Has Greece delivered another Trojan horse?
Greece’s economic statistics are dubious in more than one sense. The country probably bent its figures to get into the euro zone. Now, the EU is angry that Greece has not been straightforward about the size of its fiscal deficit. But the greater doubts concern how an uncompetitive, highly indebted, weakly governed country can live with a strong currency such as the euro.
The Trojans were shocked after Greek guile got them in. The feeling may be similar at Eurostat, the European Union’s statistics office. There is particular anger at Greece’s increase of its estimate of the fiscal deficit last year from a tolerable 3.7 percent of GDP to a quite intolerable 12.5 percent.
A revision that huge in the course of the year is ridiculous – and shows something worse than incompetence. Greece’s finance ministry blames interference in the statistics office by the previous government. But the EU, which says it has been applying intense scrutiny to Greek figures since 2004, also seems to have lacked sufficient insight. The Greeks were still keeping a lot of danger in the dark.
With the numbers out in the open what Greece and the zone face is ugly. The country has a fiscal deficit of about 13 percent of GDP, government debt of about ten times that, and prices and wages that have risen far faster than those of France and Germany for a decade. Greece is uncompetitive and, as a member of the euro zone, cannot devalue.
That suggests its growth and unemployment will get worse, along with its deficit and debt. Crisis is coming. The only way to avoid it — with or without an ugly exit from the zone – is profound reform. Greece needs to balance the government’s budget, or come close to that, while the private sector cuts wages in order to become internationally competitive again.
The process will be a brutal marathon. But before it has even begun Greek workers are protesting – louder than Irish ones, who have already started the slog. It’s not clear that Greece can make it to the zone survivors’ finish line.