Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net
Greece is a relatively small economy, easy to bailout for giants such as Germany, France, Italy or Spain. And it's convenient for them to help it, because since the financial problems in Greece were aggravated in early 2010, Europe's currency, as well as its stocks and bonds, have recorded heavy losses, due also to rising fears that other countries in the region will experience something similar.
Greece is part of the Euro zone, so, if credit conditions get worse in the Hellenic country, falling into default, the other EU members would feel multiplied consequences.
But this is not only an issue of convenience, even if we review the macroeconomic situation, we note that although Greece's fiscal deficit is one of the highest in the developed world -13.6% of GDP-, it's not far from other countries that are not at risk of insolvency, as U.S. -whose budget deficit is 10.6%- or England -12%-.
And if we talk about public debt, certainly Greece maintains an excessive level of indebtedness -estimated at 120% of GDP by the end of the year-. Quite high, but not distant from the ratios that that country has been administering over the past decade. From 2000 to the present, Greece's public debt relative to GDP has generally been above 100%, notwithstanding, the country has been paying its obligations.
In the medium term, the default of Greece is unlikely, in our view. And the chances would be lower if we refer to Italy, Spain, Portugal or Ireland, as some experts have also predicted, because these other countries have better macroeconomic fundamentals than Greece.
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