Greek GDP Contracts 0.8% Q4. Ouch!

The Greek Drachma. The currency which lasted 3100 years until the Euro was decided to be better. Boris Johnson, Mayor Of London, thinks it’s time the drachma was brought back.

All eyes are on the financial aspects of Greek’s economy, as markets assess the chances of a default or a withdrawal from the Euro, or both. There is more pride than anything else invested in the Euro, and the possessors of those feelings of pride are not yet ready to cash them in for an easier life, and admit that for Greece and others, the Euro was a massive error.

If Greece had a prospect of growing at 4% a year, and could boost revenues that way, there might be a way out. But there isn’t any hope. All the cards are stacked the other way.

As reported in the FT this weekend –

Greece’s recession has been deeper than reported, with the fourth quarter of last year seeing another turn for the worse – raising more doubts over whether it can meet its targets of cutting public-sector deficits.

Greek gross domestic product contracted by 0.8 per cent in the final three months of last year, by far the sharpest decline reported so far by a eurozone country.

That followed declines of 1 per cent, 0.3 per cent and 0.5 per cent in the first, second and third quarters of the year.

Previous estimates had shown falls of 0.5 per cent, 0.1 per cent and 0.4 per cent.

The pace at which Greek GDP dropped last year could also cast doubt on the government’s prediction that GDP will fall by just 0.3 per cent in 2010.

Every time you look at the hole, it just gets bigger. As Boris Johnson writes today in The Telegraph, the Drachma needs bringing back. HERE.

Surely the Germans realise that the Greeks are not seriously going to stop taking advantage of them. How stupid do the German want to look? They should throw the Greeks out before they and the Euro lose all credibility. Someone has to call a halt to this nonsense. Don’t the Greeks have a Boris Johnson?

He writes –

There is, finally, one option that will not be pursued. Even though it would give them a vital chance to devalue, even though it is the obvious way to regain competitiveness, the Greeks will not leave the euro. For Athens it would be too big a blow to their pride; for the other euro countries, it would be too big a shock for the still-young single currency.

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4 Responses to “Greek GDP Contracts 0.8% Q4. Ouch!”

  1. BrianSJ says:

    I fear Dr Doom has the right of it for all debt-laden currencies.

    Read the current set of posts and wince.

  2. Craig says:

    Q. What’s a Grecian urn?
    A. About 20 drachma.

    Sorry… couldn’t resist…

    Collapse of the euro wouldn’t be all that bad. Control over our interest rates again. Plus I’m looking forward to seeing the trout, stag, horse and all their friends again on Irish-issued currency.

  3. tapestry says:

    Thanks Brian. He’s good on China. But will high inflation really cause shares to rise? That didn’t happen in the 1970s. It made running a business nigh impossible.

    The BoE thinks prices will fall this year in the UK after a slight rise. Large debts require money to pay them off. Debts are deflationary as they suck money out of the economy.

    I believe that deflation is more the danger than inflation. Governments can pump cash out but if no one’s spending or investing, the effect of the money is not as big as expected or hoped.

    There is a big delaying of reality playing out. The crisis is in essence the winding down of a long boom, and the need to trim the size of governments, and debts, and release the productive part of our economies from burden.

  4. BrianSJ says:

    Yes, we are going to get reduced demand. We are also going to get stonking price increases.
    Very unconvinced that inflation and deflation mean anything any more. They might once have been useful terms for central bankers but are meaningless now.
    The least we are owed is a new economics paradigm (with due respect to Austria, which still needs to figure largely).

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