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Sep 1, 2011

Greek Debt/GDP: Only 22% In 1980

This graph shows the government debt to GDP ratio for Greece. As you see the debt was mostly accumulated in the eighties. I will sum up some of the events which are of most importance this this graph:


  • In the 1980's spending as a percentage of GDP rose by 19 points from 24% in 1980 to 43% in 1988, while revenue rose by only 7 points form 20% to 27%.
  • In the beginning of the 90's Greece was in recession twice (1990 and 1993). The deficit and the borrowing cost both spiked to over 10%. 
  • Starting in 1993 the government started a policy of fiscal consolidation to get permission to join the Euro-Zone. The deficit shrank to 3% of GDP and the borrowing costs fell to just 6% in 2000.
  • When Greece was allowed to enter the Euro-Zone the 'fiscal discipline' faded away and budget deficits began to rise again. This was not followed by higher borrowing yields though, which may had something to do with the distorting of the numbers by the Greek government.

Greek Default Watch

17 comments:

  1. over the years no one,and i mean no one politician cared to minimize that debt.
    shame on them!!!

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  2. You forgot your medication, their debt was manageable until they entered the Euro.

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  3. Look at the chart, the debt was not changed in any significant way by entering the Euro. Yes, the found a bigger market of suckers willing to buy their debt, but it's pretty much been on an out of control spiral since the beginning of the chart, whereas their entry into the Euro was around 2000. At that time their debt to GDP ration was 100% or so. If you think that's "manageable" then your banker is an angel.

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