Pubic debt deficit of Greece

Thèmes abordés

Public debt sustainability Deficit of Greece Nouriel Roubini Financial crisis GDP Economics

Résumé du document

First of all, it is important to define the three main elements in order to define the public debt sustainability.
The first key word is the public debt, which represents the total amount of all the credits that Greece contracted and has to pay in the future. The amount of Greece's public debt stands at about 300 billion euros in 2010. Then, the public deficit is a different notion but in relation with the public debt, and this amount means for a particular country, in that case for Greece, the difference between the revenues and the expenditures. The amount of the Greek public deficit is of 10.99% in 2010 of the GDP. (356 796 billion of dollars)
The sustainability is a very important word but however it's an imprecise concept. It can be regarded at short, medium or long term concept, with the open question of how to define the horizons, and debt and deficits can be measured gross or net, including or excluding the liabilities of social security systems and other items.

Extraits

[...] By this way, it seems very difficult to adopt the internal solutions that we saw before. Indeed, to change mentality in order to ink new rules and budget restrictions is very long, and the country doesn't have the time. So, the case of Greece is very critical. In case of the solutions doesn't work, some others approaches are possible. -The first is the more critical one: To leave the Euro Zone. Indeed, some economists think that the only solution for Greece is to leave the Euro Zone and create its own devalued money. [...]

[...] Because a disorderly default would generate much more damages to the European Economy. To do so, Nouriel Roubini suggests to extend the maturities of Greece's debt by five to ten years. And to “cut interest payments while keeping the face value of bonds at par” said the economist. Moreover in his opinion Greece should reduce the debt-to-GDP ratio more that the levels prescribed in the EU rescue package. In 2009 the debt-to-GDP ratio in Greece was and will hit in 2015 according to the IMF, whereas the ideal ratio for European countries should be 60%. [...]

[...] When all the debts will be evaluated in Dram (so in power parity purchase) they will be duplicated. It will be worst that the current situation. -The second is to default. This solution means that the Greek debt will be canceled, as it was the case in Argentina. This one could be used just in case if the authorities find impossible to refinance maturing debt of to finance new debt. But this decision is in the hands of the financial markets. [...]

[...] A good rule either sets limits to the deficit or public spending, preferably both. It establishes an independent body that will verify the plausibility of budgets as submitted to Parliament, supervise their execution and, if need be, bring the matter to the highest court. Finally, the government must fight against the tax evasion. Indeed, in Greece too much money is losing because of the tax fraud. The citizens have to be aware of the crisis situation and in order to fix it, everybody has to pay the tax (particularly the richest). [...]

[...] All European countries decide now to consider the public debt problem as a critical one. For instance, countries as Portugal, Spain or Italy are taking important decisions to reduce the debt. It's today fundamental for the Euro Zone. Indeed, each debt problem drags down the Euro, and so the position of the Europe in the world. Everybody hopes that the Greece case will be the only one. If not, the Europe will not know yet the end of the crisis. [...]