Greece will revise higher its 2009 budget deficit, admitted Finance Minister Giorgos Papaconstantiniou yesterday.
Final data sent by the National Statistical Service (NSS) to authorities in Brussels indicate that budget deficits between 2007-2009 will be higher than announced.
We have several horse races going on with Greece right now. First, the race between debt ratings and spreads to Bunds. The issue here is whether or not spreads to Bunds widen out faster than the sovereign debt rating infers what the spread should be. It’s important because the ECB has said it would continue accepting Greek bonds as collateral for banks that want loans from them. If spreads widen out, you can infer that the market views Greece’s debt rating as being lower than what the ratings agencies say it is. This could put pressure on the ECB to alter its plan to accept Greek bonds.
If Greek debt is not accepted by the ECB, it essentially puts the nails in Greece’s coffin. Because if nobody accepts their bonds as collateral, there’s no new cash for the Greek banks and by extension, its economy.
Meanwhile, Greek finance minster said this about the revised numbers:
“We are not talking about large changes. We are not even talking about a change reaching 1 percent of GDP,” said Papaconstantinou.
No, just up to 0.8 percent of GDP. That’s all. Trying to project calm and telling the markets they have this situation under control has been their strategy throughout the ordeal, and it hasn’t worked.
The act of seppuku on Greece’s part is looking better and better, all the time…