The Greek debt spreadsheet

By Felix Salmon
April 14, 2010
this spreadsheet? It allows you to take the official Greek assumptions of what's going to happen with respect to its fiscal situation over the next few years, and replace them with anything you like.

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How fabulous is this spreadsheet? It allows you to take the official Greek assumptions of what’s going to happen with respect to its fiscal situation over the next few years, and replace them with anything you like.

Play around with anything in the orange cells, except for the ones saying “Nominal GDP growth”: that’s just the sum of the two rows above. It’s pretty easy to come up with some assumptions which show Greece’s debt-to-GDP ratio flattening out at somewhere north of 127%, instead of peaking at 120.6% and then falling to 113%:


Do let me know what kind of results you get. Reuters’s own Brian Love has run a bunch of numbers, including seeing real GDP fall by 3% in 2010, 7% in 2011, and 1% in 2012, before seeing a 3% rebound in 2013. (Those are numbers he got from Simon Johnson.) In that case Greece’s debt-to-GDP ratio rapidly gets higher than 135%, even before you take into account the fact that its borrowing costs would surely be rising sharply at the same time. Put in a steady 8% interest rate for its debt service, and the debt-to-GDP ratio can reach 150% quite easily:


Note that the chart above even assumes that Greece manages to run a primary surplus in 2012 and 2013 — that, before interest payments, it will be spending less than its tax revenues. Even at the end of an incredibly brutal recession. Realistically, the higher the negative numbers on the second line, the higher the negative numbers on the first line as well. That’s all you really need for a debt spiral: you don’t even need the interest rate on your debt to get crazily out of hand.

The stakes, then, could barely be higher. Either Greece manages to implement its current plan, or it comes very close to spiraling out of control into devaluation and/or default. Maybe that’s why the EU isn’t insisting on high levels of conditionality in its rescue package: it knows that the Greeks themselves have every incentive to get this right. Which doesn’t, of course, mean that they’ll succeed.


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If you want to know what tipping point has been for debt to GDP for countries that found themselves in a simular situation as Greece check out Carmen Reinhart’s supurb “This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises”. It is only $5 and is free for journalists via NBER.

Posted by david3 | Report as abusive

Greek assumptions seem rather unrealistic:
– primary balance is likely to be worse than stated as tax receipts continue to deteriorate (austerity does NOT help receipts)
– inflation is likely to be negative (see Latvia)
– interest rates for 2010 and 2011 are very likely to be higher than the stated 4.7%.

Posted by Y.Alekseyev | Report as abusive

Hang on – Greece can’t devalue because it’s part of the Euro. That’s why IMF’s Strauss-Kahn was saying it’s got to go through a period of deflation. Default is the only other possibility (and as Reinhart and Rogoff point out in “This Time is Different” default counts as any renegotiation of debt terms, basically), but that would put a lot of stress on others in Europe. If the EU wants to stay in business it’s got to back Greece up – shouldn’t have let it join in the first place if it ISN’T prepared to do that!

Posted by kitkat3 | Report as abusive

Can’t help wondering. If the U.S. qualified geographically, would it’s financial condition permit it to join the EU?

Posted by Trouble | Report as abusive

Considering Greece made it in I would say yes.

Officially the country must have a deficit below 3% of GDP and debt below 60%. If this is not the case the country has to sufficiently show that it is on the right path.

They also need stable prices (max 1.5% above lowest 3 countries in EMU), low interest rates (max 2% above lowest 3 in EMU), and stable a currency (not devalued against the Euro during the 2 year switching process).

You could make a case either way pretty easily. Considering if the US applied tomorrow the would have to fulfill all above criteria. Your feeling on the future US debt burden would weigh heavily on any opinion.

However, as I said Greece got in. IF the US was in the geographic area I would say with almost certainty they would be allowed in. Imagine the EMU without Germany or France. The US is a huge economy and would have to be a part of any monetary union.

Likewise, imagine Canada and Mexico creating a monetary union without the US. It would be absurd.

Posted by MSwizzle | Report as abusive

Great model Felix Inc.

Y.Alekseyev is correct, maybe you can republish with his stats or maybe some other more realistic feedbacks. That would supply you with content for 196 days for 196 countries: “Salmon’s Global Barometer”, maybe working from the best to the worst (to give them time to fix their numbers). The overlooked and -cooked variables will come out in the wash.

MSwizzle: The only way the US will survive is to form a monetary union with: its own Alaska, Hawaii, Canada, Latin America and Southern America. That’s the only way to counter BRIC.

Posted by Ghandiolfini | Report as abusive

Ghandiolfini: Canada in a monetary union with the US? No thanks. Our banking system is fine, thank you very much, and our federal government was paying down debt – fancy that, actually paying down debt – for many years before the financial crisis struck. Even now its annual deficit, around 5% of GDP, is manageable. The Brits wisely rejected adopting the Euro. Canadians will do the same in rejecting adoption of the greenback in any proposed monetary union.

Posted by Gotthardbahn | Report as abusive

Sorry Felix, but it’s really just a box with a load of numbers in it. The Greeks – the ones in charge, that is – had every incentive they could possibly need to get it right first time around, didn’t they? At least from their fellow countrymen’s perspective, they did.

And look what happened. No, they ought to be in a box.

Posted by HBC | Report as abusive

Greece is going to continue to be a huge problem for Euro land until they default. That’s when the fun starts

Posted by Storyburncom_is | Report as abusive

Felix–do you have one of these for Ireland? It would be great to see it. Any thoughts on Irish deflationary pressure? Having nationalized the banks, the government is in the process of getting the taxpayers to buyout all the caustic debt (through NAMA)–but will Ireland go the way of Greece?

Posted by JustJustin | Report as abusive

Good little spreadsheet, love the projecting capability

I have had a stab myself at constructing a spreadsheet about the crisis. y/greek-debt

Posted by cpeake | Report as abusive