continues to be a catastrophe.” The “alleged stabilization will prove to be a false dawn.”
Some of this is borne out in the projections of the Citigroup Inc. (NYSE:C) analysts, but all of it is not. The Greek situation is no more a catastrophe for Europe than it was when the Eurocrisis begun. Greece is likely to be allowed to default on part of its debt next year. That means the projection that debt will hit 200% of GDP by 2015 might not come true, as Citi notes in the report.
Europe is facing an incredible array of problems, but it is not Greece that will bring the continent to its knees. Evans-Pritchard is coming from a very particular point of view in his piece, and his view of the Mediterranean economies is right in line with his view of the European project.
Evans-Pritchard, seeking to verify the credibility of the Citigroup Inc (NYSE:C) report, describes the author of the report as “ardent euro-federalist.” He claims that “is not an Anglo-Saxon report.” It seems that Evans-Pritchard is in opposition to the European system. Greece is bad, but it’s not a post-apocalyptic wasteland.
Rising unemployment and rising debt are major problems for the Eurozone countries, but they are not the kind of unstoppable forces that Evans Pritchard suggests in his piece. Greece’s future is going to involve a lot of pain and suffering, but it’s no forgone conclusion that Europe will have “a lost decade that is far worse than anything suffered by Japan, which will render the region marginal in coming world affairs.”
Evans-Pritchard says that the future of Europe will see “non-linear political consequences.” He implies that the rise of extremism is just around the corner on the continent. The comparisons to the 1930s have been around for a long time. Endless repetition doesn’t make them any more accurate, even when backed up by broadly standard figures from analysts.
Economic statistics are useful when used in certain ways. The margin of error is far too large to predict the future of the world with analyst reports, however. It isn’t a useful practice. In the hands of somebody working backward from conclusions they can be downright dangerous.