Courtesy of Mish.
As a result of Troika-imposed austerity, Greece has a current account surplus that widened in September to over a billion euros.
This happened because demand for foreign goods collapsed in the wake of 27.3% overall unemployment and a shockingly high 57.9% youth unemployment.
The Coming Greek Default
In spite of a current account surplus, Greece’s overall debt load is unsustainable.
Here are a couple of key details: Greece has €320 billion in sovereign debt. Greece’s debt-to-GDP ratio is 174%.
Recall that the Troika considered anything beyond 120% unsustainable. Also recall that Greek debt was restructured twice to meet those targets.
The pertinent question is not “How will Greece pay back €320 billion?” because it can’t and won’t. Rather, the pertinent question is “How will Greece NOT pay back €320 billion?”
Two Possibilities
- Default accompanied by an exit from the eurozone
- Debt relief from Germany and the rest of the eurozone
For political consumption purposes ahead of the last federal election, German chancellor Angela Merkel ruled out more aid to Greece. That blatant lie was probably enough to hold support for the eurosceptic AfD party below the 5% threshold to make German parliament. AfD failed by 0.2 percentage points.
Had Merkel admitted the truth, it’s hard to say how many more votes AfD would have gotten, but I suspect far more than 0.2 percentage points.
With election lies out of the way, the corollary questions for Germany now are quite similar….
