Fact checking Charles Wyplosz: more than a little wrong about the Greek government deficit
Why is everybody loosing track of the data when it’s about Greece…?
In a recent, interesting blogpost on Voxeu, Charles Wyplosz states about policy options for the Greek government:
In the short run, after a first default, even a partial one, the Greek government will have to balance its books because no one will lend anything any more. ‘Balancing the books’ can mean different things, however.
- One option is to run an overall balanced budget, thus continuing to service the debt after the initial wave of defaults.
Recent forecasts for 2015 are for a deficit of 3.5% of GDP, an improbably huge improvement over last year’s 12.3% deficit.
This is totally odds with the data. Wyplosz is wrong about the years and mistakes a recent estimate with a recent preidction. According to the dataset of the April 2015 World Economic Outlook these are the data for Greece:
Clearly, the government deficit is, according to the IMF, quite a bit smaller than indicated by Wyplosz (and also quite a bit smaller than the Irish or the Spanish deficit…). It is however true that Eurostat does mention a 12,3% deficit – but for 2013, not for 2014. And it does mention a 3,5% deficit – but for 2014, not for 2015. For starters, the change between 2013 and 2014 is not improbable, as the 2013 data contain quite a lot of transfers to banks, look at these data from Elstat. Which makes the task of balancing the books after a default considerably easier. Surely as the ‘strucutral’ Greek deficit is, according to the IMF, positive. I.e.: a surplus. This in stark contrast to the situation in Ireland and Spain. Everybody makes mistakes – Wyplosz can be excused (though he should have checked the data: especially the remark about a recent prediction shows that he didn’t). But mistakes matter. Balancing the books after a deficit of 3,5% while a prediction of a deficit of about -1% has been made is, unlike the scenario sketched by Wyplosz, not improbable.
It has been said before: a success of Greece is more threatening to the Troika than a default. I can understand that. But I do not understand why people like Wyplosz, in a situation as tense as in the Eurozone, does not check his data more thoroughly and spreads exactly the kind of panic which enhances the changes of default.
And oh – Wyplosz writes: ‘continuing to serve the debt’. When this means that at least a part of the legacy debts are paid after a default while nobody wants to lend to Greece anymore, a balanced budget won’t be enough. In cases like that you need a sizeable government surplus.